Asia Times: Bangkok Knights



	July 14, 1999	atimes.com

Editorials

Bangkok Knights

Who are they? Two Newsweek writers, one at least a long-time resident ofthe City of Angels (literal translation of Grung Thep, the Thaicapital's official Thai name), who say in the magazine's current issue thatthe Thai economy is in a shambles and the only growth industries are sexand golf.

We shall not dispute that. Contrary to loads of foreign fund managers orthe IMF who are pouring money into the country for their own peculiarreasons, we have often enough stated on these pages that whatever signs ofrecovery such gurus or the Royal Thai government may be divining, theeconomy remains dead in the water, with more downside than upside in theoffing.

But what came over those two journalists and the Newsweek editors that they wouldwreck an otherwise perfectly fine and insightful story byhypocritically dissing Bangkok's nightlife and inexpensive golfing pleasures?

Hey, now, guys, you know it, we know it, everyone with any Asia experience hasknown it for decades: Bangkok is fun. Tokyo can be if you (or your company)can afford it; ditto Seoul. KL is just sort of waking up; Hong Kong diedyears back. Singapore? God forbid, unless you think Harry's Bar is the beall and end all of entertainment.

So, what's the point, Messrs. Newsweek? Remember that oldsaying, it takes one to know one? You don't know or like Crown Royaland Cosmo, or Thermae when it gets too late for anything else? That wasn'tone of you there not too long ago with a pretty girl wrapped around you?

But perhaps it was the Newsweek editors, advised by some clever marketingperson, who saw the publicity advantage of having Prime Minister ChuanLeekpai complain about the sex industry references. The Thai primeminister's office can always be counted on to take the bait and fallfor such a ploy.

The Thai economy has three basic problems that stand in the way of in-depthrecovery and will require a good deal of time - years, not months - toresolve.

* Its central nervous system, the financial sector, is in serious disarrayand largely disconnected from the real-sector body. The processes offinancial intermediation have broken down and will not be fixed until some$70 billion in non-performing loans are restructured or written off.

* Its industrial structure (as the Newsweek piece accurately points out) istrapped ''in the middle'' between lower-wage, lower-technology China,Vietnam and Indonesia and higher-tech South Korea and Malaysia. As aresult, exports - which constitute 40 percent of GDP - are in the doldrums.

* Its educational system is antiquated and blocks introduction of highertechnologies while massive regional economic imbalances pull downoverall economic progress.

Other factors aside, it's the latter points, lack of education and hugeregional income discrepancies, that play a large role in the economicattraction exercised by the Bangkok sex industry.

In 1996, before the baht devaluation, GDP per capita for the Whole kingdomstood at 76,600 baht (about $3,000). But in the most populous (one third ofpopulation total) and most impoverished region of Thailand, the mainlyrural Northeast, GDP per capita was only 26,600 baht ($1,000), with the poorestprovinces like Buriram, Roi Et or Yasothon (at 21,800, 21,700 and 20,000baht, respectively) falling well below even that. Meanwhile, GDP per capita inBangkok and vicinity was 225,743 baht, or nearly ten times the Northeastaverage.

Concomitant with such economic misery, partly accounting for it and partlycaused by it, educational standards in the Northeast are abysmally low:many children drop out after grade 4; few make it beyond grade 6. Then theywork in the low-yield rice fields for a while before, at age 15 to 18,Bangkok beckons. After a brief stint in a low-paying textile plant ordepartment store job, then likely with one or two children and husbandslong gone, Northeastern girls in large numbers end up in massage parlors orthe numerous Bangkok pink zones. The boys take full- or part-timeconstruction or assembly-line jobs - or did when those were still to be had; othersdrive taxis, tuk-tuks, or motorcycle taxis. Few of those girls or boyswould likely choose such employment if their education or economicconditions provided them with a realistic choice.

Thailand must address its banking sytem, industrial structure, socialinfrastructure and regional-imbalance problems simultaneously if theeconomy is to get back on a sustainable growth track. It cannot expect torestructure bad debt without restructuring industry and defining new futureincome streams and modes of wealth creation. It cannot create the latterwithout a far better education system and more skilled manpower to supporthigher-technology manufacturing and service industries. And it cannotproduce more highly skilled manpower while over half of the populationremains trapped in rural poverty.

On the other hand, Newsweek's intrepid journos' barbs notwithstanding, wedoubt that the foreign investors now beginning to return to Thailand havesex and golf first and foremost on their minds.

Much of last years $9 billion in foreign capital inflows is accounted forby the buying up of distressed assets and banks' recapitalizationexercises. But that's not bad for starters. The question now is how acombination of public policy and private sector initiative will allocatethe capital resources, foreign and domestic, that are once again becoming available.The challenges are easy to define; management of policy execution isanother matter. Thailand will come back, but not tomorrow and not with atiger's roar as in the late 1980s and early '90s.