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BKK Post, April 2, 1998. INTERVIEW
- Subject: BKK Post, April 2, 1998. INTERVIEW
- From: burma@xxxxxxxxxx
- Date: Thu, 02 Apr 1998 00:14:00
April 2, 1998. INTERVIEW / ASDA JAYANAMA
Putting our side of the crisis
Thailand's ambassador to the United Nations recently spoke to the 'San
Diego Union And Tribune' in the United States. The following is an
edited account.
The Thai currency crisis was the first Asian economic dynamo to topple
and since then, a whole series of dominoes have gone down. How is
Thailand doing in its efforts to restore stability and the value of the
baht and, in general, cope with this economic crisis?
The first thing that we found easy was that we had a new government. As
a result of the currency crisis, the old government was toppled because
it couldn't solve the problem.
It fell?
Actually, it resigned. This new government... I sincerely believe that
it's a good, clean government. It has very outstanding people on the
economic team. And, of course, the prime minister himself is known for
his honesty, although he doesn't have much charisma. He trusts his team.
He knows where to go. The team doesn't have to defend what went on in
the past.
Second, it is clear on what it wants to do. It wants to clean up all the
bad practices of the past. And this coincides with the wishes of the
IMF. So it was very easy for this government to implement the IMF
programme.
For these two reasons alone, I think we're on a good way to recovery.
How is your relationship with the International Monetary Fund?
We implemented the IMF programme so well that we were able to negotiate
with them to change some of the conditions which we found unreasonable
and out of tune with the background because the IMF had assumed there
was going to be huge inflation. That assumption was wrong because
there's no money in the system.
Also, the IMF wanted us to run a budget surplus, 1 percent of gross
domestic product. That was not possible because the government couldn't
collect as much taxes as it wanted because the economy was in recession.
So we negotiated with the IMF and my understanding is that the IMF will
allow us deficit spending of 2 percent of GDP, which is good.
What did the IMF bailout provide for Thailand and what were you required
to do to receive this assistance?
It's a loan package of $17.2 billion in phases to cover 34 to 36 months,
from Aug 14 of last year. We have to talk to them on whether we have met
their conditions. If we have met them, they will release the money. It's
pretty tough. We do it willingly because we see that we need to do all
of these things. They demand that we run a surplus, which we negotiated
already, and that we should reform the financial system, which we are
doing.
Fully transparent?
Yes. Transparent. No more crony capitalism.
The central bank will be restructured. Part of the problem was that the
central bank was not performing its regulatory function properly. Banks
and finance companies are to be re-capitalised, meaning that the capital
will be increased. We're doing all of these step by step.
We're going to have a new bankruptcy law. It was very difficult (under
the old system) to declare a person bankrupt. We're going to modernise
the alien business law, which prohibited foreigners from performing
certain activities. The changes will be consistent with our obligations
under the World Trade Organisation.
What will happen to the weak banks?
The bad banks and finance companies will be folded. The government has
taken over a number of banks so that it can re-capitalise them. After
that, foreigners can buy them, up to 100 percent if they wish to.
How has your stock market reacted?
There are a lot of opportunities for foreign investors. Of course the
stock market has gone up by about 60 percent in the last month. We say
to ourselves this is crazy because the real economy hasn't changed.
There's no money in the system. The major banks have yet to be
re-capitalised so there will be more shares in the market to be sold to
the buyers.
The law of economics is that if there will be more shares in the market
- more supply - the price shouldn't go up, but it went up. It seems that
foreign investors, mainly mutual fund people, feel that the Thai market
has bottomed. The stock market is a good indicator that the real economy
will improve in about 6 to 8 months time.
How much did the Thai economy contract in 1997?
About minus 2 percent. It will be worse this year, but by the end of the
year is should be better. That's why we have to negotiate with the IMF.
Where are we going to get the money to have a budget surplus? We can
reduce spending. We have reduced so many times already. Still, we don't
find the IMF as heartless or as inflexible as others have criticised.
I think it's very important that we have a new government. The
government was not responsible for the crony capitalism of the past. I
do not forget that the crisis came about in Thailand, but it was not
because of crony capitalism or lack of transparency alone.
Another possible reason is that these lenders are from the West and from
Japan. Why did they lend money to us when, as any university graduate
who has studied or followed the events in our part of the world, knew
the money was not properly spent? They borrowed 6 months from American
banks or Japanese banks and then they would lend long term to property
companies for one to two years.
It's similar to the debt situation at the time of the peso crisis in
Mexico.
Yes. But what I'm saying is that when you look at this crisis, you
should be a little more balanced. I don't intend to defend crony
capitalism, but at the same time, why did these bankers lend money? They
wanted to make money too, right? Of course. This should be taken into
consideration. Everybody had a part to play in this crisis.
How much of a burden is repaying the $17.2 billion IMF loan going to be?
I don't think it's such a burden although we are joking - but we are
complaining also - that if you have a baby right now, it means that he
will have a 10,000 baht debt that he has to pay.
Just by being born?
Yes. Still, I think it's something that we can afford. We are a food-
producing country. In the last month or two, we were able to get a
current account surplus because of a draconian import reduction. We
export a lot of food, not only rice, fish, canned food, vegetables and
so on. So we are a net exporter, which is not the case with Korea or
Indonesia.
If your government successfully privatises some of these industries, are
the likely buyers going to be foreign corporations?
Most likely, because they're the only ones with money right now. So far
our government has not come in and guaranteed private foreign debt. Only
some of the finance companies, some of the banks in the beginning, but
that was under the previous government. The new government encourages
these companies to talk to foreign partners directly.
Do you think that these troubled Asian economies in general can export
their way out of this crisis?
It's something that everybody is trying.
Some analysts now believe that Thailand is going to recover, that
Korea's going to go through some real tough times for a year or so and
then the South Koreans will be back. That the Philippines, which was
hurt less by this than some other countries, will steady itself and be
OK. But the big question is - well, aside from whether China is going to
catch this disease and whether the Japanese can institute reforms - is
how long the Suharto government in Indonesia can survive. What's your
own assessment?
My short answer is that's their problem. But we are concerned if the
Suharto government falls, or if there are riots, and there is no
apparent successor to take over, it would be a vacuum. So it would
affect us although we don't have that much of an investment in
Indonesia.
Do you see China as wanting to assert a sort of regional influence in
Asia and thus over the next decade or so increasing tensions in the
region, or do you see China as basically, in foreign policy terms,
benign and preoccupied with trying to get rich?
I think China now is preoccupied with modernisation. It wants to get
rich. It wants to modernise its economy, but it has a political vision
as well. There's no denying it's a big country and it sees itself as an
important country playing roles in the world. Eventually when it
properly reforms its economy and it feels confidence in what it does,
the time will come.
How about Burma? Is there much hope for a lessening of repression there
and for economic reform and political reform?
Much economic reform already has happened there because they want to
have a free enterprise economy so that they can get revenues and so on.
So that's not a big problem. Political reform I think is very difficult
because the government is unwilling to let the NLD (National League for
Democracy led by Aung San Suu Kyi)), which is a party elected by 82
percent of the people and this election was organised by the military
government itself, be involved in drafting the constitution, for
example.
In Vietnam, economic reforms are stalled, and, perhaps out of insecurity
or a sense that their political control is slipping, Hanoi has sort of
re-imposed the political hard line and seems less flexible than it was a
few years ago. Do you agree?
I'm not sure if I agree with you entirely there. A big problem in
Vietnam is that the old cadres, the old political members, people in
their late 60s and over, are still in power. The transition is not yet
complete. It's still a one- party system. There is no political reform
in Vietnam, that's for sure.
What role should the United States play in the Asian-Pacific region?
Many of us in the region would like the US to have a presence. This is
not quite the same as inviting the US to have bases in the area.
There is a difference here between countries such as Singapore who are
more receptive to your presence and maybe bases and so on. Then there
are countries like Malaysia and Indonesia who are more reticent, but
nevertheless recognise the US role. Then there are countries like
Thailand, Philippines. We are flexible. But Thailand rejected US
requests in the past to have a floating base.
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