Since 1990, international capital flows to developing countries (see Table1) had become an important phenomenon. In Thailand, the inflows of foreign capital averaged about 10 percent of GDP between 1990-1995. It was evident that such a magnitude of capital inflows were more than what these economies could profitably employ at a reasonable level of risk. The surge in capital flows was in response to the slowdown in industriai countries and the concurrent rapid growth in emerging markets, particularly in Asia and Latin America , as well as the