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Thailand's 'painless' IMF
pullout
By Jonathan Hopfner
Thais are often quick to remind visitors to
their country that theirs is the only nation in
Southeast Asia that escaped being colonized by a Western
power. It thus comes as little surprise the early
repayment of the US$12 billion loan the country secured
from the International Monetary Fund (IMF) in 1997 to
cope with the devastation wrought by the Asian financial
crisis was unveiled with such fanfare. This is because
in the eyes of many Thais the terms and conditions that
the IMF attached to the disbursement of the funds
constituted a grave threat to Thailand's cherished
sovereignty.
Against a backdrop of a massive
national flag and patriotic theme songs, Prime Minister
Thaksin Shinawatra announced that Thailand had repaid
the loan in full on July 31, a year ahead of schedule.
He swore to his rapt audience that this was the "last
time the country would be indebted to the IMF" and
remarked that the debt had been a "pain to the nation".
Soon after, the IMF announced it would close its Bangkok
office in mid-September. While it insists its officials
will continue to visit Thailand regularly to discuss
policy with local officials, there is little doubt the
lender's influence here is on the wane.
Some of
Thailand's more opportunistic lawmakers have seized on
the country's recent freedom from the IMF's shackles.
Calls have increased for the repeal of 11 laws including
those governing bankruptcy and property ownership that
were introduced by the previous government partially to
conform with the IMF's loan conditions and are widely
alleged to favor foreign over local investors.
So is this, as some observers have surmised, the
end of an era? Was the prime minister's
characteristically nationalistic bombast yet another
indication of Thailand's growing determination to assert
its full economic, as well as political, independence?
Will Western policymakers and investors find their views
are no longer taken into account by a government
determined to pursue its own goals?
The short
answer is no, not really, because Thailand took little
of the IMF's advice to heart to begin with. In a 1998
letter of intent outlining the steps the government
should take in the following year, the IMF called on
Thailand to draft plans for the full privatization of
the state energy, tobacco, transport and utility
monopolies, as well as the freeing up of the telecom
market.
Five years later, the government has
taken some very tentative steps toward these goals - a
stake in Thai Airways has been floated on the Stock
Exchange of Thailand, and the Petroleum Authority of
Thailand and Telephone Organization of Thailand are now,
in name at least, private entities - but for the most
part the privatization and liberalization of these
crucial sectors remain as elusive as they were five
years ago.
Even the changes instituted under the
IMF's auspices - the tightening up of Thailand's
bankruptcy legislation, for example - have hardly proven
as sweeping as expected. While the new laws may have
been designed to boost the rights of creditors, they
seem to be less than adept at fulfilling this task in
practice. Witness the ongoing saga of debt-ridden Thai
Petrochemical Industry (TPI). Throughout a seemingly
endless proliferation of suits and counter-suits, the
Thai courts have allowed founder Prachai Leophairatana
to maintain nominal control of the company despite the
objections of creditors such as Bangkok Bank and
Germany's KfW, who apparently have the right to appoint
the administrators of an insolvent firm under Thailand's
bankruptcy laws.
The reality is that the economy
is at its strongest point since the 1997 crisis - growth
surged to 6.7 percent in the first quarter of this year,
and Thailand's bourse recently hit its greatest heights
since 1999. Any changes to Thailand's investment and
ownership policies are likely to be a result of the
government's perception that it is, for the first time
in years, in a position of strength, as opposed to a
desire to test the country's newfound "freedom" from its
IMF obligations.
There is every possibility,
then, that the government may indeed introduce
legislative changes that appear less than friendly to
foreign investors - but only to a point. IMF or no IMF,
Thailand's commitments as a member of the World Trade
Organization (WTO) and Association of Southeast Asian
Nations (ASEAN) will keep the country squarely on the
path of reform and openness - the telecom sector, for
example, must be completely liberalized by 2006 if
Thailand is to conform to its WTO obligations.
Healthy competition within Asia for foreign
capital is also likely to prevent the Thai government
from implementing any laws that would severely limit the
rights of multinationals doing business there. With
concerns rising about an outflow of foreign business
operations to China and other countries in the region
taking steps to deal with this threat - Singapore
recently amended its pension system to reduce its
notoriously high labor costs - Thailand will have little
choice but follow suit.
Many historians argue
that the country's leaders have often saved Thailand
from being colonized by exhibiting a healthy amount of
pragmatism. Otherwise, it is a mystery as to who it was
exactly that built that bridge over the River Kwai, and
with the labor of what prisoners of war. Nobody seems to
remember any Japanese having been in the country during
World War II.
The Thais simultaneously made
necessary concessions to foreign powers while fostering
a sense of unity among their own population. Despite the
passing of the IMF and its increasingly nationalist
rhetoric, the current government will likely do the
same.
This article is posted with the
permission of KWR International Inc, a
consulting firm specializing in the delivery of
research, communications and advisory services.
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