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Crisis, reform and recovery

The Asian financial crisis of 1997-98 shook the foundations of the global economy and what began as a localised currency crisis soon engulfed the entire Asian region. This book explores what went wrong and how did the Asian economies long considered 'miracles' respond, among other things. The combined effects of growing unemployment, rising inflation, and the absence of a meaningful social safety-net system, pushed large numbers of displaced workers and their families into poverty. Resolving Thailand's notorious non-performing loans problem will depend on the fortunes of the country's real economy, and on the success of Thai Asset Management Corporation (TAMC). Under International Monetary Fund's (IMF) oversight, the Indonesian government has also taken steps to deal with the massive debt problem. After Indonesian Debt Restructuring Agency's (INDRA) failure, the Indonesian government passed the Company Bankruptcy and Debt Restructuring and/or Rehabilitation Act to facilitate reorganization of illiquid, but financially viable companies. Economic reforms in Korea were started by Kim Dae-Jung. the partial convertibility of the Renminbi (RMB), not being heavy burdened with short-term debt liabilities, and rapid foreign trade explains China's remarkable immunity to the "Asian flu". The proposed sovereign debt restructuring mechanism (SDRM) (modeled on corporate bankruptcy law) would allow countries to seek legal protection from creditors that stand in the way of restructuring, and in exchange debtors would have to negotiate with their creditors in good faith.

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Crisis, reform and recovery

guaranteed by Bank Indonesia. The government’s strategy for corporate debt restructuring has included three elements: first, the establishment of the Indonesian Debt Restructuring Agency (INDRA) to provide foreign-exchange cover for Indonesian corporations with foreign currencydenominated debt once they have reached debt-restructuring agreements. The INDRA plan was voluntary, and under it private sector offshore debt would be restructured so that it could be repaid over an eight-year period, the first three years of which were a grace period during which only interest was

in The Asian financial crisis
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Government, President Suharto now supported those favouring direct intervention. Internationally, Jakarta claimed that the chaotic developments in its neighbour were leading to destabilisation, while Indonesian news agencies carried to the world unfounded stories of PRC and Vietnamese veterans training Fretilin troops. In November, Fretilin declared Timorese independence. Despite Indonesia’s significant involvement in encouraging conflict within East Timor, that conflict cannot be reduced to Indonesian instigation. Nor, however, was Indonesian

in Human rights and the borders of suffering
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Post-crisis Asia – economic recovery, September 11, 2001 and the challenges ahead

was earmarked for medium- and long-term reforms. By February 2000, US$21 billion had been committed, with US$13.5 billion for medium- and long-term reforms. Korea has been the largest recipient (US$8.4 billion), followed by Malaysia (US$4.4 billion), and Indonesia and Thailand with US$2.9 billion each, and the Philippines (US$2.5 billion). The initiative has supported economic adjustment, financial and corporate restructuring, social safety nets, infrastructure and export financing. In the second phase of the initiative, Japan has partially guaranteed sovereign debt

in The Asian financial crisis
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The evolving international financial architecture

between liquidity and solvency crises – a distinction easier to make in theory than in practice. That is, the Fund has to decide whether a country’s balance-of-payments position is sustainable in the medium term. If it is not sustainable, then it will be necessary to restructure the country’s debts. If it is sustainable, the Fund may decide to lend huge sums to help the country through the crisis. The challenge is in deciding when “huge” becomes “too huge,” taking into account the perceived risk of 285 The Asian financial crisis moral hazard. Suffice it to note that

in The Asian financial crisis
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Issues, debates and an overview of the crisis

1999 Brazil had about US$36 billion in reserves compared to US$70 billion in August 1998. The Standard and Poor’s ratings agency downgraded Brazil’s foreign debt rating, and the Bovespa, Brazil’s leading stock index, fell by 27 per cent in a week. As reserves continued to decline, the government was forced to abandon its exchange-rate policy and float the beleaguered real on January 15, 1999 – just two weeks after President Cardoso’s second inauguration.19 For the G-7 nations and their OECD partners, acting in concert with the IMF, the World Bank and other

in The Asian financial crisis
Why China survived the financial crisis

. Fourth, China, unlike pre-crisis Thailand, South Korea, Indonesia or Malaysia, was not heavily burdened with short-term debt liabilities. As was noted earlier, approximately 90 per cent of China’s external debt is mediumto long-term – the bulk of these debts taking the form of direct investments, mostly in joint ventures, that are highly illiquid and difficult to withdraw quickly.39 In addition, China (unlike its Asian neighbors) does not have a banking and financial system with substantial foreign debts denominated in foreign currencies. By contrast, nearly all South

in The Asian financial crisis
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Crisis, reform and recovery

a major step towards the establishment of a unified legal and institutional framework for the development of the capital market. The Act established the Securities and Exchange Commission (SEC) as an independent agency responsible for supervising capital market activities, including equities, bonds and derivatives, and permitted, for the first time, companies access to direct finance by issuing common stock and debt instruments.20 The Securities and Exchange Act was a driving force for issuance for common stocks and debt instruments, and resulted in the rapid

in The Asian financial crisis
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Crisis, reform and recovery

illiquidity rather than fundamental insolvency . . . what Korea needed was coordinated action by creditor banks to restructure its short-term debts, lengthening their maturity 225 The Asian financial crisis and providing additional temporary credits to help meet the interest obligations . . . Although many of the structural reforms that the IMF included in its early-December program for Korea would probably improve the long-term performance of the Korean economy, they are not needed for Korea to gain access to capital markets.” Rather, the IMF’s primary task should have

in The Asian financial crisis
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The Queen in Australia

Britishness around the empire’ into the 1950s. 29 With informal and formal networks of staff training and exchange, such information services can be loosely considered as part of a shared imperial/Commonwealth apparatus, with film agencies owing varying debts to the British Documentary Movement (hereafter BDM) and the advocacy of influential key figure John Grierson, an ‘institutional entrepreneur on behalf

in The British monarchy on screen