On Capitol Hill this week, Karin Lissakers, U.S. executive director at the International Monetary Fund, listed a large number of areas in which governments have begun important reforms. They included the recapitalization of banking systems, the establishment of independent central banks and autonomous regulatory agencies, adoption of international accounting standards, acceptance of foreign participation in banks and corporations, better labor relations, improved import and investment regulations, and the creation of social safety nets. But it is too early to say whether all these reforms will take hold. There are acute shortages of top managers and legal and financial experts. Entrenched interests are strongly resisting many of the changes, including foreign participation.
Interventionist instincts remain strong, and corruption is far from vanquished.
Some governments insist that they want reforms but have to fight determined opponents such as the chaebol, the tightly organized industrial groupings in South Korea. What can be said is that the reform process will be longer and more difficult than many people originally assumed - as with the transition from communism to a market economy in Russia or the efforts of Chancellor Gerhard Schroeder to modernize the German economy. In Asia, the seeds of crisis are still present. For Asians, and for the rest of the world, it is great that growth is returning and changes are beginning to be made. But the euphoria now detectable in some quarters is not only premature but dangerous.