The Evolution of Dual Economies in East Asia

With a resurgence of export-led economic growth, the underlying causes of the East Asian ‘crisis’ are being ignored. Much of the investment undertaken within East Asia in recent years was channelled into unproductive enterprises and projects. Much was stolen. A significant proportion of the 1990s private capital flow to East Asia was egregiously risky. Many flows were not supported by the sort of project and sovereign risk analysis that shareholders and depositors have a right to expect from international financial institutions. It is deeply mystifying that these flows were not perceived as contributing to the weakness of the East Asian economies by the International Monetary Fund (IMF), the World Bank and the Asian Development Bank which had responsibility for monitoring the East Asian economies. The World Bank set the analytical tone of denying emerging structural problems in its widely promoted Asian Miracle (1993). It claimed that the East Asian countries were ‘… better able than most to allocate physical and human resources to highly productive investment and to acquire and master technology’ (pp. v–vi).