Ten years ago Monday, Asia was hit by an economic “bug” that wiped out billions of dollars of wealth, cost millions of jobs and shattered the confidence of a region. Those losses have largely been made up, and Asia today is in many ways stronger than it was in 1997. Although lessons have been learned, the region is still vulnerable to shocks. More needs to be done to protect Asian economies from a recurrence of “baht-ulism.”

The Asian economic crisis began July 2, 1997, when Thailand devalued its currency, the baht. Speculators sensed vulnerability in other regional currencies and launched assaults on them. Bubbles in real estate and stock markets burst, destroying wealth and wreaking havoc throughout East Asia.

In the past decade, much of that damage has been undone, and Asia again has become the fastest growing region in the world economy. Today, the World Bank notes that “the region is far wealthier, has fewer poor people and a larger global role than ever before.”

Real per capita incomes in economies affected by the crisis significantly exceed pre-crisis levels. The Asian Development Bank concludes that “the region is enjoying growth that is the envy of many parts of the developing world.”

All is not positive, however. While still expanding, the post-crisis economies are growing at a slower pace than before the crisis. More troubling, the extraordinary growth of regional foreign exchange reserves — estimated at some $1.2 trillion — suggests that the global economy is unbalanced. Of course, these funds will provide a cushion if there’s another shock, but excessive savings in Asia also make a shock more likely.

The lessons of 1997 are that the region needs better economic management, better governance (at both the political and corporate level), and coordination and cooperation among regional governments to prevent a crisis. Some progress has been made, but the process must be continuous, and vigilance constant.

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