The Degree of Competition in the Thai Banking Industry before and after the East Asian Crisis

This paper analyzes the influence of the East Asian crisis and the subsequent reforms on the oligopolistic nature of the Thai banking industry. Since the crisis, there have been substantial changes in competitive environment, including a decline in the family ownership of banks as well as the arrival of new entrants. How did these changes affect a banking industry in which the six largest local banks accounted for over 70 percent of market share? The estimated Lerner index from Bresnahan's [1989] conjectural variation model indicates the possibility of a decline in the degree of competition.

The Production Technology of Philippine Domestic Banks in the Pre-Asian Crisis Periods: Estimation of Cost Function in the 1990-96 Period

This is to analyzes the operational behavior and technical progress among Philippine domestic banks, using micro-level data on individual banks. First, we summarize their major business activities and gain insight on how the structure is changing. Then, we formally estimate the cost function of Philippine domestic banks using panel data covering a seven-year period (1990-96). The presence of economies of scale and economies of scope is investigated and technical progress in the banking industry is measured. In addition, the results of analysis for the Philippines are compared with those of similar studies on Thailand conducted by the author previously.

Post-Crisis Economic Reform in Indonesia:Policy for Intervening in Ownership in Historical Perspective

Introduction : Economic reform in Indonesia after the Asian currency crisis is often discussed in parallel with Thailand and South Korea, which were alike hit by the crisis. It should however be noted that what happened in Indonesia was a change of political regime from authoritarianism to democracy, not just a change of government as seen in Thailand and South Korea. Indonesia’s post-crisis reform should be understood in the context of dismantling of the Soeharto regime to seek a new democratic state system. 　　　In the political sphere, dramatic institutional changes have occurred since the downfall of the Soeharto government in May 1998. In comparison, changes in the economic sphere are more complex than the political changes, as the former involve at least three aspects. The first is the continuity in the basic framework of capitalist system with policy orientation toward economic liberalization. In this framework, the policies to overcome the crisis are continued from the last period of the Soeharto rule, under the support system of IMF and CGI (Consultative Group on Indonesia). The second aspect is the impact of the political regime change on the economic structure. It is considered that the structure of economic vested interests of the Soeharto regime is being disintegrated as the regime breaks down. The third aspect is the impact of the political regime change on economic policy-making process. The process of formulating and implementing policies has changed drastically from the Soeharto time. With these three aspects simultaneously at work, it is not so easy to identify which of them is the main cause for a given specific economic phenomenon emerging in Indonesia today. 　　　Keeping this difficulty in mind, this paper attempts to situate the post-crisis economic reform in the broader context of the historical development of Indonesian economic policies and their achievements. We focus in particular on the reform policies for banking and corporate sectors and resulting structural changes in these sectors. This paper aims at understanding the significance of the changes in the economic ownership structure that are occurring in the post-Soeharto Indonesia. Economic policies here do not mean macro economic policies, such as fiscal, financial and trade policies, but refer to micro economic policies whereby the government intervenes in the economic ownership structure. In Section 1, we clarify why economic policies for intervening in the ownership structure are important in understanding Indonesia. Section 2 follows the historical development of Indonesia’s economic policies as specified above, throughout the four successive periods since Indonesia’s independence, namely, the parliamentary democracy period, the Guided Democracy period under Soekarno, the Soeharto-regime consolidation period, and the Soeharto-regime transfiguration period2. Then we observe what economic ownership structure was at work in the pre-crisis last days of the Soeharto rule as an outcome of the economic policies. In Section 3, we examine what structural changes have taken place in the banking and corporate sectors due to the reform policies in the post-crisis and post-Soeharto Indonesia. Lastly in Section 4, we interpret the current reorganization of the economic ownership in the context of the historical transition of the ownership structure, taking account of the changes in the policy-making processes under democratization.

Impact of foreign capital entry in the Indonesian banking sector

After the Asian financial crisis of 1997/98, the Indonesian banking sector experienced significant changes. Ownership structure of banking sector is substantially-changed. Currently, ownership of major commercial banks is dominated by foreign capital through acquisition. This paper examines whether foreign ownership changes a bank’s lending behavior and performance. Foreign banks tend to lend mainly to large firms; this paper examines whether the credit to small and medium-sized enterprises (SMEs) is affected by foreign capital entry into the Indonesian banking sector. Empirical results show that banks owned by foreign capital tend to decrease SME credit.