Two countries with a common and ancient civilization, India and Pakistan, celebrated 60 years of independence from colonial rule this week. At the time of independence, both countries were in danger of collapsing from internal and external threats. This greatly influenced both countries' subsequent turn toward centralism - in India's case, statism, and in Pakistan's case, army rule.

For four decades, both statism and army rule seemed irreversible. This was despite failures across the board: In both countries, territory was lost and the economy stagnated. Resources were spent on developing nuclear weaponry and on dealing with the Kashmir insurgency, which was fostered by Pakistan and repressed by India. What was left was often wasted through corruption. By 1990, it was common for Pakistan to be labeled a failed state and India, perhaps more damningly, a failed democracy.

Pakistan's army and feudal landlords, who shared political power via an informal coalition throughout the first 40 years, deserve most of the blame for Pakistan's failures. They carved up the economy among themselves, and let the poor survive by growing food and providing simple services to the rich. India's greater failures hid these strategies from national or global attention. Pakistan even overtook India for a while until Zulfikar Ali Bhutto's nationalizations of the 1970s brought them on par again.

Pakistan, a day older than India, but with an even younger population, seems to have aged more poorly over the past two decades. As the Indian economy picks up speed on the back of the 1991 reforms, India is on its way to becoming a global player in services and acquiring as formidable a reputation as China for job creation. The IT sector alone creates three new jobs every minute of each working day. In the four statistics that really matter - literacy, life expectancy, infant mortality rates and the female-to-male ratio - only in the last does Pakistan perform better than India and that, too, marginally. In the others, it is substantially worse.

There is no single reason for Pakistan's poorer performance. It turned as reformist as India in the 1990s. This has benefited some parts of its economy. For instance, the country adds over 2.5 million new cell phone users each month, or 1 for every second of the day. Though below India's rate of 2.7 new cell phone users per second, it is a much better ratio to the population.

Religious fervor is often accused, but has not - in either the subcontinent's history or in Pakistan's shorter one - been a barrier to development. Despite incidents such as led to the recent siege of the Red Mosque in Islamabad, theocratic parties have never received more than 15 percent of the popular vote - and that was three decades ago. Evidence within all the countries of South Asia provides proof of the proposition that the poor, regardless of faith or ethnicity, seek the means of development, particularly the acquisition of education. Muslims are no exception to this proposition. For instance, the first administrative district to reach 100 percent literacy in the subcontinent was the Muslim-majority district of Malappuram in the Indian state of Kerala.

Finally, one cannot simply blame performance on Pakistan not being a full democracy. The world abounds with more failed than successful democracies, while China provides the most stunning counterexample of a successful dictatorship. Pakistan's current state of governance - in which the military, the courts and parliament share power and the press is relatively free - has been achieved through decades of negotiation and may well be the best framework given its current stage of political maturity.

Yet, there is one difference that may be the real reason for Pakistan's backwardness, and it is now becoming evident - again, by comparison with India. It is linked to bad governance but does not always follow from the democratic tradition. The difference is, in a word, freedom. India provides a good example: The government used to decide how resources were spent, leaving citizens with few choices on careers, education and lifestyles - on participation in their nation's growth. Since the 1990s, the Indian state has worked hard to give its citizens more freedom. The result is an invigorated India.

Pakistan, meanwhile, has moved slowly on freedom. The state has withdrawn from the economy, but now grants favors selectively to the private sector, with the inevitable corollary of massive corruption and loss of freedom of action.

This suggests that Pakistan is only a crucial freedom step away from success. In reality, the immediate future does not look promising because the country's citizens do not have the political will to achieve real change. It is a sad commentary that Pakistan's choices for the next cycle of political rule look like bad ones: the continuation of the present system of quasi-military rule or its replacement with the destructive feudal forces that Benazir Bhutto and Nawaz Sharif represent. Surely, Pakistan's citizens deserve much better - something worth pondering as their nation celebrates turning 60.

Reprinted with permission by The San Jose Mercury News.

Japan's ruling party suffered a historic defeat Sunday. For the first time since the conservative Liberal Democratic Party (LDP) was formed in 1955, an opposition party has become the largest party in the upper house.

The powerful message delivered by Japanese voters has significant implications not only for Japan but also for the rest of the world, not least for its close ally, the United States.

The election result revives momentum in Japan toward creation of a viable two-party system, potentially ending the conservative postwar monopoly on power. Japanese voters expressed deep anxiety about the impact of economic change upon their treasured social order. They embraced the campaign of the Democratic Party (the main opposition) against growing income inequality and the failure of the state to take care of an aging population.

Equally important, the vote was a humiliating defeat for Prime Minister Shinzo Abe's agenda of giving priority to revising Japan's antiwar Constitution and allowing its military to take on a global role in support of the US. Democratic Party leader Ichiro Ozawa effectively portrayed Mr. Abe as a man out of touch with the concerns of ordinary Japanese. But he also articulated an alternative vision of Japan's international role, calling for closer ties to its Asian neighbors and sending troops overseas only under the auspices of United Nations peacekeeping missions.

Since 9/11, Japan has been among the most loyal, if not unquestioning, of US allies. It sent troops to Iraq, provided logistical support to the war in Afghanistan, and outdid the US in putting pressure on North Korea. Most recently, Abe echoed the rhetoric of the Bush administration, calling for formation of a "values-based" alliance of democracies along with India and Australia, implicitly aimed at containing a rising China. The election results will certainly slow, if not reverse, this tight synchronization.

For the business community, the vote will raise concerns that needed economic policy actions such as fiscal reforms will get stalled in a gridlocked parliament. The vote reminds politicians that the economic recovery has left an awful lot of Japanese behind, with real wages falling, youth unemployment high, and the elderly drawing down their savings to survive. Abe's feel-good rhetoric and focus on security just angered those Japanese.

There remains strong support for gradual change. Most Japanese want the country to take on a more "normal" security role, but one that will stop far short of overdrawn fears of a remilitarized Japan. And many Japanese, particularly in the younger generation, back economic reform, though not at the expense of social stability.

The most intriguing question is the future of Japan's democracy. Abe is resisting calls for his resignation, attributing the vote to a series of scandals in his Cabinet and most of all to the revelation that the government's national pension system had lost the records of some 50 million people. The election result was bad luck, Abe claimed, not a repudiation of his administration's overall policies -- a view shared by Washington policymakers.

Exit polls do confirm that voters were strongly motivated by these issues. But they also express little faith in the personal leadership of Abe, who tried to cover up the pension debacle. He suffered from an unfavorable comparison to his predecessor, Junichiro Koizumi, one of Japan's most popular postwar leaders.

But the election suggests that Mr. Koizumi's personal charisma only temporarily reversed a longer trend of drift away from the ruling conservatives, particularly by unaffiliated swing voters in Japan's cities and suburbs. Mr. Ozawa, one of Japan's most brilliant politicians, managed to both regain those voters and steal away traditional conservative backers in rural areas among farmers and pensioners worried about their future.

Ozawa, whom I have known for more than two decades, is a man of uncommon political vision. He is a former LDP stalwart who has relentlessly pursued the goal of creating a clearly defined two-party system that can create real competition. He was the architect of a split in the LDP that briefly brought the opposition to power in the early 1990s.

Over dinner last fall, Ozawa laid out to me what seemed then like an incredibly audacious plan to regain power. First to win a series of local elections, leading up to a defeat of the LDP in the upper house election, forcing in turn the dissolution of the lower house and new elections. He clearly hopes to split the LDP again and pry away its coalition partner, the New Komeito Party, as part of his strategy of realignment.

The Democratic Party has yet to demonstrate its own ability to rule, but it would be unwise to underestimate Ozawa. And it would be foolish to dismiss the desire for change delivered by Japanese voters on Sunday.

Reprinted with permission by the Christian Science Monitor.

Little more than a decade ago, Rowen's answer to the question posed by this essay's title was the year 2015. His assessment, published in the Fall 1996 issue of the National Interest, began by observing that all countries (leaving aside states that make nearly all their money from oil exports) which had attained a Gross Domestic Product per capita (GDPpc) of at least US$8,000 per year (as measured by the Purchasing-Power Parity or PPP standard for the year 1995) stood no worse than Partly Free in the ratings of political rights and civil liberties published annually by Freedom House (FH).

As China's economy was growing at a rate that promised to carry it to a level near or beyond that GDPpc benchmark by 2015, Rowen reasoned that this, the world's largest country, was a good bet to move into the Partly Free category as well. Since then, China has remained deep in Not Free territory even though its civil-liberties score has improved a bit -- from an absolutely abysmal 7 to a still-sorry 6 on the 7-point FH scale -- while its political-rights score has remained stuck at the worst level. Yet today, surveying matters from a point slightly more than midway between 1996 and 2015, Rowen stands by his main conclusion: China will in the short term continue to warrant a Not Free classification, but by 2015 it should edge into the Partly Free category. Indeed, Rowen goes further and predicts that, should China's economy and the educational attainments of its population continue to grow as they have in recent years, the more than one-sixth of the world's people who live in China will by 2025 be citizens of a country correctly classed as belonging to the Free nations of the earth.

The year 2007 marks the 20th anniversary of South Korea's June 10 civil uprising of 1987, and the 10th year since the 1997 Asian financial crisis. To commemorate these occasions, the Korea Herald published a series of contributions from prominent foreign scholars to analyze the significant changes that Korea has undergone during the past two decades. Shorenstein APARC Director Gi-Wook Shin wrote the op-ed below, on the problems of Korean nationalism.

When the Virginia Tech massacre shook American society, Koreans and Korean-Americans alike nervously responded with a deep sense of collective guilt. Many first-generation immigrants took it upon themselves to apologize for the actions of gunman Cho Seung-hui on the grounds that they all share the same Korean ethnicity (meaning blood).

South Korea's ambassador to Washington, Lee Tae-shik, went so far as to say that the Korean- American community needed to "repent," suggesting a 32-day fast, one day for each victim, to prove that Koreans were a "worthwhile ethnic minority in America." The South Korean government offered to send an official delegation to the funerals of the victims.

This episode may seem bizarre or perplexing to non-Koreans since most ethnicities (including Americans) don't have that strong sense of collective responsibility. Yet this incident well illustrates Korea's psyche, i.e., deeply rooted ethnic national identity, which remains strong today.

Korea has been democratizing and globalizing for the last two decades but neither force has weakened the power of nationalism. On the contrary, it has only become stronger.

How can we explain this phenomenon of persistent ethnic nationalism in a country at the forefront of globalization? Where does such a tradition of collectivistic, ethnic identity come from? What are the positive and negative aspects of ethnic nationalism in Korea? How can Korea, as it is becoming a multiethnic society, deal with it in a globalizing world?

Origins and History

Historically Koreans have developed a sense of nation based on shared blood and ancestry. The Korean nation was "ethnicized" or "racialized" through a belief in a common prehistoric origin, producing an intense sense of collective oneness.

Ethnicity is generally regarded as a cultural phenomenon based on a common language and history, and race understood as a collectivity defined by innate and immutable phenotypic and genotypic characteristics. However, Koreans have not differentiated between the two. Instead, race served as a marker that strengthened ethnic identity, which in turn was instrumental in defining the notion of nation. Koreans are said to believe that they all belong to a "unitary nation" ("tanil minjok"), one that is ethnically homogeneous and racially distinctive from its neighbors.

This sense of ethnic homogeneity, contrary to the popular "prehistoric origin" belief, took root in the early 20th century. Faced with imperialist encroachments, from both the East (Japan) and West, Koreans developed the notion of a unitary nation to show its autonomy and uniqueness. For Korea, which had a long history of political, linguistic, and geographic continuity, the internal issues of political integration or geographic demarcation were less important than the threat of imperialism. Enhancement of collective consciousness and internal solidarity among Koreans against the external threat was more urgent. As a result, the ethnic base or racial genealogy of the Korean nation was emphasized.

Sin Chae-ho, a leading nationalist of the time, for instance, presented Korean history as one of the "ethnic nation" ("minjoksa") and traced it to the mythical figure Tangun. According to him, the Korean people were descendants of Tangun Chosun, who merged with the Puy of Manchuria to form the Kogury people. This original blend, Sin contended, remained the ethnic or racial core ("chujok") of the Korean nation, a nation preserved through defense and warfare against outside forces. The nation was defined as "an organic body formed out of the spirit of a people descended through a single pure bloodline" that would last even after losing political sovereignty.

The need to assert the distinctiveness and purity of the Korean nation grew more important under colonial rule, especially as Japan attempted to assimilate Koreans into its empire as "imperial subjects." The assimilation policy was based on colonial racism, which claimed that Koreans and Japanese were of common origin but the former always subordinate.

The theory was used to justify colonialist policies to replace Korean cultural traditions with Japanese ones in order to supposedly get rid of all distinctions and achieve equality between the two nations. Yet colonial assimilation policy meant changing Korean names into Japanese, exclusive use of Japanese language, school instruction in the Japanese ethical system, and Shinto worship. Koreans resented and resisted the policy by asserting their unique and great national heritage. Yi Kwang-su, a leading figure at the time, claimed that bloodline, personality, and culture are three fundamental elements defining a nation and that "Koreans are without a doubt a unitary nation ("tanil han minjok") in blood and culture." Such a view was widely accepted among Koreans: to impugn the natural and unique character of the Korean ethnic nation during colonial rule would have been tantamount to betraying Koreanness in the face of the imperial challenge of an alien ethnic nation. Ironically, Japanese rule reinforced Koreans' claim to a truly distinct and homogeneous ethnic identity.

After independence in 1945, and despite peninsular division into North and South, the unity of the Korean ethnic nation or race was largely taken for granted. Neither side disputed the ethnic base of the Korean nation, spanning thousands of years, based on a single bloodline of the great Han race. Instead, both sides contested for the sole representation of the ethnically homogeneous Korean nation.

Even today, Koreans maintain a strong sense of ethnic homogeneity based on shared blood and ancestry, and nationalism continues to shape Korean politics and foreign relations. Many ethnic Koreans overseas share this sense of ethnic homogeneity, which can explain the response by the Korean American community to the Virginia Tech massacre.

Prize and Price

Ethnic nationalism has been a crucial source of pride and inspiration for the Korean people during the turbulent years of their nation's transition to modernity that involved colonialism, territorial division, war, and dictatorship. It has enhanced collective consciousness and solidarity against external threats and has served Korea's modernization well. Nationalism is also the underlying principle of guiding the current globalization process in the South.

In the North, ethnic national consciousness offered the grounds for the formation of a belief that Koreans are a chosen people, a position that became the epistemological basis for the juche ideology and the recent "theory of the Korean nation as number one." Ethnic nationalism could also play an integrative role in a unification process, as this self-ascribed identity of homogeneity can serve as the basis for the initial impetus toward unification, if not as the stable foundation of a unified Korea.

At the same time, such a blood-based ethnic national identity became a totalitarian force in politics, culture, and society. Individuals were considered only part of an abstract whole, and citizens were asked to sacrifice individual freedom and civil rights for the collectivity.

Nation was also used as a trump card to override other competing identities as well as to justify violations of human and civic rights in both Koreas in the name of the "nation." The power of nationalism has thus hindered cultural and social diversity and tolerance in Korean society.

The dominance of collectivistic, ethnic nationalism constrained space for liberalism in the public sphere. In its formative years of nation building, nationalism developed in opposition to liberalism and these two ideologies were mistakenly positioned against each other. This historical legacy led to the poverty of modern thought in Korea, including liberalism, conservatism, and radicalism. A lack of a liberal base, for instance, made Korean conservatism highly vulnerable to manipulation by authoritarian leaders.

Ironically, the very belief in ethnic unity has also produced tension and conflict between the two Koreas over the last half-century. The prevailing sense of unity in the face of territorial partition has provoked contention over who truly represents the Korean ethnic nation versus who is at fault for undermining that Korean unity. This battle for true national representation helps to explain highly charged inter-Korea conflict, including the Korean War that killed millions of fellows in the name of "national liberation."

Challenges and Future Tasks

Ethnic nationalism will remain an important organizing principle of Korean society. Neither democratization nor globalization has been able to uproot the power of nationalism. It would thus be wrong and dangerous to ignore or underestimate its power, treating it as a mere myth or something to pass away in due course. At the same time, we can't remain simply content with its current role, either.

Instead, it should be recognized that ethnic nationalism has become a dominant force in Korean society and politics and that it can be oppressive and dangerous when fused with racism and other essentialist ideologies. Koreans must strive to find ways to mitigate its potential harmful effects and use it in constructive manner. In particular, Koreans must promote cultural diversity and tolerance, and establish democratic institutions that can contain the repressive, essentialist elements of ethnic nationalism.

This important task is urgent because Korea, on the contrary to popular perception, is becoming a multiethnic society. Today about a half-million migrant labor workers, with the majority coming from China and Southeast Asia, live in the South. Only a decade ago, the number was less than one hundred thousand. Similarly more than one out of 10 marriages is "international," meaning that the spouse is nonethnic Korean (reaching 13.6 percent in 2005). Considering that the figure was only 1.7 percent in 1994, Korea is fast becoming a multiethnic society.

Despite new realities, however, perception and institutions are slow to change. Most Koreans still have stronger attachment to "ethnic Koreans living in foreign countries" than to "ethnic non-Koreans living in Korea." It is also much easier for a Korean-American who to "recover" Korean citizenship than for an Indonesian migrant worker living in Korea to obtain Korean citizenship. This is true even if the Indonesian worker might be more culturally and linguistically Korean than a Korean-American.

The principle of "bloodline" or jus sanguinis still defines the notions of Korean nationhood and citizenship, which are often inseparable in the minds of Koreans. In its formative years, Koreans stressed the ethnic base of nation without a corresponding attention to its civic dimension, i.e. citizenship. After colonial rule, neither state (North or South) paid adequate attention or made serious effort to cultivate a more inclusive notion of citizenship.

Social institutions that can address issues of discrimination against ethnic non-Koreans (e.g., ethnic Chinese known as "hwagyo") have been overlooked and underdeveloped. The Korean nationality law based on jus sanguinis legitimizes consciously or unconsciously discrimination against foreign migrant workers by explicitly favoring ethnic Koreans.

Korea needs to institutionalize a legal system that mitigates unfair practices and discrimination against those who do not supposedly share the Korean blood. Koreans need an institutional framework to promote a national identity that would allow recognition of ethnic diversity and cultural tolerance among the populace, rather than appeal to an ethnic consciousness that tends to encourage a false uniformity and then enforcing conformity to it.

They should envision a society in which they can live together, not simply as fellow ethnic Koreans but as equal citizens of a democratic polity. In fact, it is only a matter of time before Koreans will face serious challenges living in a multiethnic society (e.g., children of ethnically mixed couples, civic rights of migrant labor workers) that it is unprepared to resolve. Preparing for such challenges through public education and legal institutions won't be an easy task and should be an integral part of democratic consolidation processes that are currently under way.

Discussion of unification is premature and problematic if unification occurs without such adjustments. As the German unification experience shows, a shared ethnic identity alone will not be able to prevent North Koreans from becoming "second-class citizens" in a unified Korea. Even worse, because of higher expectations resulting from a shared sense of ethnic unity, a gap between identity (ethnic homogeneity) and practice (second-class citizens) will add more confusion and tension to the unification process.

All said, Koreans should strive to promote ethnic diversity and cultural tolerance, and develop proper legal institution so that all can live together in a multiethnic or unified Korea as equal citizens of a democratic polity. This task will be all the more important and urgent as Korea consolidates democracy, globalizes its economy, and prepares for national unification.

WASHINGTON, May 24 (IPS) - This year the Association of Southeast Asian Nations celebrates its 40th birthday, and it has big plans. After four decades of being largely a political and security alliance, ASEAN is accelerating its plans for economic integration.

ASEAN leaders are so eager to pull together into an economic community that they recently decided to move the goalposts. The economic benchmarks originally planned for 2020 have been moved up to 2015.

"The mission of this economic community is to develop a single market that is competitive, equitably developed, and well integrated in the global economy," says Worapot Manupipatpong, principal economist and director of the office of the Secretary-General in the ASEAN Secretariat. He was speaking last week at an Asian Voices seminar in Washington, DC, sponsored by the Sasakawa Peace Foundation.

The single market of 2015 would encompass all ten members of ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (Burma), Philippines, Singapore, Thailand, and Vietnam. According to the projections of the ASEAN Secretariat, the single market will be accomplished by removing all barriers to the free flow of goods, services, capital, and skilled labor. Rules and regulations will be simplified and harmonised. Member countries will benefit from improved economies of scale. Common investment projects, such as a highway network and the Singapore--Kunming rail link, will facilitate greater trade.

Although there will not be a single currency like the European Union's euro, the ASEAN countries will nevertheless aim for greater currency cooperation.

"ASEAN's process of economic integration was market-driven," says Soedradjad Djiwandono former governor of Bank Indonesia, and it was influenced by the "Washington consensus" favoring increased liberalisation. "It is a very different framework from the closed regionalism of the Latin American model," he continues. With multilateral talks on trade liberalisation stalled, efforts have largely shifted to bilateral negotiations. "There has been a proliferation of bilateral agreements that developed countries use as a way to push a program for liberalising different sectors," Djiwandono concludes.

So far, ASEAN points to increased trade within the ten-member community as an early sign of success. But, overall trade share -- 25 percent -- pales in comparison to the 46 percent share of the North American Free Trade Agreement countries or the 68 percent share of EU countries. And with intra-ASEAN foreign direct investment rather low -- only 6 percent in 2005 -- financial integration lags behind trade integration.

The ASEAN approach differs in several key respects from the EU model, which originated in a 1951 coal and steel agreement among six European nations. ASEAN's origins, in contrast, have been primarily political and security-oriented, observes Donald Emmerson, director of the South-east Asia Forum at the Shorenstein Asia-Pacific Research Center at Stanford. "The success attributed to ASEAN is that it presided over an inter-state peace ever since it was formed. There's never been a war fought between ASEAN members."

Also distinguishing ASEAN from EU is the latter's institutionalisation. "ASEAN is radically different," Emmerson continues. "The much discussed ASEAN way is consultation, not even voting, since if they vote, someone will lose. Sometimes the consultation goes on without result. Sometimes decisions are reduced to the lowest common denominator. It also means that rhetoric predominates." This consultative process will be tested in November, when ASEAN leaders gather to adopt a charter, something that the EU has so far failed to accomplish.

Another difference with Europe is the enormous economic disparities among the ASEAN members, with Singapore and Brunei among the richest countries in the world and Laos among the poorest. These economic disparities are reproduced within the countries as well.

Worapot Manupipatpong points to two ASEAN initiatives for closing the gap. There is help for small and medium-sized enterprises. And the Initiative for ASEAN Integration,"basically provides technical assistance to Cambodia, Laos, and Myanmar so that they can catch up with the rest of the ASEAN members," he says. "Attention will be paid to where these countries can participate in the regional networks, what comparative advantage they have, and how to enhance their capacities to participate in the regional development and supply chain."

Then there are ASEAN's efforts to address "public bads," according to Soedradjad Djiwandono. "When there is a tsunami or a pandemic," he argues, "the worst victims are the marginalised or the poor. Addressing that kind of issue has some positive impact on reducing inequality."

"The gap between the early joiners and the later joiners will continue to be substantial because ASEAN has always been more of a forum and less of a problem-solving organisation," observes Karl Jackson, director of the Asian Studies Program at the School for Advanced International Studies at Johns Hopkins University. "As a result one would expect that these gaps would be closed only as individual countries increase their rates of growth." He attributes the inequality within countries to the middle stage of growth experienced by almost all societies: "Inequality increases before the state becomes strong enough to redivide some of the pie and take care of the gross inequalities caused by rapid economic growth."

ASEAN is banking on financial and trade liberalisation increasing the overall regional pie. On paper it is an ambitious project. But "the low hanging fruit have been plucked," says Donald Emmerson. Tariffs on the "easy commodities" have already been reduced to less than 5 percent. But non-tariff barriers to trade remain, and member countries are very protective of certain sectors.

Also tempering the region's optimism is the memory of the Asian financial crisis. The crisis began in Thailand in 1997 and spread rapidly to other countries in the region. One school of thinking holds that capital mobility -- "hot money" -- either caused or considerably aggravated the crisis. Since the ASEAN integration promises greater capital mobility, will the region be at greater risk of another such crisis?

"One consequence of the economic dynamism of the Asia-Pacific region," notes Donald Emmerson, "is that the accumulation of vast foreign exchange reserves -- obviously in China, but in other countries too -- more than anything else represents an asset that can be brought into the equation as a stabilising factor in the event of a financial crisis." Also, he continues, as a result of the ASEAN plus Three network, which adds China, South Korea, and Japan to the mix, the 13 countries have "made serious headway toward establishing currency swap arrangements that would come into play in an emergency on the scale of an Asian financial crisis."

Karl Jackson also looks to currency reforms as a hedge against future crisis. The Thai baht and the Indonesian rupiah are now unpegged currencies. "You will not have a situation in which the central bank of Thailand loses 34 billion US dollars defending the baht," Jackson argues. "Instead, the baht will appreciate or depreciate according to market forces."

But Jackson still remains cautious about the future. He points to the large number of non-performing loans in the Chinese banking sector. Also, there is "this anomaly of the U.S. absorbing two-thirds of the savings coming out of Asia, plugging it mostly into consumption rather than direct investment," he observes. "Eventually there has to be some kind of readjustment. The real value of the dollar must fall." (END/2007)

Reprinted by permission from IPS Asia-Pacific.