Asia Times: Thailand: So, the crisis is over?



	February 10, 2000	atimes.com

Editorials

Thailand: So, the crisis is over?

''Recovery ends need for IMF'', reads the headline on a Bangkok Reuters story on Wednesday. Background to that is that Finance Minister Tarrin Nimmanahaeminda said a day earlier that Thailand had no further need for IMF assistance as its economy had returned to strong growth. ''We will leave the program after June, which is the last month we have the right to withdraw money from the IMF [US$17.2 billion bailout facility],'' a visibly proud Tarrin announced, adding that Thailand would submit no further letters of intent to the IMF.

That's all good and well. We're by no means sure that IMF-imposed crisis management did a whole lot to save Thailand or other East Asian crisis economies in the first place. So, that Thailand (with IMF consent) is now getting out from under IMF tutelage won't make much difference - except perhaps to the government of Prime Minister Chuan Leekpai which is facing first ever Senate elections in March and general elections later in the year and can now claim that it has put the country back on its own feet.

But does it all mean that Thailand's economic crisis is over for good and that a reliable future growth path has been secured? The short answer is, it doesn't. After facing what was its worst economic performance in recorded history in 1998, the country's economy, aided by cyclical recovery in exports and consumer demand, grew by an estimated 4 percent in 1999. But even at that rate, it will take at least two more years before 1996 output levels are recouped. Much more importantly, while massive infusions of public money have by hook and by crook pulled the financial sector back from the brink of bankruptcy, leaving scores of financial institutions stranded along the way nonetheless, and while corporate debt restructuring is making some progress at long last, not much has changed otherwise since 1996/97.

True, the country has now a proper bankruptcy law and reasonably functioning bankruptcy court, foreclosure is no longer a never-ending affair, financial sector regulation has been tightened, and other new regulatory measures have been implemented as the IMF had demanded. On the other hand, even within the realm of law and regulations, measures promised have not been carried through. The property sector remains largely closed to foreigners, critical privatization measures have been put on the backburner, deregulation of public utilities and especially of the crucial telecoms sector remain a thing of the indeterminate future.

But new legal and regulatory provisions aren't everything. What Thailand desparately needs beyond those is a thorough restructuring of its industrial structure, away from cheap-labor mass-manufacturing for export to higher technology regimes. Equally important are reform of the agricultural sector and redress of the enormous development and income imbalances between the Bangkok metropolitain region and most of the rest of the country, most notably the populous but badly impoverished northeast.

Such undertakings require new entrepreneurial initiative, identification of new markets with a longer-term future, and urgent social policy initiatives - principally in the fields of education and worker retraining. There is much talk about all that. Development of small and medium enterprises which create most jobs has become a political catch phrase; education is on every political party's banner. But all talk aside, not much is getting done - in part, of course, because bailing out the financial sector has cost such large amounts of money that very little is left for other initiatives from the government side.

But most urgent, if Thailand is not to be left behind for good in the rapid development regionally of the Internet economy, is telecoms deregulation. Internet access is more costly and less reliable than almost anywhere we can think of because of the monopoly role of the Communications Authority of Thailand. Telephone charges are higher only in Japan. By permitting this situation to fester, the government is seriously jeopardizing the country's future. So, leave the IMF because recovery is assured? Nonsense. The real work now needs to be done.