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MALAYSIAN "BAIL OUTS"?Capital Controls, Restructuring
and Recovery
WONG SOOK CHINGJOMO K.S.
CHIN KOK FAY
ISINGAPORE
Contents
About the Authors viiTables viiiFigures xiBoxes xiiNote on Currency xiiiAcknowledgements xivAbbreviations xviPreface xxiiiChronology: East Asian Crises and Recovery Timeline xxviiChronology: Malaysian Economic Crisis and
Corporate Restructuring xlv
( ! •
The 1997-98 East Asian Crises 1Jomo K.S.
From Miracle to Debacle 3Crises of a New Type 7Dangers of International Financial Liberalisation 9The Role of the IMF 16Conclusion 20
Crisis and Crisis Management in Malaysia, 1997—98 23Jomo K.S.
Capital Flows and Crisis 23Policy Responses and Deepening the Crises 28Mahathir's September 1998 Recovery Package 33Did Malaysia's 1998 Controls Succeed? 38
13. Corporate "Bail Outs" 47^ Wong Sook Ching
Concepts and Parameters 47Are Corporate "Bail Outs" Desirable? 52Concluding Remarks 59
' 4. Corporate Restructuring Policy Options 67Wong Sook Ching
Government or Market-led Corporate Restructuring 69Effective Corporate Restructuring 88
Contents
Timing 90Malaysian Special Purpose Vehicles 93Corporate Debt Restructuring Committee (CDRC) 98Concluding Remarks 99
5. Bank Restructuring in Malaysia 112Chin Kok Fay
Why Bank Restructuring? 113Cleaning Up the NPLs 117Recapitalising Malaysian Banking Institutions 120Resolving Corporate Debt 122Bank Mergers 125Other Bank Restructuring Efforts 130Assessing Progress 132Concluding Remarks 137
•6. Corporate Debt Restructuring in Malaysia 139V_ Wong Sook Ching
From Privatisation to Corporate Restructuringand Renationalisation 139Effectiveness of the Special Purpose Vehicles 145The Corporate Restructuring Programme 146Concluding Remarks 172
»7. Corporate Restructuring: Case Studies 179^—^ Wong Sook Ching
Malaysian Airline System Bhd (MAS) 179The United Engineers (M) Bhd/Renong Bhd (UEM/Renong) Group 203The Light Rail Transport (LRT) Systems 234Concluding Remarks ' ' 242
\ 8. Conclusion: From Financial Crises to\^y Economic Recovery 256
Jomo K.S.Malaysia's Capital Controls: Policy Lessons 261Priorities for International Financial System Reform 271Concluding Remarks 274
Bibliography 171
Index 332