Special Author: Yoon Young-kwan, Seoul National University

The Korean people had high expectations at the beginning of 2008 that the new conservative government of Lee Myung-bak would bring fast economic growth and political stability. There were high hopes that President Lee’s pragmatic and conservative approach, in contrast to his predecessor’s ideologically oriented and progressive policies, would restore a balance in the overall direction of the Korean society.

Most Koreans and foreign observers, however, were surprised as they witnessed President Lee’s popularity plummet in a matter of months. His government’s negotiation over the beef trade with the United States was severely criticized by domestic NGOs and the progressive opposition groups, who were able to mobilize huge crowds in anti-government demonstrations on the streets of Seoul. Their gripe was that policy leaders had neglected people’s concern over the health issues and given too much away to the US negotiators despite a serious danger of mad cow disease with beef imports from the States. Though it turned out that there was no scientific evidence that corroborated the arguments of its critics, the Lee government had suffered a serious political blow.

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Special Author: Chia Siow Yue, Singapore Insitute of International Affairs

Singapore is one of the most politically stable countries in Asia and continued to be so in 2008. But the past year marked the downside of globalisation, as the economy went through the turbulence buffeted of sharp hikes in global commodity and oil prices and the unfolding financial fallout of the US sub-prime crisis and the onset of global recession.

Trade in goods and services amount to over 300 per cent of Singapore’s GDP.  Soaring global energy and food prices as well as domestic real estate and stock market bubbles and higher government service fees raised the CPI inflation rate to 7.5 per cent in June 2008 (a 26-year high) and an average 6.8 per cent for the first 10 months of 2008.  The Monetary Authority of Singapore (MAS) pursued a strong dollar policy to ameliorate the effects of higher import prices and the government introduced various subsidies, rebates and cash handouts to lessen the hardships on low income and vulnerable households. Thankfully, global commodity and oil prices are now on a sharp downtrend and the CPI increase is expected to return in 2009 to the trend rate of 1-2 per cent.

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Special Author: Pisit Leeahtam, Chiang Mai University, Thailand

Despite the initial optimism with the return to democracy, 2008 was a year of political instability and internal conflict for Thailand. Former PM Thaksin, who remained abroad after the coup d’etat, returned as his political party won the election. But he and his wife fled again to escape the court processes on his corruption charges. There has been an amazing series of events, including civil disobedience against the government, dissolution of political parties, the dissolution of the ruling People Power Party, the barring of two Prime Ministers from holding office and the closure of two international airports in Bangkok.

The two main actors in these developments are the People’s Alliance for Democracy (PAD) and the United Front Against Dictatorship (UDD). The PAD (in the yellow shirts) is comprised of middleclass citizens, urban elites, academics, state union leaders and a broader coalition of those against Thaksin. The UDD (in the red shirts) comprises lower income earners, taxi drivers, the rural population in Northeast Thailand, and Thaksin supporters. The PAD and yellow shirts movement started in 2005 when Thaksin sold his shares in Shin Corporation to Temasek without paying taxes. The anti-Thaksin demonstrations ended then when the military stepped in September 2006 and installed a caretaker government. The caretaker government established a special investigation into corruption cases against the former PM Thaksin and his wife, which bought open over 13 charges of corruption against Thaksin.

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Special Author: Ishrat Husain, Institute of Business Administration, Karachi

Pakistan faced a number of serious challenges in the year 2008 — more than any other country in the region. The transition from military rule to a democratically elected political regime was difficult. The terms of trade sent shocks to the economy through severe fluctuations in oil and commodity prices, the quality of economic governance was sub-optimal and Pakistan’s ‘frontline’ status in the war against terror proved to be exceptionally disruptive. The assassination of Pakistan’s leading politician, the highly respected Benazir Bhutto, created a huge vacuum in the political landscape. Although the general elections were held peacefully and were (by and large) fair and transparent the loss of the top leadership of the winning party led to a long unsettling period marked by prolonged uncertainty.

On the regional front, aggression from Taliban and Al Qaeda, which has so far been limited to the ungovernable and hostile terrain of the border areas between Pakistan and Afghanistan, spilled over to some of the settled districts of the North West Frontier province, including Peshawar, causing immense loss of life and property, and widespread fear amongst the general populace.  On the eastern borders, however, the new government, reiterated the policy of strengthening friendly relations with India, and initially made some positive overtures.

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Special Author: Iwao Nakatani

The shock of the worldwide financial crisis over the past year has affected Japan more or less to the same degree that it has the rest of the world.

Drop in the price of stocks and other financial assets has been enormous, in spite of the Japanese financial sector being relatively unexposed to the sub-prime business, as against the financial sectors in America or Europe. The Nikkei Average, for example, fell from 15,156 yen in January 2008 to 6994 yen in October 2008, a drop of some 54 per cent. Many commercial banks are trying to squeeze their lending in response to the deterioration of their balance sheets, producing a serious credit crunch in the domestic economy.

At the same time, the yen has appreciated from 110 yen against the US dollar in January to 87 yen in December, an appreciation of more than 20 per cent. The yen has also appreciated significantly against other major currencies: it was only 160 yen per Euro in January but it rose to 114 yen per Euro in October. These changes have affected Japan’s export industries seriously and there will be more of the same in the coming year. The Japanese economy is still export-oriented in character and the sharp decline experienced by export industries like automobiles and electronics will do major damage to the economy in the coming year.

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