, april, p. 36. financial systems has increased in several countries, which brings both capital and expertise. 11 table 3 : non - performing loans per cent of total loans indonesia korea malaysia philippines thailand at peak * 48. 6 13. 6 11. 5 17. 3 45. 0 6. 1 0. 9 4. 8 6. 0 8. 1 * year of peak in brackets source : world bank emphasis has been placed on beefing up bank supervision and fostering a stronger culture of risk management in the private sector. this is an area, however, where rapid progress is very difficult, and several countries still have difficulty meeting the relevant international standards. developing and maintaining a strong supervisory apparatus is a challenge in any country at any time, no less so in the asian region. countries have also pursued stronger requirements for disclosure, better accounting and auditing standards and so on. that said, progress towards improving the broader regulatory and governance arrangements that condition the “ investment environment ” has, in the view of at least some commentators, been mixed, at best. 12 a good deal of work has also been done, particularly of a co - operative nature between countries, aimed at fostering deeper, more resilient capital markets. the asian bond funds, initiated by the regional central banks, established cross - border mutual - fund type structures allowing regional investors to hold obligations issued in local currency by regional governments and quasi - government authorities. the asean + 3 group has encouraged the issuance of local - currency debt by the multilateral institutions. the development of securitisation and credit guarantee markets in the asian region has been promoted through a number of regional fora, and securitisation in east asia has grown quite rapidly since 1999, particularly in korea, hong kong and malaysia. these sorts of initiatives typically involve trying to remove the various small impediments that individual countries have ( sometimes unintentionally ) put in the way of investors, and progress towards the mutual recognition of regulatory frameworks in differing countries. these have been very useful examples of practical co - operation – and of how much work is involved in giving practical effect to general ideas agreed to so easily in international meetings. more ambitious ideas for mutual support have also been pursued, of which the chiang mai initiative ( cmi ) is probably the most concrete. cmi provides for the countries in the asean + 3 group a series of bilateral swap lines, with the amounts committed being increased progressively. 13 recently, an in

fell, the borrowers or their bankers, or both, went under water owing to the valuation changes on the debts. but raising interest rates to support the currency damaged capacity to repay as well. it was this financial dimension that made the asian crisis so costly. and costly it certainly was. per capita real gdp fell by about 9 per cent in east asia excluding china and japan. the fall in indonesia was 15 per cent. on the best available figures, non - performing loans ( npls ) reached nearly half of all loans in indonesian and thai banks, and npl ratios reached double - digits in several other countries in the region. 5 the process of sorting out banking problems of this magnitude required, as it usually does, extensive public funding. the net fiscal costs of the banking crises are estimated to have been over 20 per cent of a year ’ s gdp in korea, 35 per cent in thailand and about 40 per cent in indonesia. 6 we sometimes read that asia quickly recovered. i am not so sure. in due course, recovery in asia did take hold, but it was very slow in some cases. the pre - crisis peak in real per capita gdp was regained within two or three years in korea, the philippines, singapore and hong kong. but that achievement took five years in thailand, six years in malaysia and seven years in indonesia. to put that in perspective, after the 1982 recession in the united states, real per capita gdp took about two years to regain its previous peak. in australia after the 1990 - 91 recession, it took about three years. as i recall, those episodes were widely seen as serious. see mcdonough, w. ( 2001 ), ” the role of financial stability ”, address at the xiii international frankfurt banking evening, frankfurt, may 2001. available at http : / / www. bis. org / review / r010504a. pdf. world bank ( 2007 ), east asia and pacific update – 10 years after the crisis, april, p. 60. imf ( 2004 ), indonesia : selected issues, imf, washington dc, p. 35. table 2 : east asian gdp per capita change post - crisis * per cent years to recover hong kong indonesia korea malaysia philippines singapore thailand east asia * * - 6. 4 - 15. 0 - 7. 5 - 9. 5 - 2. 7 - 4. 6 - 11. 6 - 8. 8 memo items : united states ( 1981 / 82 ) ^