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On the 2nd of July 1997 Asia was hit by one of the most devastating financial crises it has ever seen Of all the financial crisis that have taken place this was one of the most distressing in that it was totally unexpected The purpose of this paper is to show that particular developmental strategies employed by these economies eventually led to their downfall It will attempt to find out where the origins of the crisis lie and what events started the cycle that eventuated with this disaster In order to trace the events that led to the eventual collapse of the Asian economies one must venture across the ocean to the United States The issue of liberalisation first gained attention in the US during the Regan Administration However it was during the Clinton era that liberalisation became a top priority Whereas previous governments had pushed for the liberalisation of Japan one of Clintons main foreign policy objectives was the liberalisation of the Asian economies This process was pushed forth in Asia with such vehemence because the region held a lot of investment opportunities for American Banks Brokerages and other financial sector businesses Unfortunately Asias economies were not structurally ready to deal with the influx of capital that was headed their way They had weak banking and legal systems that were unable or unwilling to regulate the flow of foreign capital in the country The Americans eventually persuaded Korea to relax its capital flow regulations by giving it the option of joining the Organisation for Economic Co-operation and Development Even then Korea was concerned that its financial institutions may not be able to deal with an influx of foreign capital One fatal mistake that Korea as well as other Southeast Asian countries made was that they opened their capital markets in the wrong way They did not allow long term investments in Korean companies but rather only short-term investments that could be removed easily
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