1. INTRODUCTION

This second comparative report presents the results of further studies undertaken as part of the second phase of this regional technical assistance project - RETA 5795: Insolvency Law Reforms (the "Project"). The first comparative report was presented at a symposium held in Manila on 25-26 January 1999. That report was based on studies of eleven Asian economies (the "RETA economies")*. A review of the product of those collective endeavours was published by the Asian Development Bank under the title 'Insolvency Law Reform in the Asian and Pacific Region' in Law and Development at the Asian Development Bank, April 1999 (the 'ADB report').
The second phase of the project has concentrated on a more detailed examination of particular issues in five of those economies. These five economies comprise Indonesia, Thailand, Korea, Philippines and Malaysia. In this report they are sometimes collectively referred to as the 'five economies'.
There have been significant developments in the five economies in the relatively short period of nine months since the date of the first symposium. Actual or proposed legislative reform to insolvency and related laws has been considerable. There has been a significant use of informal insolvency workout processes. In some of the economies the court system for the administration of insolvency cases has been reformed. There have been attempts to improve corporate management standards and practices. The banking and financial sector of all the economies has been the subject of extensive investigation, management, review and change.
These developments evidence that many of the issues that have been the focus of this Project have been taken seriously. The respective governments of the five economies appear to have responded positively and responsibly to the need for insolvency and related law, institutional and infrastructure reform.
The level of activity and achievement is encouraging and one purpose of this report is to highlight the major developments. However, the momentum needs to be maintained. This report will therefore endeavour to identify areas in which further improvement would be helpful and, in some cases, is necessary.

1.1 Complimentary work in the Asian Development Bank
The work in progress on another regional technical assistance being conducted by the Asian Development Bank (RETA No. 5773 Secured Transactions Law Reform the "Secured Transactions Project") will be of considerable in this Project. A detailed analysis is being undertaken of secured transactions in a number of Asian economies, two of which (Indonesia & Thailand) are among the five economies engaged in this Project. This work will greatly assist in an understanding of secured transactions in those economies; the areas in which reform is necessary; and, importantly for the purposes of this Project, the dynamics of and the relationship between secured transactions and insolvency processes. The second symposium to be held in Manila 24-27 October on this Project will be combined, in part, with a symposium on the Secured Transactions Project.
1.2 Other projects and studies
It is relevant to note that a number of other projects and studies have since been commenced or are in the course of commencement on the same or similar subject matter addressed in this project. These include:
-A combined OECD/APEC study of insolvency law regimes in five Asian economies;
-A recently published report of the International Monetary Fund on important principles of insolvency law and practice;
-A project of the World Bank that has the aim of presenting guidelines and principles for best practices in insolvency law, particularly in emerging economies; and
-A proposal by UNCITRAL to undertake work to bring together the endeavours of all of these agencies and possibly to formulate a model insolvency law.
-Many bilateral projects (for example, assistance from AGILE/USAID in the preparation and drafting of rules for reorganization procedure in the Philippines) are also ongoing.

The results of this Project have and will provide valuable information on insolvency laws and related issues in the Asian region to benefit some of these other initiatives.
The Asian Development Bank is collaborating with each of the above multi-lateral agencies on their respective projects. Co-operation is important to avoid unnecessary duplication and to promote compatibility.
1.3 Scope and content of the second phase of this project
The local consultants in the five economies have provided supplementary local studies based on a work guide that identified the following areas for research and response:
-Numbers and studies of cases of corporations whose insolvent financial affairs have been administered under either an informal debt restructuring arrangement, a formal liquidation process or a formal reorganisation process.
-Recent reforms in insolvency law and practice and related areas.
-Corporate management and its performance including accounting information, financial management, corporate governance, directors duties and responsibilities, political patronage, 'cronyism' and corruption.
-Lending and credit control practices of banks and other financial institutions.
-Secured lending transactions including enforcement of security rights over property of an insolvent corporation and the balancing of those enforcement rights with the restraint that is necessary in the case of a corporation that is attempting a formal or informal restructuring or reorganisation.
-Major substantive and practical problems in corporate insolvency laws and their application.
-The operation of the judicial system in relation to formal corporate insolvency practices.
-The efficiency of the operation of informal workouts and the problems associated with those practices.
-The development of public and private sector case management administration of liquidations and reorganisations.
-The availability and quality of information and statistics.
In addition field visits were made to each of the five economies for discussions with the local consultants, government officials, judges, policy makers, legal and accounting professionals, representatives of banks and financial institutions and others.
1.4 Areas of particular interest
With that background, the main areas of interest in this second phase are to discover what has occurred and what critical areas remain to be addressed in the five economies. Examples include:
-What effect have the new insolvency law reforms had in Indonesia and Thailand?
-How have the informal processes operated in Indonesia, Thailand, Korea and Malaysia?
-Has there been any improvement to security enforcement process?
-What attempts have been made to improve standards of corporate management?
-Has the quality of judicial handling of insolvency cases been improved?
-Have bank lending and credit control practices been improved?
-Has there been any advance with the introduction of a voluntary administration process in Malaysia?
-How has the 'suspension of payments' regime under the control of the SEC in the Philippines progressed?

It cannot be expected that a totality of integrated law, legal and other processes, institutional systems and infrastructure requirements will be available in many of the economies for some time. For some of the economies it is the first time that a development of an overall insolvency law and related system has been attempted. Therefore, a major interest of this Project is to determine what might be done to improve insolvency law and related processes in the five economies. In what areas is there a need for technical assistance and what form should that assistance take?
1.5 This report
This report endeavours to combine some of the issues and conclusions reached in the first part of the Project (this will largely follow the treatment of them in the ADB report) with a review and critical evaluation of developments in respect of those issues in the five economies since the first symposium. The first comparative report and the ADB report contain a much more detailed examination of many of these issues. It is desirable, therefore, that this second comparative report be read in conjunction with that material.
It should also be observed that this report contains only a summary of the reports of the local consultants from the five economies. Reference to those reports will provide greater detail.
Following the second symposium, a final report on this Project will be published. It will incorporate discussions from the second symposium; summarize the overall results of the Project; and present a series of recommendations for insolvency and related law reform, institutional development and proposed future technical assistance.