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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek

MARCH 31, 2000 VOL. 26 NO. 12

In Favor Of Deadbeats?
Inadequate laws may give debtors the edge


COVER: Seismic Changes
Can president-elect Chen Shui-bian meet the historic challenges posed by a changing Taiwan - and by China?
The Challenge: Now comes the hard part
Reality Check: Beijing will have to deal with the new Taiwan
Profile: Chen's split personality

Editorial: Taiwan and China have reason aplenty to make peace
Editorial: Asia needs new policies to combat prostitution

South Asia: Clinton to India and Pakistan - Start Talking
'Limited War': Don't let the term fool you
Philippines: Sister Christine vs. Estrada - yet another scandal
Extended Interview: Salamat Hashim calls for independence
Myanmar: Behind the secret "Chilston" meetings
Inside Story: Asia's "Insiders" - four people who have blown the whistle on wrongdoing
Viewpoint: A Malaysian race for Islamization?

People: Sumo's big brother calls it quits
Heritage: The struggle to save Penang's old George Town
Art: Digital works blur the line between tech and expression
Books: Why healthcare was so bad in Suharto's Indonesia
Health: Noni - The craze over a smelly green fruit
Newsmakers: Thai "List of Shame" riles the privileged

Games: Microsoft's X-factor
Computing: IBM's Deep Blue man is now into e-commerce
Cutting Edge: An e-book horror story

Bankruptcy: The court-ordered restructuring of TPI suggests Thailand is coming to grips with deadbeat borrowers
Room to Improve: Inadequate laws in Indonesia and Korea
No Hype: Can Singapore's Pacific Internet regain investor favor?
Renong: The Malaysian conglomerate sells off key assets
Business Buzz: A deal to lift Singapore's spirits

Investing: How rising U.S. interest rates will affect Asia

Indonesia's State Enterprises Minister Laksamana Sukardi likes to refer to the country's judges as "auctioneers" who hand down verdicts to the highest bidder. It describes a corrupt system that is probably not up to handling the nation's huge debt problem. John Dodsworth, the senior resident representative in Jakarta for the International Monetary Fund, sums up the problem like this: "With all the private debt out there, if you're going to have a recovery in Indonesia you have to have some way of restructuring [that debt]." That means cutting the debt mountain down to size. It isn't likely to happen, he says, as long as the courts fail to implement and apply the law as they should. Too often, he says, "the courts rule in favor of debtors."

Jump to South Korea. It is much further up the ladder in terms of providing a reliable, efficient bankruptcy system. But it also has some distance to go. The problem there is that too many indebted companies actually like the prospect of filing for court protection under bankruptcy laws. One official of the Financial Supervisory Commission - the government agency created, among other reasons, to help solve the bad-debt problems of banks - says Samsung Motors is a good example of how a big company can abuse the system. "Samsung was in a position to take an active part in trying to solve [the problem with its] automotive unit. But [it] took advantage of the legal system by filing for court protection and leaving the creditors in limbo."

Bankruptcy in Indonesia and South Korea may seem different; yet there is a theme that binds them. The debtors, at least some of them, get the breaks. In the past, when so many loans in Asia were directed by governments to this particular industry or that special crony, borrowers were used to getting preferential treatment. But agencies like the FSC in Seoul aim for a level playing field: "We want to see a more definitive, U.S.-style bankruptcy law introduced in Korea," says the official. "There was nothing to prevent Samsung from going to court. It has been eight months and we've seen nothing happen." Outside the courtroom, an attempt by Renault to buy Samsung Motors has not gotten far. The French company was granted exclusive rights to strike a deal until the end of March. Samsung officials are already talking about plans to reopen the bidding after the deadline.

A recent Indonesian case involving Tirtamas Comexindo (see box this page), a company that belongs to Suharto son-in-law Hashim Djojohadikusumo, is a good example of how courts tend to favor debtors in Indonesia, say officials with the Indonesia Bank Restructuring Agency. Tirtamas, which had already been granted a standard 45-day grace period at the end of last year to settle a $200 million debt with creditors, asked for another six months. IBRA opposed the extension: "The debtor does not have any intention of settling its debts," claims IBRA lawyer Widodo Mujiono. "Earlier efforts [have] proved fruitless." The judge sided with Tirtamas

South Korean companies learned about the Indonesian system recently in the case of Bakrie Finance, the subject of a bankruptcy application by four Korean financial institutions allegedly owed $13.5 million. Last year, the same companies had their application thrown out by a judge who said they hadn't proved to his satisfaction that there was even a debt owed, let alone one that was not repaid. This time, a different judge ruled that the four didn't represent two-thirds of Bakrie's total indebtedness. The challenge now for the Koreans is to get more of Bakrie's creditors together for a third try. They may see new meaning in the phrase: bankruptcy protection.

This edition's table of contents | Asiaweek home


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COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

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