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THE NEW OPIUM WAR AND UNEQUAL TREAT



THE NEW OPIUM WAR AND UNEQUAL TREATIES
31.8.97/BANGKOK POST/PERSPECTIVE
CIMISUCHONTAN

CURRENCY WARS: AS THE OPIUM WARS STRIPPED BARE CHINA'S DECAYING
ORDER, TODAY'S CURRENCY WARS HAVE REVEALED ASEAN'S INABILITY TO
COPE WITH ATTACKS FROM THE WEST'S POWERFUL FINANCIAL MARKETS. THE
BAD NEWS IS THE PRESSURE ON ASEAN CURRENCIES MAY FINALLY SPELL
FISCAL CHAOS, DEEPEN EAST-WEST CONFLICTS AND THREATEN ASIAN
SOVEREIGNTY

As a China was known as "the sick man of Asia" during the
Opium Wars, Thailand-has I snow become Asia's new sick man. With
its recent surrender to IMF terms, Thailand can only receive its
$16.7 billion bailout package if it restructures under Western
guidance.

Malaysia and Indonesia have also fallen. Like dominoes sliding
under the weight of currency traders, Asean economies are
discovering these players have powers that go beyond commodity
boundaries and enter political arenas as well.

Ironically the West, like Asean, shares the same fears about the
unrestrained strengths of currency players.

The events which unfolded over the past month are exactly the
kind of disaster many Western monetary observers have long
feared. Since the Eighties, Western governments have pondered
over setting up controls on currency trading. What had become
scary was the US dollar, which is today's biggest traded
commodity in the world with daily transactions in the trillions.

While no conclusions have yet been reached on the matter, it is
clear currency speculation has recently been the key factor which
undermined the stability (often with good reasons) of many Asean
economies. Some like Thailand have been driven further to the
brink of political collapse.

To begin with, Thailand's clash with global players over the
baht's fall and its failure to halt its widening financial crisis
placed the kingdom in a most precarious position indeed. If
unchecked, the worsening condition over the next few months could
produce serious political repercussions.

What history teaches us is to avoid commiting the mistakes of
old. Last July, Asia celebrated the 1997 handover of Hong Kong to
China, assuming unequal treaties with the West had been laid to
rest.
     
If Thailand and Asia wish to avoid signing unequal treaties with
the West, they must pay attention to why the Opium Wars took
place in the first place? In a nutshell, it has everything to do
with free trade.

Imperial China's biggest mistake was to cling to an antiquated
"closed door trade policy" to preserve a decaying, corrupt order.

All the Western powers wanted was a fairer more "open-door
policy" in order to re-balance its widening trade deficit. That
was until the Opium Wars, favouring the Chinese. The plans to
acquire more Chinese territories only came as an after - thought
after the West noticed how easily the Chinese walls collapsed
under their gunboat policies.

As Asean-Western investors relations take a turn for the worse,
Thailand should cease actions which only fan the fires which
would further harm an already souring relationship.

The most significant ones include the botched-up raids on Dutch
and British finance houses. As a result, more people - including
Thais-are questioning whether Bangkok is a safe haven for their
hard-earned funds.

Meanwhile Malaysian leader Mahathir Mohamed's condemnation of US
trader George Soros for the ring-git's woes, has also failed to
build up investors' confidence. Barking up the wrong tree and
reactionary behaviour can prove costly in the long run.

Also damaging are Thai and Malaysian government criticism of the
free press for recent reports of poor economic performances.
Shooting the messenger of bad news is a foolish mistake that will
bode ill for the region if it appears Asean is now taking a step
backward to attack one of the main pillars of democratic systems.

The best offence for Asean to take is to go on the defensive. For
the currency traders appear unsatisfied till they have run the
exchange rate of 40-45 baht to the dollar. At that rate many Thai
banks and leading institutions will collapse.

As China suffered terrible disasters in the wake of the Opium
Wars, today's currency wars can further destabilise Thailand's,
Malaysia's and other Asean economies. They will only lose if they
go head-on against an opponent who has the advantage of running
financial technology that Asean has yet to master.

In the worst-case scenario, this conflict, like the Opium Wars,
could return imperialism to Southeast Asia.

There are several similarities between the old and new crisis.
Firstly, both are essentially clashes over the issue of free
trade.

Secondly, currency, like opium, was a controversial commodity.

Thirdly, the Thai crisis, like China's, were made worse by poor
leadership. China's Dowager was surrounded by incompetent
eunuchs. Similarly Prime Minister Chavalit Yongchaiyudh is
surrounded by not very potent advisers.

     
Fourthly, in both cases, anti-foreign sentiment was encouraged.

In the end, the clashes would lay bare incompetent, corrupt and
excessive regimes which were unfit to govern. Thais can avoid
China's folly, and make currency trading as with opium  an
international issue instead of just a domestic one.

Had China pressed for Western assistance over opium, they could
have induced greater sympathy and support from the more liberal
quarters in Western governments who understood all the evils of
opium.

A leading Thai economist and ex-deputy prime minister Supachai
Panitchpakdi recently urged Washington to take a more
humanitarian position with Thailand over the IMF loan.

If currency speculators do not have to take responsibility for
the consequences of their actions, Washington must. As a regional
superpower, the US cannot ignore Asia's call to prevent the
region from slipping to become new banana republics.

Thailand has a unique position as a frontline state with volatile
borders with Cambodia and Burma. Thais are also proponents of
free trade and democracy. Lastly, no other Asean country enjoys
as much press freedom as Thailand.

These are basic reasons why it makes sense for the West to assist
Thailand in arresting the baht's volatility.

It is not yet too late for the Chavalit government to form a
credible, capable public-private sector task force to push more
financial reforms forward.

That should not be too hard since Thailand has already been
pushing for a more open-door policy regarding foreign
investments.

Today foreign investors can own 100% of a condominium property as
well as owning residential land plots. In the past 10 years, the
Stock Exchange of Thailand has also grown to become a most open
and respected financial market.

The lesson from the Opium Wars is China's failure to reform in
time. Thailand faces the same dilemma. There is also no time to
lose, reforms must come now.

If we succeed, Thailand stands to gain heaps and become Asia's
new financial hub for free trade like Hong Kong and Singapore.

The best way to survive a new Opium War thus, is to avoid it. By
bumbling and bullying others into starting one, Asean governments
may kill all the promise of one of the strongest emerging
markets, expose its weaknesses and reduce it into a basket case.

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