The Asian Tigers created three decades of unprecedented growth from 1965-95. Average incomes in Malaysia, Indonesia, and Thailand went up around fourfold and in South Korea sevenfold. Conventional thinking was that the export miracle would be followed by an explosion in domestic spending and wealth.

In the 90s most Southeast Asian currencies were pegged to the US dollar, and anyone who was anyone borrowed in US dollars. It was a seductive cocktail of low interest rates, liquidity, high growth and rising wealth. Everyone thought the party would continue…

However in July 1997 a localized currency and financial crisis in Thailand changed everything. Speculators attacked Asian currencies for massive financial gain. The crisis spread like an Ebola virus through Southeast Asia then the world. Currencies, equities and hard assets tumbled across Asia, private debt exploded as currencies devalued and millions of ordinary peoples’ daily lives became tough.

The Year of Living Dangerously briefly chronicles Asia’s near-implosion in 1997-98. In a surreal parallel universe, the dotcom bubble was forming elsewhere. I’ve never seen anyone juxtapose the two events, so my next piece, Crisis? What Crisis? looks at the dotcom bubble. I have vivid memories of these events as divisional CEO of a regional investment banking business and subsequently as global head of the bank’s technology sector.

Let’s retrace some of the events of 1997-8, market by market:


The baht was attacked. I was asked to go to Bangkok to meet with the late General Chatichai Choonhavan, a former PM, to discuss floating the currency (why me, I still wonder?)

Thailand initially used its foreign reserves to fight. When that failed it devalued by 20% and called in the IMF which made a $17 billion loan. Austerity became the new black. I vividly remember the closure of 50+ insolvent finance companies, 30,000 white-collar workers losing their jobs, Bangkok becoming a sea of half-completed buildings and rusty cranes, and no more traffic jams.

During the height of it all the Thai authorities temporarily shut our Bangkok office for allegedly issuing negative economic research. It was as close to house arrest as a business can come – “tense” was an understatement. Fortunately that particular storm passed quite quickly.


The contagion quickly spread to Indonesia. At a time when the Suharto regime had ruled for 30 years, the crisis helped to sew the seeds of both his undoing in 1998, and of subsequent democracy.

The rupiah was attacked. Widening the rupiah-US$ trading band didn’t work. Indonesia floated its currency and it plummeted. In came the IMF and World Bank with a $40 billion rescue package. 16 banks were shut and again, austerity became the new black.

Pressured by the IMF, Suharto postponed many of the Government-subsidized projects he had awarded to his own family. 80 million Indonesians or 40% of the population fell below the poverty line. Ordinary Indonesians feared food shortages and shops were emptied. Rioting – some say inspired by the military – broke out across Jakarta and elsewhere. Ethnic Chinese Indonesians were targeted, malls and hotels burned and more than 1,000 people were killed.

I took a slightly panicky call from Jakarta – “there are tanks rolling down Sudirman, the place is burning, they are rioting, looting and killing people and we can’t find a few of our team.” Worried for the safety of our people, we evacuated the office to Singapore. It was the stuff of movies.

Hong Kong

Hong Kong was much less torrid a scene but nonetheless many of the events there were a little unnerving given its reputation for rule of law and certainty.

On a wet, stormy night in mid-1997, Hong Kong returned to China. We watched the Britannia set sail from Hong Kong just as the PLA machine rolled across the border into Hong Kong. Into the great unknown.

A few months later when the crisis struck, Hong Kong raised interest rates 300% to fend off currency speculators. Equities plummeted. The authorities were clearly rattled. I came back from lunch one day to find armed policemen in the lobby, raiding our office, demanding to see our trading records and interview staff (they had BIG guns, not peashooters). Mm I thought, China is in charge now and there are armed police in our lobby? (Hong Kong authorities did actually foil speculators with surprise purchases of stocks and dollars).

Asia’s largest private investment bank, Peregrine, filed for liquidation in 1998. Sort of expected, but still shocking and a reflection of the times. We all knew someone working there.


Malaysian PM Mahathir Mohamad accused “rogue speculators” for the crisis (especially George Soros).

Malaysia’s central bank initially defended the ringgit. Interest rates went stratospheric and controls were introduced to stem currency flight. Business activity ground to a halt.

I recall we bought an E class Mercedes from the wharves of Kuala Lumpur at knock down pricing and imported it to Hong Kong. Cash was King. A small win at a time of misery and huge losses.

The Philippines

When the crisis struck the Sick Man of Asia had just exited from 35 years of IMF supervision so was able to weather the storm better than some of its neighbours. Sure, the peso was devalued and the IMF made a billion dollars available to the country. However for some reason the crisis created less of a panic in and around our Manila office. Perhaps it was the calmness and resilience of the people. I suspect the bubble just hadn’t inflated there as much. Times were tough, but then they’d always been tough…

South Korea

The mighty South Korea was hit hard by tumbling markets, a free-falling currency and corporate bankruptcies. The IMF approved a $57 billion bailout package. Shock and awe.


Russia’s markets collapsed, forcing the central bank to triple interest rates to 150%. The IMF announced a $23 billion emergency loan package on the prospect that Moscow would run out of money and default. Yeltsin presumably had a few more vodkas at the time.


Japan announced its economy was in a recession for the first time in 23 years. Subsequently it announced a $30 billion aid package for Southeast Asia.

Latin America

Latin stocks and bonds plummeted. G-7 ministers created a rescue plan for Brazil.


Rattled by Asia, the Dow plummeted. Trading was suspended. The $3.5 billion bailout of Long Term Capital Management ensued.

The Fed cut interest rates, as the World Bank announced that the Asia crisis had cut world growth in half and a global recession was possible.

Crisis, What Crisis?

While Asia was imploding the dotcom boom was in full swing. It was nuts. Paper millionaires were being created daily. How could a parallel universe like this even exist when we were in crisis? Stay tuned folks for Crisis? What Crisis?


1. The Year of Living Dangerously is a 1982 film set in Jakarta during the 1965 overthrow of President Sukarno. It starred Mel Gibson, Sigourney Weaver and Linda Hunt (whose performance won the 1983 Oscar for Best Supporting Actress). The movie was banned in Indonesia until Suharto’s fall in 1998. The words “living dangerously” were used by Sukarno in his Indonesian Independence Day speech of 1964.

2. The sequencing of events in the Asia Crisis as depicted may differ slightly from the actual timing of events. Sources include PBS Frontline and Wikipedia.

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