Fixing Thailand from the Inside out. (Special Feature)

By Ramsay, Randolph | Business Asia, December 2001 | Go to article overview

Fixing Thailand from the Inside out. (Special Feature)

Ramsay, Randolph, Business Asia

ASK THE THAI Government how Thailand will fare through the expected world slowdown and they'll confidently state that the country is in a better position to ride out the storm than some of its neighbours.

Deputy Prime Minister and Finance Minister Dr Somkid Jatusripitak says Thailand, whose shaky financial system's collapse triggered the 1997 Asian financial crisis, has the fundamentals right. Somkid says the Government's focus on stabilising the domestic economy and promoting tourism will ensure steady, if much reduced, growth. The country's strong base of agricultural exports has also held it in good stead, he said, as Thailand had not been affected by the drop in electronics demand from the US and Europe.

Based on the most recent economic figures, it seems Somkid's confidence is well placed. While Thailand's economic growth this year is tipped to be the slowest the country has seen since the crisis (estimated to be as little as 1.3 per cent), it is still significantly ahead of other Asian economies. Singapore, most notably, is currently going through its worst recession in 37 years, with its economy tipped to contract by three per cent in 2001. The Philippines' growth is almost at a standstill (0.7 per cent), while Malaysia's economy shrunk 1.3 per cent in the third quarter, its first contraction in two years.

But there are still some who say Thailand is not doing enough to ensure continued success. Some analysts bemoan the lack of real efforts to attract much needed foreign investment to Thailand, particularly in light of China's entry to the WTO in 2002, an event many are tipping will suck investment out of South East Asia. Even the highly revered Thai King Bhumibol Adulyadej has criticised the Government of Prime Minister Thaksin Shinawatra for a "lack of progress" in fixing the economy's problems. The King said the situation was "getting worse and worse".

Things may be getting worse in some critics eyes, but Somkid sees only the massive steps forward Thailand has taken since 1997, when system wide financial imbalances led to a devaluation of the baht, triggering an Asia-wide currency crisis.

Since then, short-term borrowings have been slashed and reserves have been built up. The baht has been steadily rising, and recently reached an eight month high against the US dollar.

"Since a healthy and fully functioning financial sector is absolutely critical to Thailand's sustained economic growth, the Government has quickly implemented necessary measures to deal with Thailand's troubled financial sector," Somkid said.

"To comprehensively tackle this most urgent problem of non performing loans (NPL), we have established a national asset management corporation called the Thai Asset Management Corporation (TAMC). The TAMC will centralise the management of NPLs being purchased from banks, thereby systematically and efficiently taking the lead in dealing with nonperforming assets and related corporate restructuring activities."

Somkid is confident the Thaksin Government's strong focus on the domestic economy will reap rewards for Thailand, saying "we first need to be strong from within so as to survive in today's highly competitive environment".

"We need to form a quality-oriented strategy that will replace the outdated and non-sustainable quantity-oriented growth strategy of the past," he said. "Domestic reform is the main ingredient of a quality-oriented strategy. Reform is essential to build a solid foundation for a high-performance economy that can generate quality growth and be less vulnerable to external shocks."

The Government has spent billions so far stimulating the local economy, including suspending farmers' debt repayments, giving one million baht each to almost 77,000 villages, and offering cheap housing loans to civil servants. …

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