Two years after the start of the Asian economic crisis, the writer says, there has been no fundamental rethinking of the direction of Thailand's economic policies and despite some minor measures the country remains vulnerable to the speculative flows of global capital that brought it down two years ago.

By Boonthan Sakanond

July 1999

Bangkok: Two years after Thailand floated its currency, the baht, and triggered off an economic crisis throughout Asia, there are few signs that the country's policy-makers have learnt any long-term lessons from the experience.

Even in the short run, despite some superficial signs of macroeconomic recovery, analysts say that there are still vast problems plaguing key sectors of the economy for which no simple solutions are in sight.

There are indications that Thailand seems to be taking the Asian economic crisis as just another blip - albeit a major one - in its grand vision of becoming a tiger economy, they add.

For one, despite the unprecedented nature of the crisis, senior government and private sector officials responsible for it through negligence and even fraud remain unpunished.

There has been no fundamental rethinking of the direction of national economic policies and despite some minor measures the country still remains vulnerable to the speculative flows of global capital that brought it down two years ago.

It was on 2 July 1997 that the Bank of Thailand decided to float the baht, after nearly a year of battling currency speculators who had targeted the currency for being overvalued.

The move plunged the value of the baht by more than 100% against the US dollar and set off a round of devaluations throughout the region and beyond, leading to severe recessionary conditions all over.

One of the best examples of how those responsible for the collapse of the Thai economy are still walking free is the case of Rakesh Saxena, an Indian-born banker and former adviser to the Bangkok Bank of Commerce (BBC).

The BBC was one of the first Thai banks to collapse, in mid-1996, due to what investigators later said was fraud and embezzlement of funds by top executives of the bank along with Saxena, who is alleged to be the brains behind these operations.

More than two years after Saxena mysteriously escaped the clutches of the Thai police and fled to Canada, the Thai authorities are still unsuccessful in their attempts to extradite him to face justice in Thailand.

Several senior BBC executives, who come from politically influential Thai families, have been charged with economic crimes and let out on bail but mysteriously again, no criminal charges are being pressed against them.

The Thai government has so far spent over $4 billion on keeping the BBC afloat, making it one of the world's costliest bailouts involving an individual bank. Over 56 finance companies and four banks have been ordered shut down or merged with other more viable banks since the crisis began but none of their executives have been punished so far.

'There is very little likelihood of finance company and bank executives facing jail sentences due to numerous loopholes in Thailand's legal system,' says Dr Borwornsak Uwanno, a lecturer at the Faculty of Law in Bangkok's Chulalongkorn University.

He said the fraudulent cases which had brought down the various financial institutions rarely provided the investigators with hard evidence and in almost all cases could only lead to circumstantial evidence, which might not be sufficient under the existing legal process to bring the alleged suspects to justice.

An even more fundamental reason why no punishments are likely, Dr Borwornsak says, is because most of the culprits belong to well-entrenched 'old boy networks' that dominate politics, bureaucracy and business in the country.

He cites a case in 1984 when charges against several finance company executives were framed but quietly dropped when the economy picked up steam in the late 1980s.

At the macroeconomic level too, the Asian economic crisis does not seem to have made a difference to the basic concepts underlying national policy-making - that of making the economy as attractive as possible to foreign capital and to promote cheap labour-driven export-oriented industries.

Social action groups and economists have blamed Thailand's economic collapse on its over-dependence on foreign capital, neglect of the domestic market and lack of adequate investment in human resources.

Under the guidance of the International Monetary Fund the Chuan Leekpai government has in fact opened up the economy further to foreign investors even in sectors previously protected for domestic investors and offered incentives to boost exports.

The Thai government has claimed that due to such measures the Thai baht has strengthened steadily during the past year and the Thai stock market risen by more than 40% from the depths it plunged to in 1998.

International credit rating agencies Moody's Investment Services and Standard and Poor too have upgraded the outlook for Thai sovereign ratings and for the four big banks. Despite this improvement in selected indicators many analysts warn that key areas of the Thai economy, like its financial system, remain crisis-ridden.

'The prolonged sickness of the Thai economy is due to a breakdown in the credit system,' said Dr Olarn Chaipravat, former president of the Siam Commercial Bank in one of the toughest assessments of the Thai banking sector so far.

He said the economic crisis, which led to a spiralling number of defaults on loans by businessmen, has made it impossible for bankers to find anybody 'credit-worthy' enough to lend to. So while banks cannot make any money through lending operations, existing businesses too are struggling to find cheap credit to expand operations or even survive.

'The IMF and the authorities have focused too much on the pressing issues of the day rather than the heart of the problem,' said a recent editorial in the Bangkok-based English language daily The Nation. It said that without restoring trust between banks and businesses and getting the economy moving again at the micro-level, there was no hope for long-term recovery. - Third World Network Features/IPS -ends-

About the writer: Boonthan Sakanond is a correspondent for Inter Press Service, with whose permission the above article is reprinted.