Introduction So what is Asian financial crisis 1997? Refers to Investopedia, Asian financial crisis 1997 was otherwise called as the "Asian Contagion", it was a progression of money devaluation and different occasions that spread through numerous Asian markets starting in the late spring of 1997. The currency markets initially fizzled in Thailand as the aftereffect of the government's choice to no more peg the nearby cash to the United States dollar. Money reduction spread quick all through South Asia nation, and it caused the stock market decrease, lesser import revenues and even government upheaval also had decrease (Investopedia, 2008). There are two primary speculations and elucidations have developed in the consequence of the Asian contagion 1997. Based on one perspective, the beginning monetary turmoil in some Asian nations in 1997 and its proliferation after some time is essentially on account of the sudden change toward the business sector desires and certainty of the dealers took after by provincial contagion. In middle of 1990s some Asian country had admitted that the causes of financial crisis are worse macroeconomic performance, the perspective recommends that the degree and profundity of the emergency ought not to be credited to crumbling in basics, but rather more toward to the investors. The international and domestic investors fell panic toward the market share and start to withdraw their investment and cause the financial crisis to happen. According to the other perspective which stated that the crisis happened because of structural and policy distortions (Corsetti, Pesenti, and Roubini 1998; Dooley 1999). Based on this perspective, the crucial disparity had set off the financial contagion in 1997 even as after the crisis began, market eruption and crowding created the progressions in monetary action, resources costs, and swapping scale to be a larger number of genuine than justified by the start of frail financial and money related circumstance. (Zhuang & Dowling 2002) Literature review There are some impacts faced by every Asian country after the Asian financial crisis on July of 1997, Malaysia is also one of the country that face the impact. The impact can be divided to several aspects which are impact on economic, impact on social, and political aspects in Malaysia, and these will be explained in this research paper. Impact on the economic in Malaysia When Thai baht receive speculative attack in middle of the May the ringgit Malaysia have encountered a heavy selling pressure. Among the first week of July 1997 and 7 January 1998 the ringgit depreciate around 50 percent against the United States dollar. Net quarterly stream of portfolio capital turned negative in the second quarter of 1997 for the first time after 1991 and aggregate net surge in the initial seventy five percent of the year added up to over US$ 11 billion. Due to massive inversion of portfolio capital streams, before the end of 1997 the composite shares value list of Kuala Lumpur Stock Exchange had less 50 percent from the pre-contagion level, eliminate of just about $225 billion of market share values. Yet, due to the low foreign debt exposure of own country financial sector, in a brief timeframe period, the Malaysian government have figured out how to let the circumstance under control, dissimilar to some Asian nation, for example, Thailand and Indonesia, which needed to acquire cash from the International Monetary Fund promptly. When it reach August of 1998, the business cycle of Malaysia are in depression. National record discharged in the most recent week of August appeared there was a decline of yield by 2.8 percent and 6.8 percent separately in the beginning of two quarters. The quantity of domestic factory that are retrench was increased from19 000 in 1997 to over 83 000 in 1998. There was a sharp increment in bank loaning rates which was surpassing 20 percent by middle of 1998 in view of pile up of non-performing lending, together with 'flight to quality' of stores from little banks to bigger banks, banks that managed well. The speculator begin to diminish their certainty toward the business sector due to the continuation of fluid shares by other province's kin and capital flight. There was a striking element of capital flights happen in Malaysia amid around right on time of 1998 was that cause enormous number of ringgit Malaysia , instead of other nation cash, streaming into Singapore. This is a direct result of appealing money rates of between 20 to 40 percent in Singapore, which additionally gave an exceptional rate to the household for around 11%. It turned out to be more regrettable when joining with a diminishing conversion scale for the ringgit Malaysia. Arbitrage between the two rates by money market dealers exerted pressure on the domestic interest rates in Malaysia, underestimate the effectiveness of monetary policy (Athukorala 2010). Impact on Society In Malaysia, the impact on society were inflation, unemployment rate and poverty levels, as well as reduced access to quality education and health benefits (Ching, 1999). Inflation During the financial contagion, the inflation rate had increased from 2.7 per cent in 1997 to 5.3 percent in 1998 (Syarisa Yanti, 2002). The main causes for the increase of the inflation rate are because of raise in food prices, the weight in the overall Consumer Price Index (CPI) basket of food are 34.9 per cent. Sugar, cooking oil, and flour were also known as the controlled imported essential items were also have an increase of 20 per cent of their price. In non-food sub-groups, which are the miscellaneous goods and services and medical care and health had increases their price too. When there were calculated for the weight in the consumer basket, the amount will be 7.5 percent. The second largest sub-group which are the gross rent, fuel, and prices of fashion, it were calculated as 21.1 percentage of the weight in the Consumer Price Index basket, it also registered a minor increase of 0.4 percentage. Transport and communication price, the third largest subgroup, calculated for 17.9 per cent of the weight in the consumer price basket, decreased by 0.1 per cent (Syarisa Yanti, 2002). Because of the higher rate of inflation, increasing unemployment rates, lower wages, and reduced real incomes had happened. Unemployment The financial contagion caused the increasing of unemployment rates in Malaysia. Before the financial contagion happen, the Southeast and East Asian nations often had been referred as ''models of the positive effect of globalization in increasing rates of economic growth and job creation."(Marx, 1999). This had caused Malaysia facing labour shortage, Malaysia government solve this problem by allowing a million migrant workers come to Malaysia and work in Malaysia (Ching, 1999). During the financial crisis, which is between the month of January and December of 1998, the total number of workers that were fired was 83,865. However the unemployment rate didn’t reach an alarming level because many industries such as manufacturing, plantation and services subsectors are facing shortage of labour and there were capable of absorbing the workers that are fired. However, the unemployment rate increased form 2.6% in 1997 to 3.9% in 1998. The employment rate growth in 1998 is also slower, it has decrease 3% compare to year 1996 and 1997 (Okposin and Cheng, 2000). Impact on Poverty and Income Distribution Malaysia didn’t experience serious poverty problem during Asian financial crisis because of the employment rate still doing relatively well and government programs were available to continue to provide help. The Malaysian government have a better experience to solve the livelihood problem of the financial contagion because it’s have to solve the poverty problem that happen frequently in Malaysia among the poor Malays category, especially in countrified areas. The administration had dispensed extra spending plan toward the Development Program for the Poorest adding up to RM100 million in 1998. At that point, small scale credit hardware was supported by government to the poor trivial brokers and vendors in municipal ranges. On account of the expanding spending responsibilities, the administration's financial plan shortage had come to a high number which is 5.5 percent of GDP in 20000, which was a lofty ascent from a sound surplus in 1997 (Ramesh 2009). When financial crisis happen, the household income decrease because of the inflation in 1998. The family unit wage in edified zones and of the main 20 for every cent of families income fell little bit in 1998. The rural division salaries had developed at a higher rate if contrast with 1997, owing it to higher costs for palm oil and expanded generation of sustenance products because of higher import costs. Along these lines, the mean salary of the last 40 for every penny of family units, particularly in the rural region, stay steady, because of their skill to diversify their sources of income. This had cause the civilised and countrified area income not balance. Not only that the overall income had become imbalance had increased slightly in 1998, so it cause the decreasing of widening gap experienced from 1996 until 1997 (Noordin et al. 2010). Health During the financial crisis, the demand for private sector hospitals and clinics decrease 15 until 50 per cent in demand, because of the higher net costs of private sector hospitals and clinics compare to government hospital and government clinics. Due to the financial crisis, the cost of imported drug had increase a 30 per cent, which accounted for 60 per cent of all drugs used in the country was recorded. Refers to the reports stated that there are an increase of number which is about 18 to 20% of patient that go to government hospitals, so we can conclude that there is a huge number of patient that transferred from private sector hospitals or clinics to government hospital and clinics. This caused the government hospital and clinics increase their pressure because there are facing limited resources that provided from the government yet they need to take care the sudden increase amount of patient. Not only that, for the public health care sector, during the initial stages of the crisis there was no real threat to the budget distribution, because the government was still pursuing its fiscal austerity policies. There are increase in the budget allocation for health sector which are a slightly amount from 6.3 per cent to 6.6 percent for the budget allocation of the health sector in the national budget of 1997 to 6.6 percent in 1998 (Syarisa Yanti, 2002). Although there was an increase allocation in the overall government budget distribution for health sector but, the allocations for public health and medical treatment decreased (Noordin et al. 2010). Education Education spending plan have been cut in a large portion of the crisis nations with the exception of Malaysia in light of the fact that education is the most important sector in Malaysia's developmental strategy. In spite of the fact that this division will require numerous cash however the administration is still dedicated to add to this area. On the other hand, the financial contagion change the example of government consumption on education, at any rate in the short-term. At first, the administration declared a reduction of its use by 2 % as a major aspect of its activity to handle the emergency; on the other hand, in December 1997, this reduction was expanded by an extra 18 %. The money related had brought about an especially sharp effect on tertiary instruction. Because of the contagion, the reduction in family unit salary and the increment in the household cash expense of remote educating power numerous understudies who secretly financed to return home. This had brought on the interest for Government University to increment. There were 112000 candidates for 4022 universities places in Malaysia contrasted with 27118 candidates for 15964 spots in 1995. The government university cannot cope with this shifting pattern because of lacking base and offices, and inadequate or obsolete libraries and computers (Piei, Johan, and Abubakar 1999) (Knowles et al. 1999). Impact on Political System Political issues was don’t have exception from the effects of the financial contagion. In spite of the fact that Malaysia did not encounter the extensive political change like those which happened in Indonesia and Thailand, however Malaysia still confronted the change of the authorization of deputy prime minister which is Anwar Ibrahim had been sacked. The reason that caused this situation to happen is because of the difference opinion between the prime minister, Dr Mahathir and deputy prime minister, Anwar Ibrahim toward how the crisis should be manage. Anwar focusing on decreasing the government expenditure and let the interest rates to increase, he also focus on mega projects such as Bakun hydo electric in Sarawak and others mega project. But Mahathir think Anwar has miss the point, he think Anwar failed to recognise that the crisis wasn’t caused by domestic shortcomings but the causes should be international currency speculators and hedge fund managers. This had cause there are two different set of policies to rescue the Malaysia economy. In June 1998, Anwar launched an attack on Mahathir during party annual general meeting. Mahathir also return the attack openly. Because of Mahathir action, Anwar authority start to become not stable. In 2 September 1998, he had force to resignation because of the accusation of corruption that states he accept the help of International Monetary Fund. (Barlow and Loh, 2003). This had caused protests and demonstrations to happen. The government had control the situation of the protest effectively by using force and an assortment of lawful and legitimately sketchy intends to restrict the development of resistance. The trial of Anwar also raised serious question toward the honesty of the judgement and the right of police in Malaysia because Anwar had beaten by a police chief when he was in custody in 1998 (Aglionby, 2005). In this case, it had let the world see that the Malaysia government's monetary disappointments, progressing issues of business government relations and debasement, and social imbalance (Haggard 2000). Conclusion In conclusion, there are many impact toward Malaysia during Asian financial crisis 1997. It is a lesson toward the world and Malaysia, the government had many new policy since the Asian financial crisis to prevent the crisis happen in future again and to overcome the crisis. After ten years which is 2007 the Malaysia economy had become stronger. Economic growth had success by don’t have high inflation rate and the employment rate had increase(Noordin et al. 2010). So, we should feel grateful to the policy that made by the government during the financial crisis. We also should remember this financial crisis and don’t repeat the same mistake that every Asia country had made during 1997. References Aglionby, J. (2005). Anwar wins apology for beating. [online] the Guardian. Available at: http://www.theguardian.com/world/2005/aug/04/malaysia [Accessed 29 Nov. 2015]. Athukorala, P., 2010. Malaysian Economy in Three Crises. , pp.3–4,9. Barlow, C. and Loh, F. (2003). Malaysian economics and politics in the new century. Cheltenham, UK: Edward Elgar Pub. Haggard, S., 2000. Crisis, Political Change, and Economic Reform. The Political Economy of the Asian Financial Crisis, pp.87–138. Investopedia, (2008). Asian Financial Crisis Definition | Investopedia. 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Migrant labour in Malaysia: Impact and implication of the Asian financial crisis. EADN Regional Project on the Social Impact of theAsian Financial Crisis. Retrieved from http://www.eadn.org/Migrant%20Labour%20in%20Malaysia% 20Impact%20and%20Implications%20of%20the.pdf Zhuang, J. & Dowling, J.M., 2002. Causes of the 1997 Asian financial crisis: What can an early warning system model tell us? ERD Working Paper Series, (26), pp.1–21. The impact of Asian financial crisis 1997 11