Reform and Recovery in East Asia: The Role of the State and Economic Enterprise

Book Cover......Page 1
Half-Title......Page 2
Title......Page 3
Copyright......Page 4
Contents......Page 5
Figures......Page 7
Tables......Page 8
Contributors......Page 10
Preface......Page 12
INTRODUCTION......Page 14
THE STORY SO FAR......Page 15
THE ROLE OF THE STATE IN THE ECONOMY......Page 16
THE BUSINESS-GOVERNMENT NEXUS IN EAST ASIA......Page 18
The role of reform in recent macroeconomic performance......Page 20
The role of reforms in reducing vulnerability......Page 21
The impact of reforms on long-term performance......Page 22
PROBLEMS OF TRANSITION......Page 23
REFERENCES......Page 25
THE LEGACY......Page 26
THE ECONOMIC LEGACY OF CRISIS......Page 33
IMPLICATIONS FOR THE MULTILATERAL AND REGIONAL ECONOMIC ARCHITECTURE......Page 38
REFERENCES......Page 40
INTRODUCTION......Page 41
JAPAN’S BANK CRISIS......Page 42
Emergency policies......Page 43
Restructuring in the prewar period......Page 45
Influence of the wartime controls......Page 46
Postwar reconstruction of financial institutions......Page 47
DEFECTS OF GOVERNANCE IN BANK MANAGEMENT......Page 48
The mechanisms of the safety net in Japan......Page 49
Deposit insurance in Japan......Page 51
Disciplinary influence of market competition......Page 52
Role of competition-restricting regulations......Page 53
The role of regulators: another agency problem......Page 54
Principal-agent problem with regard to regulators......Page 55
A VACUUM OF GOVERNANCE AND MARKET RESPONSES......Page 56
Was the ‘bubble’ a result of moral hazard?......Page 57
Delayed restructuring in bank management......Page 58
How has the market responded to the crisis?......Page 60
CONCLUSION......Page 64
NOTES......Page 66
REFERENCES......Page 71
4 The state, banking and corporate relationships in Korea and Taiwan......Page 74
OVERVIEW OF DEVELOPMENT MECHANISMS......Page 75
Commonalities and contrasts......Page 79
BANKING AND CORPORATE RELATIONSHIPS......Page 80
Industrial characteristics......Page 85
Corporate sector performance......Page 87
Competitiveness......Page 88
GOVERNANCE AND LATECOMER INDUSTRIALISATION......Page 90
POST-CRISIS ISSUES: KOREA......Page 95
The role of financial institutions......Page 96
Improving exit mechanisms......Page 97
Promoting the restructuring of business groups......Page 99
Competition policy......Page 101
POST-CRISIS ISSUES: TAIWAN......Page 102
FUTURE CHALLENGES......Page 105
Evolutionary issues......Page 107
NOTES......Page 108
REFERENCES......Page 110
INTRODUCTION......Page 114
Capital controls before 1990......Page 117
Did the controls work?......Page 119
Financial liberalisation after 1990......Page 120
THE FINANCIAL SECTOR AFTER THE CRISIS......Page 121
Capital controls......Page 123
Banking reform......Page 124
Reforming the regulatory framework......Page 128
Civil actions against executives of financial institutions......Page 129
BOND MARKETS......Page 130
Non-performing loans......Page 131
‘Strategic’ NPLs......Page 132
Banking reforms......Page 133
REFERENCES......Page 134
INTRODUCTION......Page 136
Governance in the national agenda......Page 138
Corruption and governance......Page 140
Governance and the rise and fall of Soeharto......Page 141
IMF-supported reform and recovery......Page 147
Enter the IMF with a governance agenda......Page 153
Towards a regional surveillance mechanism......Page 156
Strengthening civil society......Page 157
REFERENCES......Page 159
THE POLITICAL ECONOMY OF THE RENT-GENERATING GOVERNMENT......Page 161
THE SOEHARTO-BUSINESS SYMBIOSIS......Page 163
Centralisation of power......Page 164
Rule of law......Page 165
Reliance on the military......Page 166
Civil and military salaries......Page 167
The role of the technocrats......Page 168
RENT GENERATION......Page 170
PRIVATISING THE LAFFER CURVE......Page 172
The role of Islam......Page 173
Deregulation......Page 174
Improvements in civil service salaries and conditions......Page 175
First family depredations......Page 176
WHY DID THE SYSTEM COLLAPSE?......Page 177
LOOKING TO THE FUTURE......Page 179
NOTES......Page 180
REFERENCES......Page 181
INITIAL POLICY RESPONSE......Page 184
THE EXPERIMENT......Page 186
SIGNS OF RECOVERY......Page 189
HAS THE EXPERIMENT WORKED?......Page 193
Capital controls and monetary policy autonomy......Page 194
FIXED EXCHANGE RATE AND EXPORT-LED RECOVERY......Page 195
Controls and foreign direct investment......Page 196
PORTFOLIO INVESTMENT......Page 198
CONCLUSION......Page 199
NOTES......Page 202
REFERENCES......Page 204
INTRODUCTION......Page 207
What is corporate governance?......Page 208
Sound corporate governance and macroeconomic stability......Page 209
SYSTEMS OF CORPORATE GOVERNANCE......Page 211
The Philippine system of corporate governance......Page 212
THE ROLE OF A MONITOR......Page 214
The role of banks as corporate monitors......Page 217
The role of government and the market as corporate monitors......Page 220
CURRENT TRENDS......Page 222
FUTURE ISSUES......Page 225
NOTES......Page 227
REFERENCES......Page 228
INTRODUCTION......Page 231
REDEFINING THE STATE-ENTERPRISE RELATIONSHIP......Page 232
GROWING FINANCIAL FRAGILITY......Page 235
PREPARING FOR CAPITAL ACCOUNT LIBERALISATION......Page 239
CONCLUDING REMARKS......Page 241
NOTES......Page 242
REFERENCES......Page 243
INTRODUCTION......Page 246
IMPACT OF THE REGIONAL CRISIS ON SINGAPORE AND HONG KONG......Page 247
POLICY RESPONSES TO THE CRISIS: SINGAPORE......Page 248
Exchange rate policy......Page 250
Financial centre development......Page 251
Banking supervision and financial market regulatory reform......Page 253
Corporate governance......Page 254
POLICY RESPONSES TO THE CRISIS: HONG KONG......Page 255
The Hong Kong version of a currency board......Page 256
Exchange rate mechanism reform in Hong Kong......Page 258
Extreme measures in the stock market......Page 259
Banking reform in Hong Kong......Page 260
SUMMARY AND CONCLUSION......Page 263
NOTES......Page 264
REFERENCES......Page 267
APPENDIX 11.1......Page 269
Old orthodoxies, new heresies......Page 273
The case for free capital movements......Page 274
A distortions approach......Page 275
Capital inflows......Page 277
Capital outflows......Page 279
DIAGNOSING THE PROBLEM......Page 281
Implicit subsidies to the accumulation of foreign debt......Page 282
Exchange rate policy......Page 283
Interaction of foreign capital flows with domestic distortions......Page 284
Interaction of foreign capital flows with financial sector distortions......Page 285
Externalities associated with foreign borrowing......Page 286
Imperfect information......Page 287
The developed country paradigm: aiming for ‘best practice’......Page 288
Reducing vulnerability: policies for the short and medium term......Page 290
Sequencing and prohibitions: policies for the less developed......Page 293
Lateral thinking: short cuts to avoiding financial sector distortions......Page 294
CONTROLS IN TIMES OF CRISIS: THE MALAYSIAN CASE......Page 295
CONCLUSIONS......Page 296
NOTES......Page 298
REFERENCES......Page 299
THE CONTEXT FOR FINANCIAL AND CORPORATE RESTRUCTURING......Page 301
AGENDA FOR RESTRUCTURING......Page 303
Financial sector restructuring: resolution, recapitalisation and rehabilitation......Page 304
Corporate restructuring......Page 305
PROGRESS TO DATE AND OUTSTANDING ISSUES: COUNTRY BRIEFS......Page 306
Progress in financial sector restructuring......Page 307
Progress in corporate sector restructuring......Page 310
Outstanding issues in financial and corporate sector restructuring......Page 312
Korea......Page 313
Progress in financial sector restructuring......Page 314
Progress in corporate restructuring......Page 317
Outstanding issues in financial and corporate sector restructuring......Page 319
Progress in financial sector restructuring......Page 320
Progress in corporate restructuring......Page 322
The Philippines......Page 323
Progress in corporate sector restructuring......Page 324
Thailand......Page 325
Progress in financial and corporate sector restructuring......Page 326
Progress in corporate sector restructuring......Page 328
Outstanding issues in financial and corporate sector restructuring......Page 330
Creditor constraints......Page 331
Debtor constraints......Page 332
Government and international constraints......Page 333
SUMMARY......Page 334
NOTES......Page 335
INTRODUCTION......Page 346
An economic constitution......Page 347
Designing a constitutional convention for the international financial system......Page 349
Highly leveraged institutions......Page 352
Moral hazard and IMF-supported reform programs......Page 353
Measures to strengthen the international financial system......Page 354
International standards, transparency and capital account rules......Page 355
Strengthening surveillance through organisational change......Page 356
The structure of the IMF......Page 357
The role of regional groups......Page 359
ADDRESSING CRISES—THE ROLE OF THE PRIVATE SECTOR......Page 360
CONCLUSIONS......Page 362
REFERENCES......Page 364
THE RATIONALE FOR AN INTERNATIONAL ECONOMIC CONSTITUTION......Page 365
NOTES......Page 367
Abbreviations......Page 369
Index......Page 373