Five years ago, the collapse of the currency in Thailand triggered an Asia-wide financial crisis. The mass foreign investment withdrawal from the region left thousands of banks and businesses bankrupt and exposed fundamental flaws in many Asian economies. Several countries have since bounced back, better prepared to face future problems.
The collapse of the Thai currency the baht on July 2, 1997, set in motion the devastation of what had been at the time the world's fastest-growing economic region.
The ensuing financial crisis crippled the so-called "Asian Tiger" economies of Thailand, South Korea, Singapore, Hong Kong, and Taiwan, which up until then had been enjoying years of sizzling double-digit growth. The rippling effects of the crisis soon engulfed nearly every Asian country leaving bankruptcies, bad loans, and mounting corporate debt in its wake.
Five years later, many Asian countries appear to be well out of danger. Excluding recession-mired Japan, the World Bank said it expects most Southeast Asian and East Asian economies to post an average of more than four percent growth this year and nearly six percent next year.
The optimistic outlook is partly based on expectations of at least a modest economic recovery in the United States. The giant U.S. economy has traditionally been the engine for growth in Asia.
But economists said credit must also go to the efforts some Asian governments, which have worked hard in the past five years to reduce corruption and increase transparency.
Singapore-based economist Manu Bhaskaran praises South Korea in particular for also relaxing interest rates to stimulate domestic spending and revising financial and commercial laws to help speed corporate restructuring. In 1998, South Korea received a $58 billion bail-out loan from the International Monetary Fund (IMF), the biggest in IMF's history. South Korea repaid the loan last year, nearly three years ahead of schedule.
"It cleaned up the financial sector, recapitalized the banks and it improved a lot of its operational procedures significantly. Korea is a much more efficient and resilient economy as a result," Mr. Bhaskaran said.
But economists say bad loans and incomplete financial reforms still pose a threat to several Southeast Asian countries like Indonesia, Thailand and the Philippines, which have experienced major political upheavals in recent years.
Hong Kong's recovery also remains a question mark with the Chinese territory unable to effectively meet the new economic challenges posed by fast-growing mainland cities like Shanghai. Unemployment in Hong Kong now stands at a record 7.4 percent.