The state and market in the financial sectors of Korea, Malaysia and Thailand

Abstract

In the aftermath of the Asian financial crisis of 1997, many expected the crisis affected countries to reform and restructure their financial systems. In particular, in light of the criticisms about corruption, cronyism, and the weaknesses of the state-business nexus in East Asia, and given the nature of the contemporary global financial system, it was argued that the crisis-stricken economies should become more market-driven. As such, there was an expectation, at least in some quarters, that the Asian economies would adopt features that conformed more closely with a liberal market model. Has this been the case? If indeed forms of state-business relations have material impact on the nature and potential of economic development and growth, as many contend, then it is important to investigate how such relations have changed in the aftermath ofthe Asian financial crisis. This thesis examines the proposition, given the lessons 'learned' from the severe effects of the crisis, that the East Asian economies would converge onto the liberal market model by studying the evolution of the financial sectors of Korea, Malaysia and Thailand in the decade since 1997. It adopts the 'varieties of capitalism' framework to structure the discussion, in particular the variant espoused by Vivien Schmidt as it was specifically formulated to analyse and assess institutional changes in types of capitalisms. The thesis investigates how the financial systems of Korea, Malaysia and Thailand have changed in terms of diversification, the nature of competition, and the regulatory and supervisory frameworks. What has become of the role of the state in the financial sector of these economies? Has there been a convergence onto a liberal market model in these financial systems? Or do they still remain closer to the ideal type of a 'state-influenced market economy'? The thesis provides answers to these questions through a detailed account of the evolution of the financial systems of Korea, Malaysia and Thailand since 1997. Show more