1997 Asian financial crisisFrom Wikipedia, the free encyclopedia

The countries most affected by the 1997 Asian financial crisisThe Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion.

The crisis started in Thailand (well known in Thailand as the Tom Yum Goong crisis; Thai: ) with the financial collapse of the Thai baht after the Thai government was forced to float the baht due to lack of foreign currency to support its fixed exchange rate, cutting its peg to the U.S. dollar, after exhaustive efforts to support it in the face of a severe financial over-extension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency.[1] As the crisis spread, most of Southeast Asia and Japan saw slumping currencies,[2] devalued stock markets and other asset prices, and a precipitous rise in private debt.[3]

Indonesia, South Korea and Thailand were the countries most affected by the crisis. Hong Kong, Laos, Malaysia and the Philippines were also hurt by the slump. Brunei, China, Singapore, Taiwan and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.

Foreign debt-to-GDP ratios rose from 100% to 167% in the four large Association of Southeast Asian Nations (ASEAN) economies in 199396, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13 to 21% and then as high as 40%, while the other northern newly industrialized countries fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.[4]

Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia, however. After 30 years in power, President Suharto was forced to step down on 21 May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The effects of the crisis lingered through 1998. In 1998 the Philippines growth dropped to virtually zero. Only Singapore and Taiwan proved relatively insulated from the shock, but both suffered serious hits in passing, the former more so due to its size and geographical location between Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover.[5] After the 1997 Asian Financial Crisis, economies in the region are working toward financial stability on financial supervision.[6]

Until 1999, Asia attracted almost half of the total capital inflow into developing countries. The economies of Southeast Asia in particular maintained high interest rates attractive to foreign investors looking for a high rate of return. As a result the region's economies received a large inflow of money and experienced a dramatic run-up in asset prices. At the same time, the regional economies of Thailand, Malaysia, Indonesia, Singapore, and South Korea experienced high growth rates, 812% GDP, in the late 1980 and early 1993. This achievement was widely acclaimed by financial institutions including IMF and World Bank, and was known as part of the "Asian economic miracle".

Contents [hide] 1 Credit bubbles and fixed currency exchange rates2 Panic amongst lenders and withdrawal of credit3 IMF role3.1 Economic reforms3.2 IMF and high interest rates4 Thailand5 Indonesia6 South Korea7 Philippines8 Hong Kong9 Malaysia10 Singapore11 China12 United States and Japan13 Consequences13.1 Asia13.2 Outside Asia14 See also15 References16 External linksCredit bubbles and fixed currency exchange rates[edit]The causes of the debacle are many and disputed. Thailand's economy developed into an economic bubble fueled by hot money. More and more was required as the size of the bubble grew. The same type of situation happened in Malaysia, and Indonesia, which had the added complication of what was called "crony capitalism".[7] The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only, not particularly the best suited or most efficient, but those closest to the centers of power.[8]

At the time of the mid-1990s, Thailand, Indonesia and South Korea had large private current account deficits and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.

In the mid-1990s, a series of external shocks began to change the economic environment the devaluation of the Chinese renminbi, and the Japanese yen due to the Plaza Accord of 1985, raising of U.S. interest rates which led to a strong U.S. dollar, the sharp decline in semiconductor prices; adversely affected their growth.[9] As the U.S. economy recovered from a recession in the early 1990s, the U.S. Federal Reserve Bank under Alan Greenspan began to raise U.S. interest rates to head off inflation.

This made the United States a more attractive investment destination relative to Southeast Asia, which had been attracting hot money flows through high short-term interest rates, and raised the value of the U.S. dollar. For the Southeast Asian nations which had currencies pegged to the U.S. dollar, the higher U.S. dollar caused their own exports to become more expensive and less competitive in the global markets. At the same time, Southeast Asia's export growth slowed dramatically in the spring of 1996, deteriorating their current account position.

Some economists have advanced the growing exports of China as a contributing factor to ASEAN nations' export growth slowdown, though these economists maintain the main cause of the crises was excessive real estate speculation.[10] China had begun to compete effectively with other Asian exporters particularly in the 1990s after the implementation of a number of export-oriented reforms. Other economists dispute China's impact, noting that both ASEAN and China experienced simultaneous rapid export growth in the early 1990s.[11]

Many economists believe that the Asian crisis was created not by market psychology or technology, but by policies that distorted incentives within the lenderborrower relationship. The resulting large quantities of credit that became available generated a highly leveraged economic climate, and pushed up asset prices to an unsustainable level.[12] These asset prices eventually began to collapse, causing individuals and companies to default on debt obligations.

Panic amongst lenders and withdrawal of credit[edit]The resulting panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. In addition, as foreign investors attempted to withdraw their money, the exchange market was flooded with the currencies of the crisis countries, putting depreciative pressure on their exchange rates. To prevent currency values collapsing, these countries' governments raised domestic interest rates to exceedingly high levels (to help diminish flight of capital by making lending more attractive to investors) and to intervene in the exchange market, buying up any excess domestic currency at the fixed exchange rate with foreign reserves. Neither of these policy responses could be sustained for long.

Very high interest rates, which can be extremely damaging to an economy that is healthy, wreaked further havoc on economies in an already fragile state, while the central banks were hemorrhaging foreign reserves, of which they had finite amounts. When it became clear that the tide of capital fleeing these countries was not to be stopped, the authorities ceased defending their fixed exchange rates and allowed their currencies to float. The resulting depreciated value of those currencies meant that foreign currency-denominated liabilities grew substantially in domestic currency terms, causing more bankruptcies and further deepening the crisis.

Other economists, including Joseph Stiglitz and Jeffrey Sachs, have downplayed the role of the real economy in the crisis compared to the financial markets. The rapidity with which the crisis happened has prompted Sachs and others to compare it to a classic bank run prompted by a sudden risk shock. Sachs pointed to strict monetary and contractory fiscal policies implemented by the governments on the advice of the IMF in the wake of the crisis, while Frederic Mishkin points to the role of asymmetric information in the financial markets that led to a "herd mentality" among investors that magnified a small risk in the real economy. The crisis has thus attracted interest from behavioral economists interested in market psychology.[13]

Another possible cause of the sudden risk shock may also be attributable to the handover of Hong Kong sovereignty on 1 July 1997. During the 1990s, hot money flew into the Southeast Asia region through financial hubs, especially Hong Kong. The investors were often ignorant of the actual fundamentals or risk profiles of the respective economies, and once the crisis gripped the region, coupled with the political uncertainty regarding the future of Hong Kong as an Asian financial centre led some investors to withdraw from Asia altogether. This shrink in investments only worsened the financial conditions in Asia[14] (subsequently leading to the depreciation of the Thai baht on 2 July 1997).[15]

Several case studies on the topic Application of network analysis of a financial system; explains the interconnectivity of financial markets, and the significance of the robustness of hubs or the main nodes.[16][17][18] Any negative externalities in the hubs creates a ripple effect through the financial system and the economy (and, the connected economies) as a whole.[19][20][21]

The foreign ministers of the 10 ASEAN countries believed that the well co-ordinated manipulation of their currencies was a deliberate attempt to destabilize the ASEAN economies. Former Malaysian Prime Minister Mahathir Mohamad accused George Soros of ruining Malaysia's economy with "massive currency speculation". Soros claims to have been a buyer of the ringgit during its fall, having sold it short in 1997.

At the 30th ASEAN Ministerial Meeting held in Subang Jaya, Malaysia, the foreign ministers issued a joint declaration on 25 July 1997 expressing serious concern and called for further intensification of ASEAN's cooperation to safeguard and promote ASEAN's interest in this regard.[22] Coincidentally, on that same day, the central bankers of most of the affected countries were at the EMEAP (Executive Meeting of East Asia Pacific) meeting in Shanghai, and they failed to make the "New Arrangement to Borrow" operational. A year earlier, the finance ministers of these same countries had attended the 3rd APEC finance ministers meeting in Kyoto, Japan, on 17 March 1996, and according to that joint declaration, they had been unable to double the amounts available under the "General Agreement to Borrow" and the "Emergency Finance Mechanism".

As such, the crisis could be seen as the failure to adequately build capacity in time to prevent currency manipulation. This hypothesis enjoyed little support among economists, however, who argue that no single investor could have had enough impact on the market to successfully manipulate the currencies' values. In addition, the level of organization necessary to coordinate a massive exodus of investors from Southeast Asian currencies in order to manipulate their values rendered this possibility remote.[citation needed]

IMF role[edit]Such was the scope and the severity of the collapses involved that outside intervention, considered by many as a new kind of colonialism,[23] became urgently needed. Since the countries melting down were among not only the richest in their region, but in the world, and since hundreds of billions of dollars were at stake, any response to the crisis was likely to be cooperative and international, in this case through the International Monetary Fund (IMF). The IMF created a series of bailouts ("rescue packages") for the most-affected economies to enable affected nations to avoid default, tying the packages to currency, banking and financial system reforms.[citation needed]

Economic reforms[edit]The IMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values. Above all, it was stipulated that IMF-funded capital had to be administered rationally in the future, with no favored parties receiving funds by preference. In at least one of the affected countries the restrictions on foreign ownership were greatly reduced.[24]

There were to be adequate government controls set up to supervise all financial activities, ones that were to be independent, in theory, of private interest. Insolvent institutions had to be closed, and insolvency itself had to be clearly defined. In addition, financial systems were to become "transparent", that is, provide the kind of reliable financial information used in the West to make sound financial decisions.[25]

As countries fell into crisis, many local businesses and governments that had taken out loans in US dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. The dynamics of the situation were similar to that of the Latin American debt crisis. The effects of the SAPs were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.

The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic loss. They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 20082009 Global Financial Crisis.

Many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast-track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows), maintenance of high domestic interest rates to attract portfolio investment and bank capital, and pegging of the national currency to the dollar to reassure foreign investors against currency risk.[26]

IMF and high interest rates[edit]The conventional high-interest-rate economic wisdom is normally employed by monetary authorities to attain the chain objectives of tightened money supply, discouraged currency speculation, stabilized exchange rate, curbed currency depreciation, and ultimately contained inflation.

In the Asian meltdown, highest IMF officials rationalized their prescribed high interest rates as follows:

From then IMF First Deputy managing director, Stanley Fischer (Stanley Fischer, "The IMF and the Asian Crisis," Forum Funds Lecture at UCLA, Los Angeles on 20 March 1998):

When their governments "approached the IMF, the reserves of Thailand and South Korea were perilously low, and the Indonesian Rupiah was excessively depreciated. Thus, the first order of business was... to restore confidence in the currency. To achieve this, countries have to make it more attractive to hold domestic currency, which in turn, requires increasing interest rates temporarily, even if higher interest costs complicate the situation of weak banks and corporations..."Why not operate with lower interest rates and a greater devaluation? This is a relevant tradeoff, but there can be no question that the degree of devaluation in the Asian countries is excessive, both from the viewpoint of the individual countries, and from the viewpoint of the international system. Looking first to the individual country, companies with substantial foreign currency debts, as so many companies in these countries have, stood to suffer far more from currency (depreciation) than from a temporary rise in domestic interest rates. Thus, on macroeconomics monetary policy has to be kept tight to restore confidence in the currency...."From the then IMF managing director Michel Camdessus ("Doctor Knows Best?" Asiaweek, 17 July 1998, p. 46):

"To reverse (currency depreciation), countries have to make it more attractive to hold domestic currency, and that means temporarily raising interest rates, even if this (hurts) weak banks and corporations."Thailand[edit]Further information: Economy of ThailandFrom 1985 to 1996, Thailand's economy grew at an average of over 9% per year, the highest economic growth rate of any country at the time. Inflation was kept reasonably low within a range of 3.45.7%.[27] The baht was pegged at 25 to the U.S. dollar.

On 14 May and 15 May 1997, the Thai baht was hit by massive speculative attacks. On 30 June 1997, Prime Minister Chavalit Yongchaiyudh said that he would not devalue the baht. This was the spark that ignited the Asian financial crisis as the Thai government failed to defend the baht, which was pegged to the basket of currencies in which the U.S. dollar was the main component,[28] against international speculators.

Thailand's booming economy came to a halt amid massive layoffs in finance, real estate, and construction that resulted in huge numbers of workers returning to their villages in the countryside and 600,000 foreign workers being sent back to their home countries.[29] The baht devalued swiftly and lost more than half of its value. The baht reached its lowest point of 56 units to the U.S. dollar in January 1998. The Thai stock market dropped 75%. Finance One, the largest Thai finance company until then, collapsed.[30]

Without foreign reserves to support the U.S.-Baht currency peg, the Thai government was eventually forced to float the Baht, on 2 July 1997, allowing the value of the Baht to be set by the currency market. On 11 August 1997, the IMF unveiled a rescue package for Thailand with more than $17 billion, subject to conditions such as passing laws relating to bankruptcy (reorganizing and restructuring) procedures and establishing strong regulation frameworks for banks and other financial institutions. The IMF approved on 20 August 1997, another bailout package of $2.9 billion.

By 2001, Thailand's economy had recovered. The increasing tax revenues allowed the country to balance its budget and repay its debts to the IMF in 2003, four years ahead of schedule. The Thai baht continued to appreciate to 29 Baht to the U.S. dollar in October 2010.

Indonesia[edit]See also: Fall of Suharto and Economy of Indonesia

Fall of Suharto: President Suharto resigns, 21 May 1998.In June 1997, Indonesia seemed far from crisis. Unlike Thailand, Indonesia had low inflation, a trade surplus of more than $900 million, huge foreign exchange reserves of more than $20 billion, and a good banking sector. But a large number of Indonesian corporations had been borrowing in U.S. dollars. During the preceding years, as the rupiah had strengthened respective to the dollar, this practice had worked well for these corporations; their effective levels of debt and financing costs had decreased as the local currency's value rose.

In July 1997, when Thailand floated the baht, Indonesia's monetary authorities widened the rupiah currency trading band from 8% to 12%. The rupiah suddenly came under severe attack in August. On 14 August 1997, the managed floating exchange regime was replaced by a free-floating exchange rate arrangement. The rupiah dropped further. The IMF came forward with a rescue package of $23 billion, but the rupiah was sinking further amid fears over corporate debts, massive selling of rupiah, and strong demand for dollars. The rupiah and the Jakarta Stock Exchange touched a historic low in September. Moody's eventually downgraded Indonesia's long-term debt to "junk bond".[31]

Although the rupiah crisis began in July and August 1997, it intensified in November when the effects of that summer devaluation showed up on corporate balance sheets. Companies that had borrowed in dollars had to face the higher costs imposed upon them by the rupiah's decline, and many reacted by buying dollars through selling rupiah, undermining the value of the latter further. In February 1998, President Suharto sacked Bank Indonesia Governor J. Soedradjad Djiwandono, but this proved insufficient. Suharto resigned under public pressure in May 1998 and Vice President B. J. Habibie was elevated in his place. Before the crisis, the exchange rate between the rupiah and the dollar was roughly 2,600 rupiah to 1 U.S. dollar.[32]

The rate plunged to over 11,000 rupiah to 1 U.S. dollar on 9 January 1998, with spot rates over 14,000 during 2326 January and trading again over 14,000 for about six weeks during JuneJuly 1998. On 31 December 1998, the rate was almost exactly 8,000 to 1 U.S. dollar.[33] Indonesia lost 13.5% of its GDP that year.

The crisis also brought independence to East Timor.

South Korea[edit]Further information: Economy of South KoreaThe banking sector was burdened with non-performing loans as its large corporations were funding aggressive expansions. During that time, there was a haste to build great conglomerates to compete on the world stage. Many businesses ultimately failed to ensure returns and profitability. The chaebol, South Korean conglomerates, simply absorbed more and more capital investment. Eventually, excess debt led to major failures and takeovers.

For example, in July 1997, South Korea's third-largest car maker, Kia Motors, asked for emergency loans. In the wake of the Asian market downturn, Moody's lowered the credit rating of South Korea from A1 to A3, on 28 November 1997, and downgraded again to B2 on 11 December. That contributed to a further decline in South Korean shares since stock markets were already bearish in November. The Seoul stock exchange fell by 4% on 7 November 1997. On 8 November, it plunged by 7%, its biggest one-day drop to that date. And on 24 November, stocks fell a further 7.2% on fears that the IMF would demand tough reforms. In 1998, Hyundai Motors took over Kia Motors. Samsung Motors' $5 billion venture was dissolved due to the crisis, and eventually Daewoo Motors was sold to the American company General Motors (GM).

The South Korean won, meanwhile, weakened to more than 1,700 per U.S. dollar from around 800. Despite an initial sharp economic slowdown and numerous corporate bankruptcies, South Korea has managed to triple its per capita GDP in dollar terms since 1997. Indeed, it resumed its role as the world's fastest-growing economysince 1960, per capita GDP has grown from $80 in nominal terms to more than $21,000 as of 2007. However, like the chaebol, South Korea's government did not escape unscathed. Its national debt-to-GDP ratio more than doubled (approximately 13% to 30%) as a result of the crisis.

In South Korea, the crisis is also commonly referred to as IMF.

Philippines[edit]Further information: Economy of the PhilippinesThe Philippine central bank raised interest rates by 1.75 percentage points in May 1997 and again by 2 points on 19 June. Thailand triggered the crisis on 2 July and on 3 July, the Philippine Central Bank intervened to defend the peso, raising the overnight rate from 15% to 32% at the onset of the Asian crisis in mid-July 1997. The peso dropped from 26 pesos per dollar at the start of the crisis to 38 pesos in mid-1999 to 54 pesos as in early August 2001.

The Philippine GDP contracted by 0.6% during the worst part of the crisis, but grew by 3% by 2001, despite scandals of the administration of Joseph Estrada in 2001, most notably the "jueteng" scandal, causing the PSE Composite Index, the main index of the Philippine Stock Exchange, to fall to 1,000 points from a high of 3000 points in 1997. The peso's value declined to about 55 pesos to the U.S. dollar. Later that year, Estrada was on the verge of impeachment but his allies in the senate voted against continuing the proceedings.

This led to popular protests culminating in the "EDSA II Revolution", which effected his resignation and elevated Gloria Macapagal-Arroyo to the presidency. Arroyo lessened the crisis in the country. The Philippine peso rose to about 50 pesos by the year's end and traded at around 41 pesos to a dollar in late 2007. The stock market also reached an all-time high in 2007 and the economy was growing by more than 7 percent, its highest in nearly two decades.

Hong Kong[edit]Further information: Economy of Hong KongIn October 1997, the Hong Kong dollar, which had been pegged at 7.8 to the U.S. dollar since 1983, came under speculative pressure because Hong Kong's inflation rate had been significantly higher than the United States' for years. Monetary authorities spent more than $1 billion to defend the local currency. Since Hong Kong had more than $80 billion in foreign reserves, which is equivalent to 700% of its M1 money supply and 45% of its M3 money supply,[citation needed] the Hong Kong Monetary Authority (effectively the city's central bank) managed to maintain the peg.

Stock markets became more and more volatile; between 20 and 23 October the Hang Seng Index dropped 23%. The Hong Kong Monetary Authority then promised to protect the currency. On 15 August 1998, it raised overnight interest rates from 8% to 23%, and at one point to '280%'.The HKMA had recognized that speculators were taking advantage of the city's unique currency-board system, in which overnight rates automatically increase in proportion to large net sales of the local currency. The rate hike, however, increased downward pressure on the stock market, allowing speculators to profit by short selling shares. The HKMA started buying component shares of the Hang Seng Index in mid-August.

The HKMA and Donald Tsang, then the Financial Secretary, declared war on speculators. The Government ended up buying approximately HK$120 billion (US$15 billion) worth of shares in various companies,[34] and became the largest shareholder of some of those companies (e.g., the government owned 10% of HSBC) at the end of August, when hostilities ended with the closing of the August Hang Seng Index futures contract. In 1999, the Government started selling those shares by launching the Tracker Fund of Hong Kong, making a profit of about HK$30 billion (US$4 billion).

Malaysia[edit]Further information: Economy of MalaysiaIn July 1997, within days of the Thai baht devaluation, the Malaysian ringgit was "attacked" by speculators. The overnight rate jumped from under 8% to over 40%. This led to rating downgrades and a general sell off on the stock and currency markets. By end of 1997, ratings had fallen many notches from investment grade to junk, the KLSE had lost more than 50% from above 1,200 to under 600, and the ringgit had lost 50% of its value, falling from above 2.50 to under 4.57 on (23 January 1998) to the dollar. The then prime minister, Mahathir Mohammad imposed strict capital controls and introduced a 3.80 peg against the U.S. dollar.

Malaysian moves involved fixing the local currency to the U.S. dollar, stopping the overseas trade in ringgit currency and other ringgit assets therefore making offshore use of the ringgit invalid, restricting the amount of currency and investments that residents can take abroad, and imposed for foreign portfolio funds, a minimum one-year "stay period" which since has been converted to an exit tax. The decision to make ringgit held abroad invalid has also dried up sources of ringgit held abroad that speculators borrow from to manipulate the ringgit, for example by "selling short". Those who do, have to purchase back the limited ringgit at higher prices, making it unattractive to them.[35] In addition, it also fully suspended the trading of CLOB (Central Limit Order Book) counters, indefinitely freezing approximately $4.47 billion worth of shares and affecting 172,000 investors, most of them Singaporeans.[36][37][38]

In 1998, the output of the real economy declined plunging the country into its first recession for many years. The construction sector contracted 23.5%, manufacturing shrunk 9% and the agriculture sector 5.9%. Overall, the country's gross domestic product plunged 6.2% in 1998. During that year, the ringgit plunged below 4.7 and the KLSE fell below 270 points. In September that year, various defensive measures were announced to overcome the crisis.

The principal measure taken were to move the ringgit from a free float to a fixed exchange rate regime. Bank Negara fixed the ringgit at 3.8 to the dollar. Capital controls were imposed while aid offered from the IMF was refused. Various task force agencies were formed. The Corporate Debt Restructuring Committee dealt with corporate loans. Danaharta discounted and bought bad loans from banks to facilitate orderly asset realization. Danamodal recapitalized banks.

Growth then settled at a slower but more sustainable pace. The massive current account deficit became a fairly substantial surplus. Banks were better capitalized and NPLs were realised in an orderly way. Small banks were bought out by strong ones. A large number of PLCs were unable to regulate their financial affairs and were delisted. Compared to the 1997 current account, by 2005, Malaysia was estimated to have a $14.06 billion surplus.[39] Asset values however, have not returned to their pre-crisis highs. In 2005 the last of the crisis measures were removed as taken off the fixed exchange system. But unlike the pre-crisis days, it did not appear to be a free float, but a managed float, like the Singapore dollar.

Singapore[edit]Further information: Economy of SingaporeAs the financial crisis spread the economy of Singapore dipped into a short recession. The short duration and milder effect on its economy was credited to the active management by the government. For example, the Monetary Authority of Singapore allowed for a gradual 20% depreciation of the Singapore dollar to cushion and guide the economy to a soft landing. The timing of government programs such as the Interim Upgrading Program and other construction related projects were brought forward.[40]

Instead of allowing the labor markets to work, the National Wage Council pre-emptively agreed to Central Provident Fund cuts to lower labor costs, with limited impact on disposable income and local demand. Unlike in Hong Kong, no attempt was made to directly intervene in the capital markets and the Straits Times Index was allowed to drop 60%. In less than a year, the Singaporean economy fully recovered and continued on its growth trajectory.[40]

The crisis has also brought the pilot of SilkAir Flight 185, Tsu Way Ming, to commit an in-flight murder suicide after he lost so much money in the stock market.

China[edit]Further information: Economy of the People's Republic of ChinaThe Chinese currency, the renminbi (RMB), had been pegged to the U.S. dollar at a ratio of 8.3 RMB to the dollar, in 1994. Having largely kept itself above the fray throughout 19971998 there was heavy speculation in the Western press that China would soon be forced to devalue its currency to protect the competitiveness of its exports vis-a-vis those of the ASEAN nations, whose exports became cheaper relative to China's. However, the RMB's non-convertibility protected its value from currency speculators, and the decision was made to maintain the peg of the currency, thereby improving the country's standing within Asia. The currency peg was partly scrapped in July 2005 rising 2.3% against the dollar, reflecting pressure from the United States.

Unlike investments of many of the Southeast Asian nations, almost all of China's foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapid capital flight. While China was unaffected by the crisis compared to Southeast Asia and South Korea, GDP growth slowed sharply in 1998 and 1999, calling attention to structural problems within its economy. In particular, the Asian financial crisis convinced the Chinese government of the need to resolve the issues of its enormous financial weaknesses, such as having too many non-performing loans within its banking system, and relying heavily on trade with the United States.

United States and Japan[edit]Further information: Economy of the United States and Economy of JapanThe "Asian flu" had also put pressure on the United States and Japan. Their markets did not collapse, but they were severely hit. On 27 October 1997, the Dow Jones industrial plunged 554 points or 7.2%, amid ongoing worries about the Asian economies. The New York Stock Exchange briefly suspended trading. The crisis led to a drop in consumer and spending confidence (see 27 October 1997 mini-crash). Indirect effects included the dot-com bubble, and years later the housing bubble and the subprime mortgage crisis.[41]

Japan was affected because its economy is prominent in the region. Asian countries usually run a trade deficit with Japan because the latter's economy was more than twice the size of the rest of Asia together; about 40% of Japan's exports go to Asia. The Japanese yen fell to 147 as mass selling began, but Japan was the world's largest holder of currency reserves at the time, so it was easily defended, and quickly bounced back. The real GDP growth rate slowed dramatically in 1997, from 5% to 1.6%, and even sank into recession in 1998 due to intense competition from cheapened rivals. The Asian financial crisis also led to more bankruptcies in Japan. In addition, with South Korea's devalued currency, and China's steady gains, many companies complained outright that they could not compete.[41]

Another longer-term result was the changing relationship between the United States and Japan, with the United States no longer openly supporting the highly artificial trade environment and exchange rates that governed economic relations between the two countries for almost five decades after World War II.[42]

Consequences[edit]Asia[edit]The crisis had significant macroeconomic-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries.[43] The nominal U.S. dollar GDP of ASEAN fell by $9.2 billion in 1997 and $218.2 billion (31.7%) in 1998. In South Korea, the $170.9 billion fall in 1998 was equal to 33.1% of the 1997 GDP.[44] Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 19971998. Indonesia, South Korea and Thailand were the countries most affected by the crisis.

CurrencyExchange rate(per US$1)[45]ChangeJune 1997July 1998Thailand Thai baht24.541Decrease 40.2%Indonesia Indonesian rupiah2,38014,150Decrease 83.2%Philippines Philippine peso26.342Decrease 37.4%Malaysia Malaysian ringgit2.54.1Decrease 39.0%South Korea South Korean won8501,290Decrease 34.1%CountryGNP (US$1 billion)[45]ChangeJune 1997July 1998 Thailand170102Decrease 40.0% Indonesia20534Decrease 83.4% Philippines7547Decrease 37.3% Malaysia9055Decrease 38.9% South Korea430283Decrease 34.2%The above tabulation shows that despite the prompt raising of interest rates to 32% in the Philippines upon the onset of crisis in mid-July 1997, and to 65% in Indonesia upon the intensification of crisis in 1998, their local currencies depreciated just the same and did not perform better than those of South Korea, Thailand, and Malaysia, which countries had their high interest rates set at generally lower than 20% during the Asian crisis. This created grave doubts on the credibility of IMF and the validity of its high-interest-rate prescription to economic crisis.

The economic crisis also led to a political upheaval, most notably culminating in the resignations of President Suharto in Indonesia and Prime Minister General Chavalit Yongchaiyudh in Thailand. There was a general rise in anti-Western sentiment, with George Soros and the IMF in particular singled out as targets of criticisms. Heavy U.S. investment in Thailand ended, replaced by mostly European investment, though Japanese investment was sustained.[citation needed] Islamic and other separatist movements intensified in Southeast Asia as central authorities weakened.[46]

New regulations weakened the influence of the bamboo network, a network of overseas Chinese family-owned businesses that dominate the private sector of Southeast Asia. After the crisis, business relationships were more frequently based on contracts, rather than the trust and family ties of the traditional bamboo network.[47]

More long-term consequences included reversal of the relative gains made in the boom years just preceding the crisis. Nominal U.S. dollar GDP per capital fell 42.3% in Indonesia in 1997, 21.2% in Thailand, 19% in Malaysia, 18.5% in South Korea and 12.5% in the Philippines.[44] The CIA World Factbook reported that the per capita income (measured by purchasing power parity) in Thailand declined from $8,800 to $8,300 between 1997 and 2005; in Indonesia it increased from $2,628 to $3,185;[48] in Malaysia it declined from $11,100 to $10,400. Over the same period, world per capita income rose from $6,500 to $9,300.[49] Indeed, the CIA's analysis asserted that the economy of Indonesia was still smaller in 2005 than it had been in 1997, suggesting an impact on that country similar to that of the Great Depression. Within East Asia, the bulk of investment and a significant amount of economic weight shifted from Japan and ASEAN to China and India.[50]

The crisis has been intensively analyzed by economists for its breadth, speed, and dynamism; it affected dozens of countries, had a direct impact on the livelihood of millions, happened within the course of a mere few months, and at each stage of the crisis leading economists, in particular the international institutions, seemed a step behind. Perhaps more interesting to economists was the speed with which it ended, leaving most of the developed economies unharmed. These curiosities have prompted an explosion of literature about financial economics and a litany of explanations why the crisis occurred. A number of critiques have been leveled against the conduct of the IMF in the crisis, including one by former World Bank economist Joseph Stiglitz. Politically there were some benefits. In several countries, particularly South Korea and Indonesia, there was renewed push for improved corporate governance. Rampaging inflation weakened the authority of the Suharto regime and led to its toppling in 1998, as well as accelerating East Timor's independence.[51]

Outside Asia[edit]After the Asian crisis, international investors were reluctant to lend to developing countries, leading to economic slowdowns in developing countries in many parts of the world. The powerful negative shock also sharply reduced the price of oil, which reached a low of about $11 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters. In response to a severe fall in oil prices, the supermajors that emerged in the late-1990s, undertook some major mergers and acquisitions between 1998 and 2002 often in an effort to improve economies of scale, hedge against oil price volatility, and reduce large cash reserves through reinvestment.[52]

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis).[53]

The crisis in general was part of a global backlash against the Washington Consensus and institutions such as the IMF and World Bank, which simultaneously became unpopular in developed countries following the rise of the anti-globalization movement in 1999. Four major rounds of world trade talks since the crisis, in Seattle, Doha, Cancn, and Hong Kong, have failed to produce a significant agreement as developing countries have become more assertive, and nations are increasingly turning toward regional or bilateral free trade agreements (FTAs) as an alternative to global institutions.

Many nations learned from this, and quickly built up foreign exchange reserves as a hedge against attacks, including Japan, China, South Korea. Pan Asian currency swaps were introduced in the event of another crisis. However, interestingly enough, such nations as Brazil, Russia, and India as well as most of East Asia began copying the Japanese model of weakening their currencies, restructuring their economies so as to create a current account surplus to build large foreign currency reserves. This has led to an ever-increasing funding for U.S. treasury bonds, allowing or aiding housing (in 20012005) and stock asset bubbles (in 19962000) to develop in the United States.

Minangkabau peopleFrom Wikipedia, the free encyclopediaMinangkabauUrang MinangAdityawarman.jpgAdityawarmanRohana Kudus.jpgRohana KudusImam Bonjol in 5000 IDR.jpgImam BonjolRasuna Said.jpgRasuna SaidSoetanSjahrir.jpgSutan SyahrirMohammad Natsir1.jpgMohammad NatsirMohammad Hatta 1950.jpgMohammad HattaAgus Salim headshot.jpgHaji Agus SalimTanMalaka DariPendjara ed3.jpgTan MalakaChairil Anwar cigarette.jpgChairil AnwarBuya Hamka.jpgHamkaUsmar Ismail Kesusastraan Modern Indonesia p133.jpgUsmar IsmailGhazali Shafie (crop).jpgGhazali ShafieRais Yatim cropped.jpgRais YatimChristine Hakim.jpgChristine HakimIndra-live-pic2.jpgIndra LesmanaTotal populationcirca 8 million[1]Regions with significant populationsIndonesia (2010 census)6,462,713[2] West Sumatra4,281,439 Riau624,145 North Sumatra345,403 Jakarta305,538 West Java202,203 Jambi168,947 Riau Islands156,770 Banten86,217 Bengkulu73,333 South Sumatra69,996 Lampung69,884Malaysia891,000[3]Singapore15,720LanguagesMinangkabau, Indonesian and Malay.ReligionSunni Islam[4]Related ethnic groupsMalays, Mandailing, KerinciMinangkabau people (Minangkabau: Urang Minang, Indonesian: Suku Minang, Jawi:), also known as Minang is an ethnic group indigenous to the Minangkabau Highlands of West Sumatra, Indonesia. Their culture is both matrilineal and patriarchal, with property and land passing down from mother to daughter, while religious and political affairs are the responsibility of men (although some women also play important roles in these areas. This custom is called Adat perpatih in Malaysia and Lareh Bodi Caniago in Indonesia. Today 4 million Minangs live in West Sumatra, while about 4 million more are scattered throughout many Indonesian and Malay peninsular cities and towns.

The Minangkabau are famous for their dedication to education, as well the widespread diaspora of their men throughout southeast Asia, the result being that Minangs have been disproportionately successful in gaining positions of economic and political power throughout the region. The co-founder of the Republic of Indonesia, Mohammad Hatta, was a Minang, as were the first modern heads of state of both Malaysia and Singapore

The Minangkabau are strongly Islamic, but also follow their ethnic traditions, or adat. The Minangkabau adat was derived from animist and Hindu-Buddhist beliefs before the arrival of Islam, and remnants of animist beliefs still exist even among some practising Muslims. The present relationship between Islam and adat is described in the saying "tradition [adat] founded upon Islamic law, Islamic law founded upon the Qur'an" (adat basandi syara', syara' basandi Kitabullah).

As one of the world's most populous (and politically and economically influential) matrilineal ethnicity, Minangkabau gender dynamics have been extensively studied by anthropologists. The adat (Minangkabau: Adaik) traditions have allowed Minangkabau women to hold a relatively advantageous position in their society compared to most patriarchal societies, as most property and other economic assets pass though female lines. With the arrival of the Dutch and other Muslim races, the traditions have been gradually influenced by both western and conservative Islamic thought.

Their West Sumatran homelands were the location of the Padri War from 1821 to 1837.

Contents [hide] 1 Etymology2 History3 Historiography4 Culture4.1 Ceremonies and festivals4.2 Performing arts4.3 Crafts4.4 Cuisine4.5 Architecture4.6 Oral traditions and literature5 Language6 Adat and religion7 Notable Minangkabau8 See also9 References9.1 General9.2 Notes10 Further reading11 External linksEtymology[edit]Main article: Minangkabau (legend)The name Minangkabau is thought to be a conjunction of two words, minang ("victorious") and kabau ("buffalo"). There is a legend that the name is derived from a territorial dispute between the Minangkabau and a neighbouring prince. To avoid a battle, the local people proposed a fight to the death between two water buffalo to settle the dispute. The prince agreed and produced the largest, meanest, most aggressive buffalo. The Minangkabau produced a hungry baby buffalo with its small horns ground to be as sharp as knives. Seeing the adult buffalo across the field, the baby ran forward, hoping for milk. The big buffalo saw no threat in the baby buffalo and paid no attention to it, looking around for a worthy opponent. But when the baby thrust his head under the big bull's belly, looking for an udder, the sharpened horns punctured and killed the bull, and the Minangkabau won the contest and the dispute.

The roofline of traditional houses in West Sumatra, called Rumah Gadang (Minangkabau, "big house"), curve upward from the middle and end in points, in imitation of the water buffalo's upward-curving horns.

The first mention of the name Minangkabau as Minangkabwa, is in the 1365 Majapahit court poem, the Desawarnana (or Nagarakrtagama) composed by Mpu Prapanca.[5]

History[edit]

A statue believed to be Adityawarman, founder of a Minangkabau kingdom.

Flag or marawa of MinangkabauThe Minangkabau language is a member of the Austronesian language family, and is closest to the Malay language, though when the two languages split from a common ancestor and the precise historical relationship between Malay and Minangkabau culture is not known. Until the 20th century the majority of the Sumatran population lived in the highlands. The highlands are well suited for human habitation, with plentiful fresh water, fertile soil, a cool climate, and valuable commodities. It is probable that wet rice cultivation evolved in the Minangkabau Highlands long before it appeared in other parts of Sumatra, and predates significant foreign contact.[6]

Adityawarman, a follower of Tantric Buddhism with ties to the Singhasari and Majapahit kingdoms of Java, is believed to have founded a kingdom in the Minangkabau highlands at Pagaruyung and ruled between 1347 and 1375. The establishment of a royal system seems to have involved conflict and violence, eventually leading to a division of villages into one of two systems of tradition, Bodi Caniago and Koto Piliang, the later having overt allegiances to royalty.[7] By the 16th century, the time of the next report after the reign of Adityawarman, royal power had been split into three recognised reigning kings. They were the King of the World (Raja Alam), the King of Adat (Raja Adat), and the King of Religion (Raja Ibadat), and collectively they were known as the Kings of the Three Seats (Rajo Tigo Selo).[8] The Minangkabau kings were charismatic or magical figures, but did not have much authority over the conduct of village affairs.[7][9]

Tuanku Imam Bonjol, a leader in the Padri War.It was around the 16th century that Islam started to be adopted by the Minangkabau. The first contact between the Minangkabau and western nations occurred with the 1529 voyage of Jean Parmentier to Sumatra. The Dutch East India Company first acquired gold at Pariaman in 1651, but later moved south to Padang to avoid interference from the Acehnese occupiers. In 1663 the Dutch agreed to protect and liberate local villages from the Acehnese in return for a trading monopoly, and as a result setup trading posts at Painan and Padang. Until early in the 19th century the Dutch remained content with their coastal trade of gold and produce, and made no attempt to visit the Minangkabau highlands. As a result of conflict in Europe, the British occupied Padang from 1781 to 1784 during the Fourth Anglo-Dutch War, and again from 1795 to 1819 during the Napoleonic Wars.

Late in the 18th century the gold supply which provided the economic base for Minangkabau royalty began to be exhausted. Around the same time other parts of the Minangkabau economy had a period of unparalleled expansion as new opportunities for the export of agricultural commodities arose, particularly with coffee which was in very high demand. A civil war started in 1803 with the Padri fundamentalist Islamic group in conflict with the traditional syncretic groups, elite families and Pagaruyung royals. As a result of a treaty with a number of penghulu and representatives of the Minangkabau royal family, Dutch forces made their first attack on a Padri village in April 1821.[7] The first phase of the war ended in 1825 when the Dutch signed an agreement with the Padri leader Tuanku Imam Bonjol to halt hostilities, allowing them to redeploy their forces to fight the Java War. When fighting resumed in 1832, the reinforced Dutch troops were able to more effectively attack the Padri. The main centre of resistance was captured in 1837, Tuanku Imam Bonjol was captured and exiled soon after, and by the end of the next year the war was effectively over.

Minangkabau chiefs, picture taken between 1910 and 1930With the Minangkabau territories now under the control of the Dutch, transportation systems were improved and economic exploitation was intensified. New forms of education were introduced, allowing some Minangkabau to take advantage of a modern education system. The 20th century marked a rise and cultural and political nationalism, culminating in the demand for Indonesian independence. Later rebellions against the Dutch occupation occurred such as the 1908 Anti-Tax Rebellion and the 1927 Communist Uprising. During World War II the Minangkabau territories were occupied by the Japanese, and when the Japanese surrendered in August 1945 Indonesia proclaimed independence. The Dutch attempts to regain control of the area were ultimately unsuccessful and in 1949 the Minangkabau territories became part of Indonesia as the province of Central Sumatra.

In February 1958, dissatisfaction with the centralist and communist-leaning policies of the Sukarno administration triggered a revolt which was centred in the Minangkabau region of Sumatra, with rebels proclaiming the Revolutionary Government of the Republic of Indonesia (PRRI) in Bukittinggi. The Indonesian military invaded West Sumatra in April 1958 and had recaptured major towns within the next month. A period of guerrilla warfare ensued, but most rebels had surrendered by August 1961. In the years following, West Sumatra was like an occupied territory with Javanese officials occupying most senior civilian, military and police positions.[10] The policies of centralisation continued under the Suharto regime. The national government legislated to apply the Javanese desa village system throughout Indonesia, and in 1983 the traditional Minangkabau nagari village units were split into smaller jorong units, thereby destroying the traditional village social and cultural institutions.[11] In the years following the downfall of the Suharto regime decentralisation policies were implemented, giving more autonomy to provinces, thereby allowing West Sumatra to reinstitute the nagari system.[12]

Historiography[edit]

The village of Pariangan, located on the slopes of Mount Marapi, is in folklore said to be the first Minangkabau village.The traditional historiography or tambo of the Minangkabau tells of the development of the Minangkabau World (alam Minangkabau) and its adat. These stories are derived from an oral history which was transmitted between generations before the Minangkabau had a written language. The first Minangkabau are said to have arrived by ship and landed on Mount Marapi when it was no bigger than the size of an egg, which protruded from a surrounding body of water. After the waters receded the Minangkabau proliferated and dispersed to the slopes and valleys surrounding the volcano, a region called the darek. The darek is composed of three luhak - Tanah Datar, Agam and Limapuluh Koto. The tambo claims the ship was sailed by a descendant of Alexander the Great (Iskandar Zulkarnain).[13]

A division in Minangkabau adat into two systems is said to be the result of conflict between two half-brothers Datuk Ketemanggungan and Datuk Perpatih nan Sabatang, who were the leaders who formulated the foundations of Minangkabau adat. The former accepted Adityawarman, a prince from Majapahit, as a king while the latter considered him a minister, and a civil war ensued. The Bodi Caniago/Adat perpatih system formulated by Datuk Perpatih nan Sabatang is based upon egalitarian principles with all panghulu (clan chiefs) being equal while the Koto Piliang /Adat Temenggung system is more autocratic with there being a hierarchy of panghulu. Each village (nagari) in the darek was an autonomous "republic", and governed independently of the Minangkabau kings using one of the two adat systems. After the darek was settled, new outside settlements were created and ruled using the Koto Piliang system by rajas who were representatives of the king.[13]

Culture[edit]

Minangkabau men in traditional Minangkabau clothes

Minangkabau women clad in traditional Minang costumesMinangkabau have large corporate descent groups, but they traditionally reckon descent matrilineally.[14] A young boy, for instance, has his primary responsibility to his mother's and sisters' clans.[14] It is considered "customary" and ideal for married sisters to remain in their parental home, with their husbands having a sort of visiting status. Not everyone lives up to this ideal, however.[14] In the 1990s, anthropologist Evelyn Blackwood studied a relatively conservative village[citation needed] in Sumatera Barat where only about 22 percent of the households were "matrihouses", consisting of a mother and a married daughter or daughters.[14] Nonetheless, there is a shared ideal among Minangkabau in which sisters and unmarried lineage members try to live close to one another or even in the same house.[14]

Landholding is one of the crucial functions of the suku (female lineage unit). Because Minangkabau men, like Acehnese men, often migrate to seek experience, wealth, and commercial success, the women's kin group is responsible for maintaining the continuity of the family and the distribution and cultivation of the land.[14] These family groups, however, are typically led by a penghulu (headman), elected by groups of lineage leaders.[14] With the agrarian base of the Minangkabau economy in decline, the sukuas a landholding unithas also been declining somewhat in importance, especially in urban areas.[14] Indeed, the position of penghulu is not always filled after the death of the incumbent, particularly if lineage members are not willing to bear the expense of the ceremony required to install a new penghulu.[14]

The Minangs are the world's largest matrilineal society; properties such as land and houses are inherited through female lineage and guarded by clanmen. This custom is called Adat perpatih. Some scholars argue that this might have caused the diaspora (Minangkabau, "merantau") of Minangkabau males throughout the Maritime Southeast Asia to become scholars or to seek fortune as merchants. However, the native Minangkabaus agreed that this matrilineal culture is indeed the result of (not the reason for) diaspora. With their men travelling out of the country for unspecified time (with possibility of some of them not returning home), it is only logical to hand the land and property to those who do not have to leave it: The women. This also ensures the women's (meaning: mothers of the future generations') welfare and hence ensuring their offsprings welfare. Besides, native Minangkabaus argue that "Men can live anywhere and hence they do not need a house like women do". The concept of matrilineal can be seen from the naming of important museums such as "The house where Buya Hamka was born" by Maninjau Lake. It has never been and never will be Buya Hamka's house because it was his mother's house and passed down only to his sisters. Another museum in Bukit Tinggi was called by the locals: "Muhammad Hatta's Mom's house" where you will see that Muhammad Hatta (the Indonesia's Independence Proclamator) only had a room outside of the house, albeit attached to it.[citation needed]

As early as the age of 7, boys traditionally leave their homes and live in a surau (a prayer house and community centre) to learn religious and cultural (adat) teachings. When they are teenagers, they are encouraged to leave their hometown to learn from schools or from experiences out of their hometown so that when they are adults they can return home wise and 'useful' for the society and can contribute their thinking and experience to run the family or nagari (hometown) when they sit as the member of 'council of uncles'. This tradition has created Minang communities in many Indonesian cities and towns, which nevertheless are still tied closely to their homeland; a state in Malaysia named Negeri Sembilan is heavily influenced by Minang culture because Negeri Sembilan was originally Minangkabau's colony.[15]

The traditions of shariain which inheritance laws favour males and indigenous female-oriented adat are often depicted as conflicting forces in Minangkabau society.[14] The male-oriented sharia appears to offer young men something of a balance against the dominance of law in local villages, which forces a young man to wait passively for a marriage proposal from some young woman's family.[14] By acquiring property and education through merantau experience, a young man can attempt to influence his own destiny in positive ways.[14]

Increasingly, married couples go off on merantau; in such situations, the woman's role tends to change.[14] When married couples reside in urban areas or outside the Minangkabau region, women lose some of their social and economic rights in property. One apparent consequence is an increased likelihood of divorce.[14]

Minangkabau were prominent among the intellectual figures in the Indonesian independence movement.[14] Not only were they strongly Islamic (meaning: Their religious belief is different from the occupying Protestant Dutch), and like every other Sumatran: They are culturally and naturally proud people, they also have traditional belief of egalitarianism of "Standing as tall, sitting as low" (that no body stand or sit on an increased stage), they speak a language closely related to Bahasa Indonesia, which was considerably freer of hierarchical connotations than Javanese.[14] Partly because of their tradition of merantau, Minangkabau developed a cosmopolitan bourgeoisie that readily adopted and promoted the ideas of an emerging nation-state.[14]

Due to their culture that stresses the importance of learning, Minang people are over-represented in the educated professions in Indonesia, with many ministers from Minang.[16]

In addition to being renowned as merchants, the Minangs have produced some of Indonesia's most influential poets, writers, statesmen, scholars, and religious scholars. Being fervent Muslims, many of them embraced the idea of incorporating Islamic ideals into modern society. Furthermore, the presence of these intellectuals combined with the people's basically proud character, made the Minangkabau homeland (the province of West Sumatra) one of the powerhouses in the Indonesian struggle for independence.[citation needed]

Ceremonies and festivals[edit]

Tabuik ceremony.

Women carrying platters of food to a ceremony

Rakik Lampion in Maninjau LakeMinangkabau ceremonies and festivals include:

Turun mandi - baby blessing ceremonySunat rasul - circumcision ceremonyBaralek - wedding ceremonyBatagak pangulu - clan leader inauguration ceremony. Other clan leaders, all relatives in the same clan and all villagers in the region are invited. The ceremony lasts for seven days or more.Turun ka sawah - community work ceremonyManyabik - harvesting ceremonyHari Rayo - Islamic festivalsAdoption ceremonyAdat ceremonyFuneral ceremonyWild boar hunt ceremonyMaanta pabukoan - sending food to mother-in-law for RamadhanTabuik - Muslim celebration in the coastal village of PariamanTanah Ta Sirah, inaugurate a new clan leader (Datuk) when the old one died in the few hours (no need to proceed batagak pangulu, but the clan must invite all clan leader in the region).Mambangkik Batang Tarandam, inaugurate a new leader (Datuk) when the old one died in the pass 10 or 50 years and even more, must do the Batagak Pangulu.Performing arts[edit]

Saluang performanceTraditional Minangkabau music includes saluang jo dendang which consists of singing to the accompaniment of a saluang bamboo flute, and talempong gong-chime music. Dances include the tari piring (plate dance), tari payung (umbrella dance) and tari indang (also known as endang or badindin). Demonstrations of the silat martial art are performed. Pidato adat are ceremonial orations performed at formal occasions.

Randai is a folk theatre tradition which incorporates music, singing, dance, drama and the silat martial art. Randai is usually performed for traditional ceremonies and festivals, and complex stories may span a number of nights.[17] It is performed as a theatre-in-the-round to achieve an equality and unity between audience members and the performers.[18] Randai performances are a synthesis of alternating martial arts dances, songs, and acted scenes. Stories are delivered by the acting and singing and are mostly based upon Minangkabau legends and folktales.[17] Randai originated early in the 20th century out of fusion of local martial arts, storytelling and other performance traditions.[19] Men originally played male and female characters in the story but, since the 1960s, women have participated.[17]

Crafts[edit]

Minangkabau songket, the pattern in the lower third representing bamboo sprouts

West Sumatra grand mosque with Minangkabau-modern style.Particular Minangkabau villages specialise in cottage industries producing handicrafts such as woven sugarcane and reed purses, gold and silver jewellery using filigree and granulation techniques, woven songket textiles, wood carving, embroidery, pottery, and metallurgy.

Cuisine[edit]Main article: Minangkabau cuisine

Rendang

Minangkabau CuisineThe staple ingredients of the Minangkabau diet are rice, fish, coconut, green leafy vegetables and chili. Meat is mainly limited to special occasions, and beef and chicken are most commonly used. Pork is not halal and not consumed, while lamb, goat and game are rarely consumed for reasons of taste and availability. Spiciness is a characteristic of Minangkabau food: The most commonly used herbs and spices are chili, turmeric, ginger and galangal. Vegetables are consumed two or three times a day. Fruits are mainly seasonal, although fruits such as banana, papaya and citrus are continually available.[20]

Three meals a day are typical with lunch being the most important, except during the fasting month of Ramadan when lunch is not eaten. Meals commonly consist of steamed rice, a hot fried dish and a coconut milk dish, with a little variation from breakfast to dinner.[20] Meals are generally eaten from a plate using the fingers of the right hand.[citation needed] Snacks are more frequently eaten by people in urban areas than in villages. Western food has had little impact upon Minangkabau consumption and preference.[20]

Rendang is a dish which is considered to be a characteristic of Minangkabau culture; it is cooked 4-5 times a year.[20] Other characteristic dishes include Asam Padeh, Soto Padang, Sate Padang, Dendeng Balado (beef with chili sauce).

Food has a central role in the Minangkabau ceremonies which honour religious and life-cycle rites.

Minangkabau food is popular among Indonesians and restaurants are present throughout Indonesia. Nasi Padang restaurants, named after the capital of West Sumatra, are known for placing a variety of Minangkabau dishes on a customer's tablewith rice and billing only for what is taken.[21] Nasi Kapau is another restaurant variant which specialises in dishes using offal and tamarind to add a sourness to the spicy flavour.[22]

Architecture[edit]

Rumah gadang in the Pandai Sikek village of West Sumatra, with two rice barns (rangkiang) in front.Rumah gadang (Minangkabau: 'big house') or rumah bagonjong (Minangkabau: 'spired roof house') are the traditional homes of the Minangkabau. The architecture, construction, internal and external decoration, and the functions of the house reflect the culture and values of the Minangkabau. A rumah gadang serves as a residence, a hall for family meetings, and for ceremonial activities. The rumah gadang is owned by the women of the family who live there ownership is passed from mother to daughter.[23]

The houses have dramatic curved roof structure with multi-tiered, upswept gables. According to Minangkabau tradition, the roof shapes was meant to mimic the horns of buffalo. Shuttered windows are built into walls incised with profuse painted floral carvings. The term rumah gadang usually refers to the larger communal homes, however, smaller single residences share many of its architectural elements.

Oral traditions and literature[edit]

A Minangkabau bride and groom.Minangkabau culture has a long history of oral traditions. One is the pidato adat (ceremonial orations) which are performed by panghulu (clan chiefs) at formal occasions such as weddings, funerals, adoption ceremonies, and panghulu inaugurations. These ceremonial orations consist of many forms including pantun, aphorisms (papatah-patitih), proverbs (pameo), religious advice (petuah), parables (tamsia), two-line aphorisms (gurindam), and similes (ibarat).

Minangkabau traditional folktales (kaba) consist of narratives that present the social and personal consequences of either ignoring or observing the ethical teachings and the norms embedded in the adat. The storyteller (tukang kaba) recites the story in poetic or lyrical prose while accompanying himself on a rebab.

A theme in Minangkabau folktales is the central role mothers and motherhood has in Minangkabau society, with the folktales Rancak diLabueh and Malin Kundang being two examples. Rancak diLabueh is about a mother who acts as teacher and adviser to her two growing children. Initially her son is vain and headstrong and only after her perseverance does he become a good son who listens to his mother.[24] Malin Kundang is about the dangers of treating your mother badly. A sailor from a poor family voyages to seek his fortune, becoming rich and marrying. After refusing to recognise his elderly mother on his return home, being ashamed of his humble origins, he is cursed and dies when a storm ensues and turn him along with his ship to stone. The said stone is in Air Manis beach and is known by locals as batu Malin Kundang.[24]

Other popular folktales also relate to the important role of the woman in Minangkabau society. In the Cindua Mato epic the woman is the source of wisdom, while in the Sabai nan Aluih she is more a doer than a thinker. Cindua Mato (Staring Eye) is about the traditions of Minangkabau royalty. The story involves a mythical Minangkabau queen, Bundo Kanduang, who embodies the behaviours prescribed by adat. Cindua Mato, a servant of the queen, uses magic to defeat hostile outside forces and save the kingdom.[25] Sabai nan Aluih (The genteel Sabai) is about a girl named Sabai who avenges the murder of her father by a powerful and evil ruler from a neighbouring village. After her father's death, her cowardly elder brother refuses to confront the murderer and so Sabai decides to take matters into her own hands. She seeks out the murderer and shoots him in revenge.[17]

Language[edit]Main article: Minangkabau language

Location ethnic groups of Sumatra, the Minangkabau is shown in light and dark oliveThe Minangkabau language (Baso Minangkabau) is an Austronesian language belonging to the Malayic linguistic subgroup, which in turn belongs to the Malayo-Polynesian branch. The Minangkabau language is closely related to the Negeri Sembilan Malay language used by the people of Negeri Sembilan, many of which are descendants of Minangkabau immigrants.

The language has a number of dialects and sub-dialects, but native Minangkabau speakers generally have no difficulty understanding the variety of dialects. The differences between dialects are mainly at the phonological level, though some lexical differences also exist. Minangkabau dialects are regional, consisting of one or more villages (nagari), and usually correspond to differences in customs and traditions. Each sub-village (jorong) has its own sub-dialect consisting of subtle differences which can be detected by native speakers.[26] The Padang dialect has become the lingua franca for people of different language regions.[27]

The Minangkabau society has a diglossia situation, whereby they use their native language for everyday conversations, while the Indonesian language is used for most formal occasions, in education, and in writing, even to relatives and friends.[26] The Minangkabau language was originally written using the Jawi script, an adapted Arabic alphabet. Romanization of the language dates from the 19th century, and a standardised official orthography of the language was published in 1976.[27]

DenominationsISO 639-3Population (as of)DialectsMinangkabaumin6,500,000 (1981)Agam, Payakumbuh, Tanah Datar, Sijunjung, Batu Sangkar-Pariangan, Singkarak, Pariaman, Orang Mamak, Ulu, Kampar Ocu, Rokan, Pasaman, Rao, Kuantan, Kerinci-Minangkabau, Pesisir, Aneuk Jamee (Jamee), Painan, Penghulu, Mukomuko.Source: Gordon (2005).[28]Despite widespread use of Indonesian, they have their own mother tongue. The Minangkabau language shares many similar words with Malay, yet it has a distinctive pronunciation and some grammatical differences rendering it unintelligible to Malay speakers.[citation needed]

Adat and religion[edit]

A Minangkabau mosque circa 1900.Animism had been an important component of Minangkabau culture. Even after the penetration of Islam into Minangkabau society in the 16th century, animistic beliefs were not extinguished. In this belief system, people were said to have two souls, a real soul and a soul which can disappear called the semangat. Semangat represents the vitality of life and it is said to be possessed by all living creatures including animals and plants. An illness may be explained as the capture of the semangat by an evil spirit, and a shaman (pawang) may be consulted to conjure invisible forces and bring comfort to the family. Sacrificial offerings can be made to placate the spirits, and certain objects such as amulets are used as protection.[29]

Until the rise of the Padri movement late in the 18th century, Islamic practices such as prayers, fasting and attendance at mosques had been weakly observed in the Minangkabau highlands. The Padri were inspired by the Wahhabi movement in Mecca, and sought to eliminate societal problems such as tobacco and opium smoking, gambling and general anarchy by ensuring the tenets of the Koran were strictly observed. All Minangkabau customs allegedly in conflict with the Koran were to be abolished. Although the Padri were eventually defeated by the Dutch, during this period the relationship between adat and religion was reformulated. Previously adat was said to be based upon appropriateness and propriety, but this was changed so adat was more strongly based upon Islamic precepts.[4][30]

With the Minangkabau highlands being the heartland of their culture, and with Islam likely entering the region from coast it is said that 'custom descended, religion ascended' (adat manurun, syarak mandaki).[8]

Notable Minangkabau[edit]

Mohammad Hatta, Indonesian nationalist and first vice-president of IndonesiaSee also: List of Minangkabau peopleThe Minangkabau are known as a society that places top priority in high education and thus they are widespread across Indonesia and foreign countries in a variety of professions and expertise such as politicians, writers, scholars, teachers, journalists, and businesspeople. Based on a relatively small population, Minangkabau is one of the most successful.[31] Based on Tempo magazine (2000 New Year special edition), six of the top ten most influential Indonesians of the 20th century were Minang.[32] Three out of the four Indonesian founding fathers are Minangkabau people.[33][34]

Many of Minangkabau people held prominent positions in the Indonesian and Malay nationalist movement.[35] In 19201960, the political leadership in Indonesian was replete with Minangkabau people, such as Mohammad Hatta a former Indonesian government prime minister and vice-president, Agus Salim a former Indonesian government minister, Tan Malaka international communist leader and founder of PARI and Murba, Sutan Sjahrir a former Indonesian government prime minister and founder of Socialist Party of Indonesia, Muhammad Natsir a former Indonesian government prime minister and founder of Masyumi, Assaat a former Indonesian president, and Abdul Halim a former Indonesian government prime minister. During the liberal democracy era, Minangkabau politician dominated Indonesian parliament and cabinets. They were diversely affiliated to all of the existing factions, such as Islamist, nationalist, socialist and communist.

Minangkabau writers and journalists have made significant contributions to modern Indonesian literature. These include authors Marah Roesli, Abdul Muis, Sutan Takdir Alisjahbana, Idrus, Hamka, and Ali Akbar Navis; poets Muhammad Yamin, Chairil Anwar, and Taufik Ismail; and journalists Djamaluddin Adinegoro, Rosihan Anwar, and Ani Idrus. Many prominent Indonesian novels were written by Minangkabau writers and later influenced the development of modern Indonesian language.[36]

Moreover, there are also significant number of Minangkabau people in the popular entertainment industry, such as movie directors Usmar Ismail, Nasri Cheppy, and Mira Lesmana; movie producer Djamaluddin Malik, screenwriter Arizal and Asrul Sani; as well as celebrities Soekarno M. Noer, Christine Hakim, Camelia Malik, Fariz RM, Eva Arnaz, Dorce Gamalama, Afgansyah Reza, Nirina Zubir, Titi Rajo Bintang, Dude Herlino, Marshanda, Bunga Citra Lestari, and Sherina Munaf.

Nowadays, besides Chinese Indonesian, Minangkabau people have made significant contributions to Indonesia's economic activities. Minangkabau businessmen are also notable in hospitality sector, media industry, healthcare, publisher, automotive, and textile trading. Minangkabau businessmen also prominent in traditional Minangkabau cuisine restaurant chains in many cities of Indonesia, Malaysia, Singapore, and Australia. Notable successes include Abdul Latief, Basrizal Koto, Mokhzani Mahathir, and Tunku Tan Sri Abdullah.

Historically, Minangs had also settled outside West Sumatra, migrating as far as the south Philippines by the 14th century. The Minangkabaus migrated to the Malay peninsula in the 14th century and began to take control of the local politics. In 1773 Raja Melewar was appointed the first head of state of Negeri Sembilan.

Notable people of Minangkabau descent outside of Indonesia include the first President of Singapore, Yusof Ishak; the first Supreme Head of State (Yang di-Pertuan Agong) of the Federation of Malaya, Tuanku Abdul Rahman; Zubir Said, who composed Majulah Singapura (the national anthem of Singapore); World War II hero, Lieutenant Adnan Bin Saidi; member of the House of Representatives of the Netherlands, Rustam Effendi; Ahmad Khatib, the imam (head) of the Shafi'i school of law at Masjid al-Haram; and Khatib's grandson Fouad Abdulhameed Alkhateeb as Saudi Arabian ambassador.

Character education is an umbrella term loosely used to describe the teaching of children in a manner that will help them develop variously as moral, civic, good, mannered, behaved, non-bullying, healthy, critical, successful, traditional, compliant or socially acceptable beings. Concepts that now and in the past have fallen under this term include social and emotional learning, moral reasoning and cognitive development, life skills education, health education, violence prevention, critical thinking, ethical reasoning, and conflict resolution and mediation.[1] Many of these are now considered failed programs, i.e. "religious education", "moral education", "values clarification".[2]

Today, there are dozens of character education programs in, and vying for adoption by, schools and businesses.[3] Some are commercial, some non-profit and many are uniquely devised by states, districts and schools, themselves. A common approach of these programs is to provide a list of principles, pillars, values or virtues, which are memorized or around which themed activities are planned.[4] It is commonly claimed that the values included in any particular list are universally recognized. However, there is no agreement among the competing programs on core values (e.g., honesty, stewardship, kindness, generosity, courage, freedom, justice, equality, and respect) or even how many to list. There is also no common or standard means for assessing, implementing or evaluating programs.[5]

Contents [hide] 1 Terminology2 In-school programs3 History3.1 Understanding character3.1.1 Psychic arts3.1.2 Race character3.1.3 Generational character3.2 Developing character3.2.1 Eastern philosophy3.2.2 Western philosophy3.2.3 Contemporary views3.3 History of character education in U.S. schools3.3.1 The colonial period3.3.2 Nineteenth century3.3.3 Mid-twentieth century3.3.4 Character education movement of the 1980s3.4 Modern scientific approaches4 Issues and controversies4.1 Scientific studies4.2 Functional and ideological problems5 See also6 References7 External links and BibliographyTerminology[edit]"Character" is one of those overarching concepts that is the subject of disciplines from philosophy to theology, from psychology to sociologywith many competing and conflicting theories.

Character as it relates to character education most often refers to how 'good' a person is. In other words, a person who exhibits personal qualities like those a society considers desirable might be considered to have good characterand developing such personal qualities is often seen as a purpose of education. However, the various proponents of character education are far from agreement as to what "good" is, or what qualities are desirable. Compounding this problem is that there is no scientific definition of character. Because such a concept blends personality and behavioral components, scientists have long since abandoned use of the term "character" and, instead, use the term psychological motivators to measure the behavioral predispositions of individuals. With no clinically defined meaning, there is virtually no way to measure if an individual has a deficit of character, or if a school program can improve it.

The various terms in the lists of values that character education programs proposeeven those few found in common among some programssuffer from vague definitions. This makes the need and effectiveness of character education problematic to measure.

In-school programs[edit]There is no common practice in schools in relation to the formation of pupils' character or values education.[6] This is partly due to the many competing programs and the lack of standards in character education, but also because of how and by whom the programs are executed.

Programs are generally of four varieties:[4] cheerleading, praise and reward, define and drill, and forced formality. They may be used alone or in combination.

1) Cheerleading involves multicolored posters, banners, and bulletin boards featuring a value or virtue of the month; lively morning public-address announcements; occasional motivational assemblies; and possibly a high-profile event such as a fund-raiser for a good cause.

2) Praise-and-reward approach seeks to make virtue into habit using "positive reinforcement". Elements include "catching students being good" and praising them or giving them chits that can be exchanged for privileges or prizes. In this approach, all too often, the real significance of the students' actions is lost, as the reward or award becomes the primary focus.

3) Define-and-drill calls on students to memorize a list of values and the definition of each. Students' simple memorization of definitions seems to be equated with their development of the far more complex capacity for making moral decisions.

4) Forced-formality focuses on strict, uniform compliance with specific rules of conduct, (i.e., walking in lines, arms at one's sides), or formal forms of address ("yes sir," "no ma'am"), or other procedures deemed to promote order or respect of adults.

"These four approaches aim for quick behavioral results, rather than helping students better understand and commit to the values that are core to our society, or helping them develop the skills for putting those values into action in life's complex situations." [4]

Generally, the most common practitioners of character education in the United States are school counselors, although there is a growing tendency to include other professionals in schools and the wider community. Depending on the program, the means of implementation may be by teachers and/or any other adults (faculty, bus drivers, cafeteria workers, maintenance staff, etc.); by storytelling, which can be through books and media; or by embedding into the classroom curriculum. There are many theories about means, but no comparative data and no consensus in the industry as to what, if any, approach may be effective.[7]

History[edit]It has been said that, "character education is as old as education itself". Indeed, the attempt to understand and develop character extends into prehistory.

Understanding character[edit]Psychic arts[edit]Since very early times, people have tried to access or "read" the pre-disposition (character) of self and others. Being able to predict and even manipulate human behavior, motivations, and reactions would bestow obvious advantages. Pre-scientific character assessment techniques have included, among others: anthropometry, astrology, palmistry, metoposcopy, and chiromancy. These approaches have been scientifically discredited although they continue to be widely practiced.

Race character[edit]The concept of inherited "race character" has long been used to characterize desirable versus undesirable qualities in members of groups as a whole along national, tribal, ethnic, religious and even class lines. Race character is predominantly used as a justification for the denigration and subsequent persecution of minority groups, most infamously, justifying European persecution of native Americans, the concept of slavery, and the Nazis' persecution of Jews. Though race character continues to be used as a justification for persecution of minorities worldwide,[8] it has been scientifically discredited and is not overtly a component of modern character education in western societies.

Generational character[edit]Particularly in modern liberal republics, social and economic change is rapid and can result in cognitive stress to older generations when each succeeding generation expands on and exhibits their own modes of expressing the freedoms such societies enjoy.

America is a prime example. With few traditions, each generation exhibites attitudes and behaviors that conservative segments of preceding generations uneasily assimilate. Individual incidents can also produce a moral panic. Cries about loss of morals in the succeeding generation, overwhelmingly unsubstantiated,[9] and calls for remediation have been constant in America since before its founding. (It should be expected thatin a free country that supports children's rightsthis trend will continue apace.)

Developing character[edit]Eastern philosophy[edit]Eastern philosophy views the nature of man as initially quiet and calm, but when affected by the external world, it develops desires. When the desires are not properly controlled and the conscious mind is distracted by the material world, we lose our true selves and the principle of reason in Nature is destroyed. From this arise rebellion, disobedience, cunning and deceit, and general immorality. This is the way of chaos. Confucianism stands with Taoism as two of the great religious/philosophical systems of China.

A hallmark of the philosophy of Confucius is his emphasis on tradition and study. He disparages those who have faith in natural understanding or intuition and argues for long and careful study. Study, for Confucius, means finding a good teacher, who is familiar with the ways of the past and the practices of the ancients, imitating his words and deeds. The result is a heavy scheme of obligations and intricate duties throughout all of one's many social roles. Confucius is said to have sung his sayings and accompanied himself on a 'qin' (a kind of zither). According to Confucius, musical training is the most effective method for molding the moral character of man and keeping society in order. He said: "Let a man be stimulated by poetry, established by the rules of propriety, perfected by music." [10]

The theme of Taoism[11] is one of harmony with nature. Zhuangzi was a central figure in Taoist philosophy. He wrote that people develop different moral attitudes from different natural upbringings, each feeling that his own views are obvious and natural, yet all are blinded by this socialization to their true nature. To Zhuangzi, pre-social desires are relatively few and easy to satisfy, but socialization creates a plethora of desires for "social goods" such as status, reputation, and pride. These conventional values, because of their comparative nature create attitudes of resentment and anger inciting competition and then violence. The way to social order is for people to eliminate these socialized ambitions through open-minded receptivity to all kinds of voices - particularly those who have run afoul of human authority or seem least authoritative. Each has insights. Indeed, in Taoist moral philosophy, perfection may well look like its opposite to us. One theme of Zhuangzi's that links Taoism to the Zen branch of Buddhism is the concept of flow, of losing oneself in activity, particularly the absorption in skilled execution of a highly cultivated way. His most famous example concerns a butcher who carves beef with the focus and absorption of a virtuoso dancer in an elegantly choreographed performance. The height of human satisfaction comes in achieving and exercising such skills with the focus and commitment that gets us "outside ourselves" and into such an intimate connection with our inborn nature.

Western philosophy[edit]The early Greek philosophers[12] felt that happiness requires virtue and hence that a happy person must have virtuous traits of character.

Socrates identifies happiness with pleasure and explains the various virtues as instrumental means to pleasure. He teaches, however, that pleasure is to be understood in an overarching sense wherein fleeing battle is a momentary pl