Asia may well be undergoing a major transition rather than an economic crisis, and Australian markets should look at the long-term benefits of engagement within the bloc. Professor John McKay, director of the Monash Asia Institute, comments.

Reactions around the world to the economic crisis in Asia have been a curious mixture of disbelief, fear, panic and even a 'we told you so' triumphalism.

I want to offer a number of my own opinions, most of which are certainly unfashionable and controversial, in the hope of generating a more reasoned and informed debate.

Firstly, I do not believe we have seen the end of the Asian miracle. The basic economic, social and political structures of most Asian countries are still sound. Korea, for example, recorded a 30 per cent increase in exports in the six months before the crash, and since then has had three straight months of current account surplus. Asia will be back as the driving force of the global economy, and some of the reforms that are being put in place in response to the current problems will make the region even stronger. Nor do I believe that the recovery will take as long as some commentators are predicting. Indonesia remains the most serious victim, and there the pain will go on for a number of years, perhaps even five years. But in most other cases, while some reforms are clearly essential, the transition may be quite short.

Secondly, the idea of 'Asian values' is not dead. It is very difficult to generalise about a region as large and diverse as Asia, but the cultural values that lent support to the economic transformation of the last four decades are largely intact and will aid the transition now taking place. Hard work, thrift, high savings rates and concern for the common good remain as general characteristics.

Thirdly, I do not believe that industrial pol-icy and the central catalytic role of the government are at an end. Even before the onset of the crisis, it was clear that the countries of north-east Asia -- the first generation 'tiger economies' -- faced enormous problems in making the transition to higher technology, and higher value-added production. The unfettered workings of the market are unlikely to aid these countries in moving to this next stage of industrial development. In this case, as in earlier phases of industrialisation, strong government intervention and assistance are needed.

Fourthly, I do not believe that the Asian crisis proves that the Asian model is no longer relevant to planners in less developed countries. It is very dangerous to transplant any model to a new cultural and institutional setting, but the lessons and the example are still as valid as ever. The original model produced unprecedented growth rates for more than 35 years. What is needed is a carefully designed set of transition policies allowing a country to replace its old industrial policies with more appropriate new policies when the time is right.

These and other ideas are being developed in a major new research initiative by the Monash Asia Institute on the causes, consequences and lessons of the crisis, including an analysis of the role of the IMF.

Such continued engagement with Asia is essential. If Asia is deserted in its time of need and painted as a failure, not only would this be an incorrect and simplistic analysis, it would invite a closing down of the region to the outside world and encourage the emergence of a defensive Asian bloc. Such a result would be an economic, political and strategic disaster for Australia.