By
Jonathan Hopfner
Thais are often quick to remind visitors to their country 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 $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, one 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 towards 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 the economy 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 has recently ascended
to 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 then-rulers saved
Thailand from being colonized by exhibiting a healthy amount of
pragmatism. They 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.
