Indonesia, Malaysia at risk of repeating 1997-98 meltdown

Hong Kong

THE last time South-east Asia mixed a heady cocktail of foreign borrowing with weakening currencies, the hangover was a financial crisis.

Now, Indonesia and Malaysia are at risk of repeating the mistakes that led to the 1997-98 meltdown. After the crisis, economists Barry Eichengreen and Ricardo Hausmann coined the term "original sin" to describe the difficulties encountered by developing nations borrowing overseas. This year, Indonesian and Malaysian governments and companies have already sold more foreign-currency debt than they did in the whole of 2014 as a global bond rout pushes up yields and their currencies weaken.

"There are worrying signs that original sin is returning," said Chua Hak Bin, head of emerging Asia economics at Bank of America Merrill Lynch in Singapore. "Governments are forced to opt for more foreign-currency debt financin…