Economic Recovery: Illusion or Illusive?

Southeast Asian Affairs, January 1, 2001 | Go to article overview

Economic Recovery: Illusion or Illusive?


Throughout the year, the economy remained the main concern of the Thais. Finance Minister Tarrin Nimmanahaeminda was the target of criticism from many corners. Even the former economic tsar, Boonchoo Rojanasathira, who is a fellow Democrat Party member, subjected Tarrin to harsh criticism. Tarrin was blamed for an ineffective policy to assist economic recovery. However, the Democrat members who held positions in the Cabinet supported Tarrin and assured him that he had not failed in tackling the economic crisis. They maintained their confidence in him as minister.

In fact, the economy was not as bad as many perceived it to be. According to the report distributed by the Ministry of Finance on 9 October 2000, there was a recovery in the national economy as a whole.16 Together with the statement of the General Secretary of the National Economic and Social Development Board (NESDB), and leading businessmen, they confirmed that there had been some effective measures to stimulate the economy, as seen in the expansion of exports, increasing domestic investment, and the allocation of 910,000 million baht for government expenditures for the 2001 fiscal year.17 Although the macroeconomy looked better, academics and business people were sceptical about the financial and productive sectors.

Ammar Siamwalla, a prominent economist, analysed the cause of Thai economic stagnation in his article entitled "AMC: An idea whose time has gone". He argued that the economic crisis stemmed from the adoption of the modern banking system in an unstructured Thai economy, which relied upon unrealistic public companies, and unsystematic businesses. Therefore, the implementation of the bank-based, high debt model of banking, with the hope of reducing non-performing loans, could not work. He suggested the adoption of the market-based prudential model instead.18 Business people were also hampered in their efforts by the government's financial measures which needed to be adjusted. In another approach, Banthoon Lamsam, the president of Thai Farmer Bank (TFB), for example, urged the government to intervene in the financial institutions as well as to stimulate the production sector.19 His opinion was similar to that of the president of the Federation of Thai Industries, Thawee Butrsunthon.20 Meanwhile, others in the commercial sector proposed a temporary retreat or delinkage from the world capitalist economy, which they believed to be the only measure to help Thailand out of its crippled situation.

Tarrin resolutely held on to his policy. Prior to the dissolution of Parliament, he had initiated a range of economic measures aimed at cutting business costs, helping farmers, and raising household income. Programmes under these measures would be financed with unused funds from existing loans from international institutions, with no new borrowing that would cause taxation rate increases. The Cabinet approved these programmes, and the issue of new bonds for the Finance Institutions Development Funds on 31 October 2000.21 However, the economy remained generally lethargic, which helped to undermine the Democrat Party in the 2001 general election.

Whether or not the economic recovery was illusive, the reality is that between 1997 and 2000, poverty levels rose from 11.4 per cent to 16. …

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