15 maturity structure, interest rate and currency composition were compatible with the repayment capacity of the projects or investments for which the funds were borrowed. The level and composition of the reserves were both adequate. Of course, there were exceptions to these generalizations in individual country cases at certain points of time. Indonesia's growing exposure in yen was a source of concern in 1987 and 1988 while the size of Korea's debt stock in 1982 had created some questions in the minds of the creditors.

South Asian countries received substantially large proportions of capital flows in the form of concessional assistance. It is only in the late 1980s that India became a significant borrower in the international capital markets. Finally, the share of variable interest rates in total debt wab *.omparaiiveiy lower than the Latm American countries and thus the rise in interest rates did not result in immediate servicing difficulties.

FDI has contributed to growth both by augmenting resources available for capital formation and by improving the efficiency of investment. The rate of approval of FDI in ASEAN countries during the period 198689 is impressive. According to some estimates, the total approvals escalated to $16.7 billion in 1989 compared to $2.5 billion in 1986. FDI flows account for more than 50% of all types of capital flows to these countries. In China, the pledged value of foreign direct investment amounted to $34 billion at the end of 1989, of which $15.4billion had actually been disbursed. Disbursements have risen to $3.3 billion annually and foreign investors have made a major contribution to the development of services, oil exploration and export-oriented manufacturing industries. As a result, these countries do not face difficulty in attracting foreign savings at relatively lower cost.

# _(5)_ Domestic Savings

Finally the domestic savings rates and domestic resource mobilization efforts in these countries were intense which enabled them to finance a large proportion of their overall investment without resorting to excessive external borrowing.

For the period 1973-80, Asia's domestic savings rate was 25.3 % while investment ratio was 26.1 %. In the subsequent period 1980-87 these ratios were 26.7% and 28.1 % respectively. Foreign resources inflows were thus modest despite the two oil shocks and other adverse external circumstances. Empirical studies have also shown a stronger correlation between growth rates in GDP and domestic savings ratios than between growth rates and investment rates. Thus the policy relevance of stronger domestic saving effort becomes more pronounced.

When domestic savings decline in relation to national income while external indebtedness increases, the substitution of external borrowing for domestic savings implies a rise of funds borrowed from abroad to finance consumption. The evidence for Asia shows that this has not happened. The saving rates of China and Malaysia exceeded 35 % while those of Indonesia, Malaysia, Thailand, and MrD a, 30_ ZOV. '-dia saves aboui 21 _%o_ of its income. In thalland, significant increases in **government** savings have taken place. The Philippines, Pakistan and Sri Lanka have lower domestic savings rates in the range of 10 to 15 percent while Bangladesh has barely positive rates. The savings GDP ratio in Latin America was 20% and Sub-Saharan Africa about 13%.

Fry' has analyzed determinants of savings ratios in Asian developing economies and found that these ratios are increased by income growth. National savings ratios are also raised by a higher overall governnent budget balance aid by higher real deposit rates of interest. On the other hand, higher population dependency 27Fry, M.J., Domestic Resource Mobilization in Developing **Asia:** Four Policy Issues.' Asian Development Review 1991, Vol. 9, No. I.