GLOBALISATION'S power was first demonstrated in the stock markets 10 years ago, in July 1997, with the onset of the Asian financial crisis. Within days all of the region's emerging markets were affected, although the developed world's markets remained relatively untouched.

The crisis was precipitated when the Bank of Thailand ran out of foreign exchange and could not withstand the subsequent run on its currency. Thai banks and companies were heavily indebted to foreign banks, especially those in the US, while institutional fund managers from the developed world had invested billions of dollars in the stock markets of the booming South-east Asian economies.

When the crunch came, those investors rushed for the exit, selling local stocks and currencies, disregarding the countries' fundamentals. The sudden withdrawal of liquidity from the region's stock markets broke the central banks of Thailand, Indonesia, Malaysia and South Korea.

Drawing on its experience in Latin America, the International Monetary Fund imposed remedies that many critics believe made the situation worse. Many Asian banks went belly-up, and many companies were bankrupted.

While many Asian countries incurred large current account deficits in 1996, 10 years later they had substantial current account surpluses, as well as ample foreign currency reserves.

When New York's stock market was sold down in July and August this year, the contagion spread immediately to Europe and Japan and then to emerging Asia. The sub-prime mortgage loans at the root of this were a US problem, but they had been passed on through CDOs (collateralised debt obligations) to European banks and insurance companies and to three major banks in China.

Although the exposure to Asian banks and insurance companies was not large, their stock markets fell. Asia's economies still depend on American consumers. Hence, if the sub-prime mortgage problem spills over into the US' real economy, reducing consumer demand, Asia's exports will decline and economic growth will slow.

The world's strategic markers and projection trends have changed radically during the last 10 years. In 1997 China and India were minor players. Now their growth into the world's two largest economies is creating new dynamics in the global economy.

Security threats

THE Cold War is over, but there has been no peace dividend. Even though there were ominous signs - the 1993 bomb that exploded under the World Trade Center, the 1998 bombings of US embassies in Africa and the 2000 attack on the USS Cole in the port of Aiden, Yemen - few paid heed to the growing threat of Islamist extremism. Once the Soviets had withdrawn from Afghanistan, the world forgot about the jihad against the invaders.

Jihad in Afghanistan was but a prelude to global jihad. Sept 11, 2001 was the turning point. The United States and the world were shocked by the destruction of the Twin Towers and the attack on the Pentagon. US forces retaliated by invading Afghanistan in October. The choice for the world was clear: You are either with us (the US) or against us. In March 2003 the US invaded Iraq and overthrew Saddam Hussein.

Right or wrong, Americans are in Iraq. They must now find the right way out of Iraq - without their decisions being tied to election deadlines. President George W. Bush has made clear his policy to Robert Draper, author of Dead Certain, a book on the President: 'To get us in a position where the presidential candidates will be comfortable about sustaining a presence' and, he said later, 'stay longer.' President Bush knows this policy will not be popular. But with so much at stake, he wants to give his successor - Democrat or Republican - time for careful deliberation, without the pressures of electioneering, to decide on his or her course of action.

Omens

THE ultimate threat to human survival is global warming and climate change. The habitats of millions, maybe billions, of people may be damaged. The polar ice cap is melting. This has triggered Russia, Canada, Denmark, Norway, the US and other nations abutting the Arctic to lay claim to sections of the Arctic.

The scramble for the riches under the ice is on. The Kremlin has sent submarines to plant a titanium Russian flag on the seabed at the North Pole. Canada has claimed ownership of the North-west Passage. But if sea levels rise to inundate many millions of people, and if glaciers in the Himalayas, Tibet and the Andes melt away, leaving more millions without enough water, there will be no 'life as usual'.

Global player

THE US - embroiled in Iraq, snagged by interminable problems over Iran's nuclear programme and unable to pin down that elusive two-state solution for Israel/Palestine - may appear weakened and weary. But whether you are for or against US policies in Iraq and elsewhere, the fact is that many of the world's problems cannot be effectively managed without the active participation of the US.

World leaders know America will bounce back again. For it remains the world's most dynamic society; it has the most innovative economy with its leading-edge technology, both civilian and military.

But given Russia's anti-US position, the United Nations Security Council will not be effective in solving two immediate problems facing it: Iran's nuclear programme and Kosovo's final status.

The writer is Minister Mentor of Singapore. This article appears in the current issue of Forbes magazine.

THE RIGHT EXIT

Right or wrong, Americans are in Iraq. They must now find the right way out of Iraq - without their decisions being tied to election datelines.