Another direct result of the East Asian crisis was the sharp reversal of capital flows which was observed in the second half of 1997 and the first quarter of 1998. Economies which experienced the greatest withdrawal of capital were those in East Asia, namely, South Korea, Thailand, Malaysia and Indonesia-and to some extent the Philippines

According to an early estimate, net outflows from Asian regional ex-Japan funds during 1997 (excluding offshore funds) amounted to nearly US$6b, growing from US$171 million in January to peak at US$1.2b in September. Including offshore funds, the total figure amounted to just under US$11b.

A more recent report by the Institute of International Finance estimates that the five worst-affected Asian economies-Indonesia, Korea, Malaysia, the Philippines and Thailand-experienced a withdrawal by international commercial banks and a departure of portfolio equity investments amounting to an estimated US$31.2b. Of this amount more than 86% was estimated to be due to the withdrawal of credit by international commercial banks.

Although this was partly offset by a relatively stable flow of direct investment into these economies, estimated at US$6.4b, as well as the estimated inflow of US$12.9b from non-bank private creditors, the five economies experienced a net private outflow of US$11.9b. This represents a sharp reversal from the US$97.1b of total private capital inflows registered by these five economies in 1996-a decline of almost 112%. The capital flight from these five economies alone accounted for more than 16% of the total decline in financial flows to all emerging market economies.