ADB brings X-mas cheer to South Korea, Thailand

ADB brings X-mas cheer to South Korea, Thailand

MANILA (AFP): The Asian Development Bank (ADB) brought Christmas cheer to two ailing regional economies, announcing yesterday it approved a loan of US$4 billion to South Korea and 300 million dollars to Thailand.

ADB President Mitsuo Sato told a news conference the loan to South Korea was the "single largest loan" approved by the Manila- based bank in its 30-year history of helping developing Asian nations.

Paul Dickie, ADB director for the financial sector, told reporters the South Korean national assembly was expected to formalize its request to borrow from the ADB on Dec. 23, after which the first tranche of $2 billion will be disbursed on Christmas eve.

The rest of the money will come in three other tranches until 1999, ADB said.

The loan aims to help implement reforms in the financial sector through the setting up of a powerful but autonomous Financial Supervisory Agency and by giving more independence to the Bank of Korea, Sato said.

"The program is a rapid response to an exceptional and urgent crisis in the Korean economy," the Manila-headquartered bank said in a separate statement.

It said the loan would help South Korea "address the structural problems in the financial sector through increased reliance on market forces with independent regulatory oversight." It will cover banking and nonbank financial institutions.

ADB said "the equities and bond markets will be improved through increased reliance on market forces, improved access to international investors and new financial products to reflect the more market based economy."

Sato said the ADB loan was in support of the 60-billion-dollar financial rescue package arranged by the IMF to bail out the South Korean economy left in shambles by a series of bad debts, crumbling financial institutions and a sharply depreciating currency.

The loan to Thailand, the first Asian economy to be scorched by the financial crisis in July, will be for reforms in the country's financial markets, ADB said.

The amount is part of ADB's 1.2 billion dollar contribution to a $17.2 billion rescue package the IMF had arranged for the troubled southeast Asian country.

ADB had earlier approved loans totaling 3.5 billion dollars as part of another IMF-brokered multi-billion-dollar bailout package to Indonesia.

Asked about the most immediate impact of the loans, Sato said "this disbursement will have a major impact in dealing with the very important question of ... foreign exchange reserves."

But he said it would take "one or two years" for South Korea and Thailand to put in place "the institutional measures" needed to restore their economies and protect them from future crises.

"These reforms will help to restore confidence in these economies and when fully implemented will help greatly reduce the risk of such events recurring in the future," said Sato, a former top official at the Japanese finance ministry.

"We are confident that these reform programs will do much to transform these sectors through increased reliance on market forces supported by independent regulatory agencies," he added.

He said globalization had allowed developing Asian countries to attain remarkable economic growth but that such integration also has made them vulnerable to financial shocks elsewhere.

"The lesson that a country should learn from the currency turmoil is how to improve their policies and institutional capacities as such that it can take advantage of globalization to better develop its economy rather than to avoid being integrated," he said.

In response to the Asian financial turmoil, the ADB will focus its operations in the medium-term on helping developing member countries undertake the necessary reforms to help them withstand similar crises in the future, Sato added.