In the course of two decades of industrialization these countries have nurtured the same kinds of industries and export structures. Electronic products in particular are major exports, so when Thailand devalued its currency, its competitors were obliged to follow suit. First, it has become quite clear that the dollar-peg system does not suit these countries. In fact, they have already switched to floating exchange rates and are shaving their current account deficits little by little. Second, keeping a sharp eye on low-income countries' entry into the international market, they must constantly watch their position in terms of international competitiveness and work tirelessly to make their industrial and export structures more sophisticated.
Comparative advantages shift dramatically in Southeast Asia.
The currency crisis has made these and other Southeast Asian countries more keenly aware that their efforts to achieve greater structural sophistication have not gone far enough. Third, dependence on short-term foreign funds is dangerous. Fortunately, there has not been a flight of capital from Southeast Asia, but those concerned must have had a frisson , remembering the capital flight triggered by the Mexican currency crisis of 1994. The lesson is that countries must introduce stable capital that, once in the country, cannot easily be pulled out and that investors will not promptly withdraw just because the rate of return falls. That means concentrating on direct investment.