Private-sector investment in the five Asian economies hit hardest by the regional eco nomic downturn plummeted last year, with expectations of a continuing decline this year, the Institute of International Finance (IIF), a global association of financial institutions, says. It estimates private capital flows to Indonesia, the Philippines, Malaysia, South Korea and Thailand fell from US$93 billion in 1996 to $12 billion last year. But investment in other leading emerging market economies - including Asia - last year rose by $10 billion to $212 billion during the same period. IIF chairman Georges Blum said: 'It is remarkable that in these circumstances, flows to all other major emerging markets actually increased, demonstrating that contagion in flows has been limited.' The IIF, which represents 280 financial institutions, estimates that the total net private capital flow to the 29 leading emerging-market economies last year was $199.6 billion, a fall from the previous year's record $295 billion. This year's projected total, covering both direct and portfolio equity, is about $171.5 billion. Equity flows accounted for about 65 per cent of total net private flows last year. During the year, the Asian equity crisis triggered a huge increase in public equity flows into the region. The IFF estimates that official capital flows last year rose to about $30 billion from about $3 billion in 1996. A further $30 billion is expected this year. This will partly offset an estimated $100 billion downturn in private-sector flows to $66 billion last year and a further decline to about $40 billion this year. 'The fall seen last year was due to reduction in net new flows from banks to emerging market economies, while the 1998 projections involve an expectation of a significant decline in new bond issues,' Mr Blum said. 'Total 1998 net funds from non-bank private creditors are expected to be $40 billion, after $70 billion last year.' The IIF said that the continuing turbulence in the Asia-Pacific region meant there were 'major uncertainties' involved in making forecasts. The rate of economic growth for the leading emerging market economies is expected to drop to 2.9 per cent from 4.9 per cent during the past two years. Asia-Pacific emerging economies are expected to grow at an average of 2.8 per cent this year, the lowest rate in a generation, compared with 6.2 per cent last year and 8 per cent in 1996. 'Should Asian economies not stabilise, net flows will be sharply lower,' IIF managing director Charles Dallara said. 'On the whole, however, we foresee strong flows of equity to emerging markets outside Asia and a gradual rebound in both bank lending and capital-market lending. 'Discrimination and sound risk management by investors and lenders will be more important than ever.'