Private nonguaranteed debt booms. The most significant development in the region's debt profile was the strong jump in disbursements on private nonguaranteed debt, in which a private creditor contracts with a private debtor without any form of guarantee from the debtor's government. Private nonguaranteed debt disbursements are estimated to have almost doubled to about $39 billion in 1996, from $20.8 billion in 1995. As a result, net inflows rose to about $29 billion, and the stock of private nonguaranteed debt in the region rose 50 percent, from $58 billion in 1995 to $87 billion in 1996, or 19 percent of total external debt. A substantial part of the new private nonguaranteed debt disbursements went to Indonesia, and significant activity was also seen in China, Malaysia, and Thailand.

Short-term debt increases. Net short-term debt inflows increased significantly in 1995 and 1996, and short-term debt now accounts for about 21 percent of the region's total external debt, up from about 16 percent in 1989. The rise occurred in most of the region's major economies, but it has been concentrated in China, Indonesia, and Thailand and has been motivated by, among other things, differentials between domestic and international interest rates. In Thailand short-term debt now accounts for about 33 percent of total debt.

Debt indicators remain healthy. Although growth in the region's debt stock outpaced growth of exports, the region's debt to export ratio remained moderate at 99 percent in 1996, much lower than the average debt to export ratio of 146 percent for low- and middle-income countries. The region's ratio of debt service to exports fell to about 12 percent, much lower than South Asia's 23 percent and Latin America's 30 percent.

Debt burdens vary. The debt to export ratio rose in Indonesia, Malaysia, and Thailand but fell in China and the Philippines. Within the region debt to export ratios ranged from 19 percent (Fiji) to 451 percent (Lao PDR), while debt to GNP ratios ranged from 15 percent (China) to 113 percent (Vietnam). The countries with the heaviest estimated burden of debt service as a percentage of exports are Indonesia (34 percent), the Philippines (19 percent), Papua New Guinea (18 percent), and Myanmar (18 percent).

No debt is rescheduled in 1996. There have been no new debt rescheduling agreements in East Asia since Cambodia's Paris Club deal in February 1995. Myanmar, however, is classified as a heavily indebted poor country. The Russian Federation is a major creditor of both countries.

Foreign direct investment to China rises. For the region as a whole foreign direct investment rose by about $9 billion to $61 billion in 1996, largely as a result of an estimated $6 billion rise in investment flows into China. Modest increases in foreign direct investment were observed in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Portfolio equity flows fell to $12.9 billion in 1996 from $14.7 billion in 1995. About 60 percent of portfolio equity to the region reflects direct investment in local exchanges; the rest is international equity issues. China continues to account for about 69 percent of foreign direct investment to the region and about 22 percent of portfolio equity.

Regional bond issues recover. Bond issuance rebounded in 1996, with the net inflow for the year estimated at $11.4 billion, up from about $7.9 billion in 1995 and $9.7 billion in 1994. Increased activity was observed in China, Indonesia, the Philippines, and Thailand; net inflows fell sharply in Malaysia. China and Malaysia issued bonds with 100 year maturities, and Indonesia was successful in diversifying its investor base into Europe.

Aid flows decline again. Official development assistance to East Asia fell for the second consecutive year in 1996, as net concessional flows from multilateral lenders declined to just $1.1 billion, down from an average of $1.3 billion in 1991-95. The decline mainly reflected weaker flows to China and Indonesia. Grants to the region also fell slightly, from $3.1 billion to $2.8 billion. Official development assistance flows to East Asia now account for about 14 percent of all such aid to low- and middle-income countries, down from 15 percent in 1990.