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Exus Blog Article

Debt and debt recovery in APAC: What the politicians say

7 minute read


Although the Asia-Pacific (APAC) region is currently under a severe amount of debt pressure, the rate of regional household and business borrowing has actually slowed in recent years. That being said, debt levels remain high overall. Across APAC, a 5% increase in the household debt to GDP ratio over a three-year period is expected to lead to a 1.25% drop in GDP growth in another three years.

Below, we’ve examined the debt situation in five APAC countries and have collected a number of quotes from each country’s leading politicians and banking industry experts explaining their thoughts on the situation. The idea is to gain some understanding into exactly what those in charge are currently doing (and what they plan to do in the immediate future) about this pervasive debt pressure.


Indonesia is a country mired in debt, with a current public debt level of 29% of GDP. It seems unlikely, however, that Indonesia will plunge into the same precipice currently inhabited by countries like Greece, as the debt-to-GDP ratio is still within a sustainable limit.

The wholesale and retail trade, along with the processing sectors, make up almost half of total NPLs and the growing bad debt burden is hitting the profitability of Indonesian banks, prompting foreign players to explore the alternative of NPL sales.

What the politicians say:

According to President Joko Widodo, the current Indonesian debt level of 29% of GDP is 'safe'. Granted, it's lower than the country's immediate peer Malaysia (51%). However, the Indonesian opposition leader (an army general), Prabowo Subianto, strongly disagrees – “Some people say large debts are no problem, but experts who understand know that debts are threatening the sovereignty of our nation. Our economy is not growing. We're under threat of becoming a poor country forever.”

Maritime Coordinating Minister Luhut Panjaitan says - “I don’t see Indonesia be in a major crisis. There is no need to worry that a crisis such as 1998 will re-occur today. Conditions are very different from 1998. Don’t panic. Our economic conditions and our government are far stronger than Argentina and Turkey. I also ask you not to worry about global uncertainties.”

What the banking industry says:

Accounting firm Deloitte says - “As at Q2 2017 the reported NPL volume in Indonesia was US$10.1bn. This number is likely to increase once IFRS 9 is formally adopted across Indonesia and therefore it is only a matter of time before the banks seek initiatives and assistance from foreign investors in helping to remedy the NPL issue.”

What the press says:

Economist Bhima Yudhistira believes that the issue of debt is popular amongst grassroots voters in Indonesia because it's something they understand - “Even in small coffee shops people now talk more about debt than the economic growth issue, because not all people understand what economic growth is all about.” Everyone, however, understands debt.


Singapore is one of the few countries in the APAC region that appears to be coping well with debt pressure, thanks in no small part to an efficient court system. The game was changed as recently as September 2018, however, when an omnibus bill was introduced into Parliament that dramatically updates many of Singapore's insolvency and debt restructuring laws. The primary objective of the “Insolvency, Restructuring and Dissolution Bill” is to consolidate the Bankruptcy Act and the Companies Act. With the bill in force, the latter will be repealed and the former will have all provisions relating to corporate insolvency and restructuring removed.

The bill (which passed on Oct 1) also establishes a regulatory regime for insolvency practitioners, introducing minimum qualifications, conditions for the grant and renewal of licenses, and a disciplinary framework. It also includes a new restriction of ipso facto clauses (that allow a contract to be terminated or changed after a specified 'trigger event') in debt restructuring.

What the politicians say:

Singapore Ministry of Law – “This (bill) is intended to facilitate restructuring where a distressed company’s business relies on contracts that contain ipso facto clauses. (The reforms) will benefit local businesses experiencing financial difficulties, position Singapore as a location of choice for foreign debtors to restructure; and create new opportunities for insolvency professionals (including lawyers and accountants), distressed debt funds and financial institutions.”

“The bill further strengthens our debt restructuring regimes to provide greater opportunity for rehabilitation of companies in financial distress. This supports amendments to the Companies Act in 2017 that enhanced Singapore as a centre for debt restructuring.”

What the banking industry says:

Euler Hermes – “The insolvency framework (in Singapore) is in line with international standards. However, in practice, as in most countries, collecting debt from insolvent debtors would prove to be a genuine challenge.”

What the press says:

Allianz Global Wealth Report – “In 2017, strong growth in financial assets and a relatively stable debt level have boosted Singapore's per capita financial assets to seventh place in a global ranking. The country’s per capita financial assets came to 90,650 euros in 2017, a growth of 8.9%. In 2000, it was ranked 15th.”


Thailand's household debt remains high, both historically and in relation to its peers. Indeed, a recent survey by Bansomdej Poll in collaboration with the Foundation for Consumers (FFC)’s Chaladsue (Smart Buyer) magazine found that around 7.5% of Bangkok residents are in debt, with 53% admitting to falling behind on repayments. Does this mean there is a day of reckoning ahead for the Thai banking system and the economy in kind? Not necessarily.

Household debt actually fell as a share of GDP to 77% in Q1 2017, which is a subtle, but notable drop from the high peak of 81.2% it had reached by the end of 2015. Public debt is also expected to peak at about 49% of GDP in the next three to four years.

To further help matters, The Bank of Thailand recently implemented fresh regulations to rein in credit card debt that should prevent debt build-up amongst vulnerable borrowers. By making it harder for low-income borrowers to obtain new loans or credit cards, the Bank of Thailand was able to slow the growth in unsecured lending that was threatening to sink the economy. According to a recent report, The Bank of Thailand (BoT) has also initiated a pilot of the DLT Scripless Bond Project, which aims to transform Thailand's securities markets infrastructure with blockchain technology.

What the politicians say

Minister of Finance Apisak Tantivorawong – “We see no need for any change in monetary policy. The relatively resilient foreign exchange rate and the contained pace of fund outflows provide scope to leave borrowing costs unchanged.”

“A policy rate hike would not address low inflation and would, in fact, worsen the debt-servicing ability of small-business operators and strengthen the baht. The debt payment ability of small and medium-sized enterprises (SMEs) would be affected and fund inflows would accelerate if the policy rate were raised. The central bank should consider the timing for policy changes and ensure that there are no problems for the economy.”

What the banking industry says:

Dr. Veerathai Santiprabhob, Governor of the Bank of Thailand – “A high level of household debt has constrained private consumption growth as households have to use additional income to service their debt obligations rather than spending on goods and services. Last year, we tightened credit card regulations as well as uncollateralized personal loan limits to mitigate household debt problems.”

Sutthirak Traichira-aporn, chief executive of JMT, which buys bad loans and provides debt collection services – “As consumer loans increase, bad debt will also rise. Now we also see more secured loans, particularly home loans, turning sour. We are buying more of that too. We can buy any bad debt we want in the market. It’s very big, much bigger than us.”

What the press says:

The Financial Times - “Consumer borrowing is accelerating significantly in Thailand and around a quarter of consumers are having trouble making repayments on their debts, with credit cards and car loans the main areas of concern.”


It’s no great secret that Vietnam has a debt problem, but thanks to a number of major economic reforms in recent years, the debt pressure has been mitigated slightly as it's managed to bounce back from the banking crisis of 2012. Currently, according to the Ministry of Planning and Investment, Vietnam's public debt to GDP ratio is estimated at 61.4%, down 2.3% from last year and comfortably below the country's self-imposed ceiling of 65%.

However, a new government report, recently submitted by the Ministry of Planning and Investment, revealed that the country’s per capita public debt is set to rise to $1,500 this year, which could mean a rise up to just below 64% by the end of this year: uncomfortably close to the debt ceiling. Overall, however, it would appear that there is at least an increase in the ‘quality’ of public debt, if not (at least substantially) the quantity.

What the politicians say:

Vietnam Finance Minister Dinh Tien Dung – “If the dong loses value and we still prop it up, it’s not beneficial in the long term. It will limit exports and domestic manufacturing, especially since the Vietnamese economy is a trade economy. It needs to be more flexible to support development and growth.

“Public debt at the moment is better, safer, and is under less pressure. The rate by which debt was increasing has slowed by almost half and the overall level of debt has decreased, but, most importantly, the quality of public debt has improved tremendously.”

What the banking industry says:

World Economic Forum President, Borge Brende - “The Vietnamese government did not sleep on victory or be complacent. Moreover, Vietnam is continuing its reforms to ensure growth in the future. This result is not something [even] a developed country could achieve.”

What the press says:

Dam Van Tuan, ACB - “Bad debts are down, provisioning is up, there are better oversight, internal risk management and transparency, and the central bank is already looking at implementing Basel III requirements further down the line. The SBV (State Bank of Vietnam) is also preparing to adopt a risk-based approach to bank supervision, so in the next three to five years, the sector will be even sounder and safer than it is now.”


Malaysia’s household debt to GDP ratio currently sits at around 83.8%, compared to 84.2% in 2017. Overall, household debt accumulation has been on a sustainable path relative to income growth, largely as a result of cost-cutting measures that have been implemented since 2010.

The national debt, however, is currently a headline issue in Malaysia, with the country currently poised to devise a bold new tax strategy and sell off some of its assets to raise enough money to pay off a sovereign debt that exceeds $170 billion (around 1 Trillion Ringgit). These debts are due in no small part to losses from the 1MDB fund set up by disgraced former Prime Minister Najib Razak. A fund from which US investigators say Najib's associates stole and laundered at least $4.5 billion.

What the politicians say:

Prime Minister Mahathir Mohamed - “We may have to devise new taxes in order to have the money to pay our (national) debts. The other thing we can do is to sell our assets. The land is one of them. Beyond that, we may have to sell some of our valuable assets in order to raise funds to pay the debts.”

Finance Minister Lim Guan Eng – “We want to see reductions (in debt) over the course of 3 years and at the same time we are able to service these debts, we will not be in default. When we are talking about belt-tightening, cost rationalisation, then we are doing it. It’s painful, but it’s necessary. I’m willing to be the most unpopular finance minister in Malaysian history,

“All we are doing here is pulling back the excesses of the past. What we are calling for is not austerity, but smarter spending. Let me stress here that Malaysia is not in austerity mode; we want to see economic growth progressing.”

What the banking industry says:

Bank Negara Malaysia - “New household borrowings remained of high quality. About three-quarters of new loans approved were to borrowers with debt service ratios (DSR) of less than 60 percent. The ratio of household debt-to-GDP continued to moderate and currently stands at 83.8% in the second quarter of 2018 against 84.2% in 2017.”

What the press says:

Sagarika Chandra and Stephen Schwartz from Fitch Ratings, on a possible review of the state’s contingent liabilities and infrastructure projects - “If carried out effectively, such a review could help limit the build-up of risks to broader public finances over the long term, though at the expense of creating some headwinds for domestic demand and growth.”

Written by: Chris Maranis

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