Recent capital flows to Asia/Pacific countries

Abstract

The volume of international private capital flows in the 1990s has been unprecedented in human history, startling even the most astute observers. The major new beneficiaries of such inflows have been developing countries. Among developing countries, the major recipient region has been East Asia and the Pacific. The revival and sheer volume of private capital flows was particularly startling against the backdrop of the 1980s, when myriad debt crises during the first half of the decade triggered capital-flow constipation that persisted for most of the decade. Although Asia/ Pacific countries attracted considerable foreign direct investment, most of the rest of the developing world found itself starved for capital and subsisted on official inflows: from the international financial institutions and from developed country governments. Even the Asia/Pacific countries were unable to attract much money from foreign commercial banks, and they were even less able to sell bonds or equities internationally. Thus even the relatively healthy Asia/Pacific economies were sometimes forced to run large trade surpluses to finance their capital needs.