This is a tough time for Asian exporters. Their customers in the U.S. and Europe expect them to cut prices dramatically and ship their goods quickly. After all, Thai, Indonesian, Malaysian, Korean, and even Taiwanese currencies are down sharply, so prices should be that much lower. Companies and countries facing huge debt repayments should be anxious to export to get the dollars to pay off loans.
While the logic is consistent, the reality is different. Many Asian exporters are finding it extremely difficult to get the financing to make and ship goods these days. Banks have pulled back on lending, choking off commerce. Interest rates have soared. Currencies are still volatile, making customers wary of setting firm prices. And while prices in local currencies have fallen, prices for imports denominated in dollars have shot up. Since many Asian exports, particularly of high-tech and electronic goods, begin with imports of components, what is gained by currency depreciation is also lost by it.
What is to be done? Governments must convince the markets that they are serious about ending crony capitalism, introducing transparency into financial transaction, and opening up closed, protected markets. That would stabilize currencies and lower interest rates. Then banks must get over their paralysis and begin lending to credit-worthy businesses. It has been six months since the Asian financial crisis began. It's time for the rebuilding to begin.