Poverty and Development Division
(PDD)

last updated : 27 December 2001

GOVERNANCE RE-INVENTED: THE PROGRESS, CONSTRAINTS,
AND REMAINING AGENDA IN BANK AND CORPORATE
RESTRUCTURING IN EAST AND SOUTH-EAST ASIA

Contents

Preface

I. FINANCIAL AND CORPORATE SECTOR RESTRUCTURING IN EAST AND SOUTH-EAST ASIA: AN OVERVIEW

A. Economic crisis and corporate governance
B.The impact of the financial crisis
C.Approaches to restructuring
D.Adopting international standards and strengthening legal framework
E.Constraints and remaining agenda
F.Conclusions and lessons

II. GOOD CORPORATE GOVERNANCE IN POST-CRISIS INDONESIA: INITIAL CONDITION, WINDOWS OF OPPORTUNITY AND REFORM AGENDA

Introduction
A.Historical overview
B.Impact of the crisis
C.The chosen approach toward restructuring
D.Some lessons from the crisis
E.Summary and conclusions

III. GOVERNANCE RE-INVENTED: PROGRESS, CONSTRAINTS, AND REMAINING AGENDA IN BANK AND CORPORATE RESTRUCTURING IN MALAYSIA

Introduction
A.Pre-crisis structure of the Malaysian financial system
B.Financial and corporate sector restructuring
C.Illustrations of corporate governance
D.The remaining agenda
E.Corporate sector restructuring
F.Conclusion

IV. GOVERNANCE RE-INVENTED: THE PROGRESS, CONSTRAINTS, AND REMAINING AGENDA IN BANK AND CORPORATE RESTRUCTURING IN THE REPUBLIC OF KOREA

Introduction
A.Governance-banking-corporate relationship: old paradigm of high growth and its problems in a transition period
B.Pre-crisis governance structures of the Republic of Korea banking and corporate sectors
C.Restructuring of the governance structures after the crisis
D.Assessment of the restructuring of the governance structures
E.The remaining agenda for a new paradigm
F. Conclusion

V. PICKING UP THE PIECES; BANK AND CORPORATE RESTRUCTURING IN POST-1997 THAILAND

A.Before the bubble
B.The bubble
C.Into the crisis
D.Picking up the pieces
E.The restructuring process
Epilogue


ANNEX: Report of the subregional seminar on governance re-invented: the progress, constraints, and remaining agenda in bank and corporate restructuring in East and South-East Asia

List of Tables

Table I.1.How concentrated is family control?
Table I.2.Main macroeconomic indicators of selected developing Asian economies, 1996-2000
Table I.3.NPLs of crisis-affected countries
Table III.1.Danaharta loan recovery
Table III.2.Danaharta expected loan recovery
Table III.3.Progress of Danaharta as at 31 March 2001
Table III.4.Danamodal operations
Table III.5.Progress of Danamodal as at 31 March 2001
Table III.6.List of finance companies
Table III.7.List of banking groups
Table III.8.Loan approvals and disbursements
Table III.9.Banking system: loans by selected sector
Table IV.1.Republic of Korea's marginal productivity of capital, 1971-1997
Table IV.2.Inflation and interest rates, 1964-1972
Table IV.3.Inflation and interest rates, 1973-1990
Table IV.4.Non-performing loans of commercial banks
Table IV.5.External debts of the Republic of Korea
Table IV.6.Composition of corporate external financing by source
Table IV.7.Composition of equity and debt financing in the corporate sector
Table IV.8.Fund deficits in the corporate sector and the supply of long-term funds
Table IV.9.Composition of long and short-term financing in the manufacturing sector
Table IV.10.Dept-to-equity ratio of the manufacturing sector
Table IV.11.Net income-to-total assets ratio of the manufacturing sector
Table IV.12.Terms of trade, exchange rates and foreign exchange reserves
Table IV.13.Ownership by major shareholders in the Republic of Korea
Table IV.14.Number of cases and duration of bankruptcy proceedings, 1993-1995
Table IV.15.Board composition of commercial banks of the Republic of Korea
Table IV.16.Key items of minority shareholders' rights
Table IV.17.Ownership of the government organizations in commercial banks
Table IV.18.Ratio of outside directors to all directors
Table IV.19.Composition of outside directors
Table IV.20.Composition of auditing committee
Table V.1.Surplus of saving over investment by sectors in Thailand, 1975-1996
Table V.2.Sources of financing flows for investments by non-financial incorporated enterprises, 1975-1996
Table V.3.Sources of financing flows for investments by non-financial incorporated enterprises, 1991-1996
Table V.4.Flows of funds from and to commercial banks, 1991-1996
Table V.5.Stock of external debt of Thailand, 1991-1996
Table V.6.Sources and uses of FIDF funds, June 1996-August 1997
Table V.7.Value of winning bids for the FRA's auction of assets as per cent of face value
Table V.8.Current account and net flows of private financial account, 1997-2000
Table V.9.Movements of NPLs, July 2000 - March 2001

List of figures

Figure III.1.The financial system structure: the banking institutions
Figure III.2.The financial system structure: the financial markets
Figure III.3.Objectives of restructuring the banking sector
Figure III.4.Loans as a percentage of GDP
Figure III.5.Loans growth by sectors
Figure III.6.Breakdown of loans by sector, April 1998
Figure III.7.Breakdown of loans by sector, April 1997
Figure III.8.External debt - breakdown by tenure
Figure III.9.External debt - breakdown by private-public sector
Figure III.10.Three-pronged approach to resolve problems in the Malaysian banking system
Figure III.11.Golden Hope Corporate Governance Structure
Figure IV.1.Government-banking-corporate relationship
Figure IV.2.Pre-crisis governance structures of the banking and corporate sectors
Figure IV.3.Post-crisis governance structures of the banking and corporate sectors of the Republic of Korea
Figure V.1.Ratios of gross domestic investment and capital account surplus to gross domestic product, 1990-1996
Figure V.2.Distribution of loans by number of creditors, 2000
Figure V.3.Monthly exchange rate and interest rate movements, January 1997 - March 2001
Figure V.4.Foreign-currency denominated loans and borrowings of Thai banks
Figure V.5.Percentage of NPLs in total loans outstanding
Figure V.6.Bills, loans, and overdrafts of commercial banks


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