Report says S. Korea, Thailand bore the bruntInternational banks began pulling their money out of Asia during the last half of 1997, with South Korea and Thailand bearing the brunt of the withdrawals, according to a report released Monday by the Bank for International Settlements.
Lending to Indonesia remained stable between June and December of last year, but the figures do not reflect recent political and social upheaval in the country. Negotiations to repackage billions of dollars in external debt owed by Indonesian concerns have been postponed until the turmoil recedes there.Indonesia had about $58.4 billion in foreign debt at the end of last year, the bulk of which was owed by local banks and corporations, according to the bank's data. Approximately 61 percent of the loans to Indonesia were short term, in keeping with the region's continuing dependence on debt maturing in one year or less.
An overreliance on short-term borrowing has been cited repeatedly by analysts and economists as a key reason the financial crisis in Asia snowballed so quickly after it began last summer.
In a January report, the World Bank said that lax regulations and dubious financial practices in Asian countries "were aggravated by undisciplined foreign lending, which led to too much money chasing bad investments." The World Bank noted that Asia's reliance on short-term debt "left the economies vulnerable to a sudden collapse of confidence."
All of Asia, excluding Singapore and Hong Kong, had about $381 billion in external debt at year-end, down from $390.5 billion at the end of last June, but still well above the $367 billion that had been rung up by the end of 1996, according to the BIS, an organization in Basel, Switzerland, that coordinates the activities of the world's central banks.
The BIS said the lending data reflected the fact that loans to Asia last year "were well sustained until the very last stage of the crisis." Given the problems that still plague the region, it may be overly optimistic to assert that the last stage of the crisis has actually occurred, but the problems certainly seemed to have reached a turning point in December.
At the time, bankers and politicians were scrambling to avoid a huge default on loans owed by South Korean banks. U.S. bankers and analysts said Japanese and German banks were too quick to pull money out of the country last fall and winter, making it harder to calm beleaguered markets there.