Why did investments drop so sharply in the aftermath of the Asian financial crisis?

The 1997/98 crisis was a huge shock that exacted a heavy psychological toll on all, including businesses, the government and central bank as well as the people. It left lingering scars on both the political and economic landscape of the country.

We witnessed increased risk aversion in banks as well as on the part of regulators, as evidenced by rigid guidelines on provisions, risk weightage, coverage ratios and foreign funding, among other things.

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