The currency fall, capital flight, shrinkage in economy, bankruptcies, job losses and untold social trauma swept through the once bastions of global competitiveness. The investors, who once waxed eloquent on the ascendancy of the tigers,saw chinks in the armour and pulled the plug. In 1996, total private capital inflows to Indonesia, Malaysia, South Korea, Thailand and the Philippines were $93 billion, up from $41 billion in 1994. In 1997, that suddenly changed to an outflow of $12 billion. The fall in currency followed by an increase in the debt burden impinged on the profitability of corporations leading to bankruptcies and job losses. In South Korea, the social fallout showed up in terms of soaring suicide and personal bankruptcy rates. By the end of 1997, foreign equity investors lost nearly three-quarters of the value of their equity holdings in some Asian markets.

An inquiry into the casual factors brought forth a cacophony of voices of politicians and economists citing widely differing reasons. Kim Dae Jong, the president of Korea stated that lack of political freedom within the countries caused the crisis. Obviously, he glossed over the fact that Singapore and China, who lacked truly democratic regimes, did not fall victims to thiscalamitous tide. Some economists assigned the debacle to lack of controls on capital flows, while others stated quite the opposite that the movement of capital was not sufficiently free.

Several said that the burgeoning short-term foreign debt caused it. Malaysia's prime minister Mahathir Muhammad blamed George Soros and other players in the international money markets for driving the currencies of the affected countries off the cliff. Some economists blamed crony capitalism as a primary cause. The Asian contagion eroded the confidence of investors, raising doubts about their return in the near future.

The result of it all is that the proponents of controls are hogging the limelight accusing the US of imposing its flavour of capitalism on other countries and causing the trouble. They cited the example of Chile, which kept the currency crisis at bay ostensibly through restrictions on short-term capital inflows. Chile imposed a 30 per cent tax on incoming portfolio investments, refundable after a year, inan effort to slow money flow and avert inflationary bubble. But while its admirers were going overboard with praise, Chile rolled back this measure to garner more foreign-currency inflows. In India also, economists have been gaining credibility for delaying capital account convertibility.

To contain the economic damage unleashed by the crisis, the IMF's intervention was sought. Even the IMF was taken aback by the unfolding of events. The IMF provided $36 billion in the later part of 1997 and early 1998 to support the reform programmes in three worst-hit countries - Indonesia, Korea and Thailand. But meanwhile, the Asian economies have lost their faith in free market forces. Even the political system is unwilling to implement the reform package wholesale.

Malaysia has imposed capital controls and is fixing the exchange rate. Banks have reduced interest rates by more than three percentage points since early September last in an attempt to reduce the interest burden on the heavily indebted business groups.In South Korea, attempts are on to protect the Chaebols, as their failure will impose staggering NPAs on the banks. The bad debts are doubling every six months. Even Thailand, which is proceeding with reforms treating the IMF package as a rule book, is increasingly growing skeptical of short-term capital inflows. It has also announced a bank- restructuring plan, which has not been agreed to by any of the banks. Politics is fast becoming the chief obstacle to recovery. Politicians are steering clear of painful choices.

As on date, the IMF rescue package appears to have fallen short of expectations. The countries hit by contagion have witnessed soaring unemployment and interest rates, growing social unrest and decimation of foreign-investment inflow. Overall, the stricken Asian economies will not see a full recovery for years.

The Asian contagion will have its ramifications for the global economy. Economists at JP Morgan & Co estimate that the global economy will expand at a rate of 1.7 per cent in 1999,half the growth rate before July 1997, when the crisis began.