JAKARTA INITIATIVE TASK FORCE Maximizing Value of Distressed Assets, A Public Policy Perspective OECD Forum for Asian Insolvency Reform Seoul - November 10, 2003. A. Background. Asian financial crisis has resulted in large numbers of distressed assets.
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JAKARTA INITIATIVE TASK FORCEMaximizing Value of Distressed Assets,A Public Policy PerspectiveOECD Forum for AsianInsolvency ReformSeoul - November 10, 2003
Speed of divestment and related policies concerning transfer of corporate ownership give rise to timing concerns.
Radical seizure and divestment by public and private sector creates instability
Denying market opportunity to renew and recycle corporate assets harms long term growth.
Solution: maximize long-term growth consistent with short-term stability.
Balancing short and long term requires careful cost-benefit analysis
Public sector must consider several factors
market disruptions in the short term
government recovery of its own distressed assets
long term economic health
Because of essential nature of working market to recycle corporate assets to maintain credibility, emphasis should be on long-term economic health
Maximizing value of distressed assets to the public requires sound policies to ensure that corporate failure is punished and new entrepreneurs are given the chance to improve the corporate sector
This requires policies encouraging a working insolvency system and signal from government that it will allow the market to punish corporate failure.
NOTE: this is not the same as maximizing the secondary market value of assets in the hands of lenders. The former is a long term economic goal while the latter is a short-term manifestation of public policy.