Asia Times: Thailand: The record of Chuan/IMF policy failure


	January 16, 2001	atimes.com

Editorials

Thailand: The record of Chuan/IMF policy failure

From the Dow Jones publications Asian Wall Street Journal and Far Eastern Economic Review to the London Economist, the winner by a stunning landslide in Thailand's January 6 elections, telecoms tycoon Thaksin Shinawatra, has received nothing but bad marks in the international press. His personal wealth and indictment by the National Counter Corruption Commission for failure to disclose a small portion of his assets after leaving office in 1997 readily translated into unsubstantiated charges of cronyism and predictions of a corrupt new government in the making. His economic policy proposals stressing stimulation of domestic demand have earned the label of "populist quick fixes". We have commented on this before and will not repeat ourselves.

What we find astonishing is that such charges and suspicions are inevitably accompanied by high praise for outgoing "reform" Prime Minister Chuan Leekpai and thinly veiled disdain for Thai voters who stupidly turned out in record numbers to throw out the fine government they had.

"Technocrat Prime Minister Chuan Leekpai has spent the last three years nursing along an unspectacular recovery from the Asian crisis, but his reforms have laid the foundation for Thailand to avoid such catastrophes in future. Now along comes a grasshopper, Thaksin Shinawatra, a media tycoon who promises populist quick fixes for the economy," wrote the Wall Street Journal.

The Far Eastern Economic Review wrote: "Chuan's Democrats put forward a reform programme that went to the heart of many of the institutional and structural flaws in the Thai economy that led to crisis in 1997. But belt-tightening brought little short-term economic relief, particularly at the grassroots, and perceptions grew that the Democrats gave a helping hand only to big financial institutions and foreign investors."

"By electing an untested billionaire as prime minister, Thailand has apparently abandoned political reform and opted for uncertainty," wrote the Economist.

What reforms exactly Chuan is supposed to have effected, they don't say or just briefly hint at. New bankruptcy and foreclosure laws? Those were drafted by the prior Chavalit Yongchaiyudh government and well along in the legislative process before Chuan took over in late 1997. Financial system consolidation? Fifty-six effectively insolvent finance companies were shut down and wound up before Chuan arrived on the scene. A new, more democratic constitution? That had been readied for final passage well before Chuan became prime minister. So, what economic or political reforms did he institute? Was the process of privatization of state-owned enterprises advanced? It wasn't. Was telecommunications liberalization pushed ahead? It was stalled. Was decisive progress made in corporate debt restructuring? Nothing of the sort. So again, what reforms did the darling of the international media bring about? The documented record is: none to speak of - which is precisely why the Thai economy, a foreign-demand led spurt in exports aside, made no progress over the past three years.

But make no mistake. The Chuan government DOES have impressive numbers to show for itself. Here they are.

In December 1997, a month after Chuan took over as prime minister, Thailand's government debt (bonds and treasury notes outstanding) was 31.8 billion baht. By end November 2000, that had increased to 724 billion baht - an impressive increase of 2,177 percent. And that doesn't count in some 800 billion baht (by central bank reckoning, 1.2 trillion baht) in obligations incurred by the Financial Institutions Development Fund in bank and finance company bail-outs, an additional 96 billion baht in government-guaranteed state-enterprise bonds or the US$12.8 billion the country owes to the IMF. In the meantime, the Chuan "reforms" - ably assisted by the IMF - did wonders for the real sector of the economy. In the first crisis year (fiscal 97/98), total government tax revenue had been 727 billion baht. In the fiscal year that ended in September 2000, the government's ah! so laudable efforts had spurred the economy to yield a marvellous revenue increase to 747 billion baht - a 2.7 percent rise or, more impressively, 0.4 percent of GDP.

So, we humbly submit to our impressionable international press colleagues that the Thai voters may not be so stupid after all and that booting the Chuan gang overboard and trying a different tack on economic recovery may well have been the one thing to forestall state bankruptcy. Most Thai voters will not have toted up these numbers before they cast their ballots, but they certainly knew from looking at their pocket books what the Chuan reforms had done for them.

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