In the rollercoaster that has been the Asian financial crisis, the movement has been mostly downhill. But the latest indications suggest that recovery is possible, at least on the stock exchanges. Some long-term funds are flowing back to the region, sustainable economic and political reforms are under way while the US, Japan and China - the three major props of its economic performance - are beginning to formulate more coherent policies. It is still too early for optimism, given the deep cuts in employment and welfare, the collapse in currency values and the prospect of social and political turmoil in key states such as Indonesia. The extent of the damage may be gauged from figures relating to Indonesian levels of income. Two years ago its international status was officially changed from one of the world's least-developed nations on the basis that its average income level had gone to $1,200 GDP per head of population. According to the latest statistics the crisis, including the rupiah devaluation, has brought this figure down to $300. The growth and development that brought millions of Indonesian villagers to towns and cities in search of work over recent years has now tossed many of them back home without any welfare safety net. The new middle class in Indonesia has also seen the crisis play havoc with their standard of living. Zero growth will not improve matters. Meanwhile, the forthcoming presidential election - which is set to return President Suharto to power - will heighten expectations of more radical change. There are disturbing reports of ethnic confrontations in the huge archipelago.
Indonesia is certainly the most extreme case in the region. The recent agreements to reschedule public and private loans, and an ambitious programme to dismantle the notorious crony capitalism centred on the Suharto family, have improved prospects that the reform programme - insisted on by the International Monetary Fund (IMF) - might succeed in opening up its economy. But the debate on how appropriate the IMF packages have been continues to reverberate around the Asian region. It was short-term, savage and directed only at one of the chief culprits of the Asian crisis, the international banks that poured credit into the countries concerned and now expect to emerge cost-free from their miscalculations about shock devaluations and bankruptcies. There is a growing realisation that these priorities are wrong and that the pain must be redistributed. In contrast to the IMF, the World Bank has shown itself much more aware of the social costs involved and of the need to underwrite economic reform with a continued commitment to appropriate infrastructural modernisation. A clearer focus has also come on to the roles of China and Japan. Chinese leaders insist they will not devalue their currency, will hold the Hong Kong peg with the US dollar and have announced a very large-scale programme of investment over the next three years. The need to prevent the crisis overwhelming Chinese policies has loomed larger in the discussion. Likewise the need to involve Japan more in managing the crisis by boosting its domestic demand and buying more from the region should dominate discussion in coming weeks.