Korean credits to RI $5.3b

Korean credits to RI $5.3b

SEOUL (AFP): South Korean financial institutions had some US$5.3 billion in debt exposed to Indonesia at the end of 1997, including $2.4 billion in loans, a finance ministry tally showed yesterday.

South Korea's direct investment in Indonesia also stood at $1.45 billion at the end of 1997, Yonhap news agency said, citing ministry sources.

The tally was released amid mounting fears over Indonesia's debt defaults which would cause South Korean lenders to suffer a sharp rise in bad loans.

But analysts said South Korea's debt exposure to Indonesia may be greater as merchant banks here had raised short-term funds in Singapore and Hong Kong to re-lend them to Indonesia in pursuit of high yields.

Furthermore, South Korean firms have invested heavily in junk bonds and derivatives issued by Indonesian financial institutions.

In 1996, South Korea's exports to Indonesia were estimated at $3.2 billion.