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.