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ASIA
MARCH 29, 1999 VOL. 153 NO. 12
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Stuck in the Dumps
Experts expected Thailand to be among the first countries in Asia to recover from the financial crisis, but nothing seems to be going right
By DAVID LIEBHOLD Bangkok
Michael Wansley's killer was clearly a professional. Riding on the back of a motorcycle near the town of Nakhon Sawan, 210 km north of Bangkok, the gunman pulled alongside a van in which the Australian auditor was sitting and fired an 11-mm pistol through the vehicle's middle window. Eight bullets found their mark, and none of the five other people in the van was injured. Wansley, 58, was on his way to an indebted sugar mill that his international accounting firm, Deloitte Touche Tohmatsu, was helping to restructure on behalf of creditors.
Although the assassin remains at large (three alleged accomplices were arrested last week), the March 10 killing appears to be part of the fierce battle raging between debtors and creditors in Thailand, a country drowning in bad debt. "I think Mr. Wansley probably discovered something," says Banthoon Lamsam, president of the Thai Bankers' Association, who notes that debtors sometimes resort to hiding assets or squirreling away funds that should remain within a company. "When it comes to sharing a smaller cake, things can get very emotional."
What happened to Thailand's recovery? For months, analysts have been predicting that Thailand would be the first Asian country to pull out of the region-wide financial crisis, just as it had been the first to crumble. The government of Prime Minister Chuan Leekpai has been diligently following the prescriptions of the International Monetary Fund and has succeeded in stabilizing the currency, bringing down interest rates and increasing the current account surplus. But there is little good news on the horizon, and Wansley's killing only adds to the gloom. The economy shrank 8% in 1998, and many analysts expect further contraction this year. Nearly half of all loans are now non-performing, and bankruptcies are on the rise. Says former Finance Minister Virabongsa Ramangkura: "Our country could be headed into deeper recession."
Is the government to blame? Critics say Bangkok is obsessed with financial-sector reform, ignoring the decimation of the population's spending power. Instead of closing down companies that can't service their debt, critics charge, the government should be spending on public works programs, putting money in people's pockets and allowing businesses to recover and start repaying their obligations. Chuan's government is aware of the problem: last week it gave final approval to a $1.45 billion stimulus package from Japan's Miyazawa fund and the World Bank. But that won't go nearly far enough, says Senator Sawat Horungroeng. "The government should put at least another 300 billion to 400 billion baht [$8 billion to $10.6 billion] into the economy," he says, adding that the funds could come from Thailand's banks, which are sitting on more than $80 billion in deposits. "That would lead to more jobs and more spending power."
Thailand's economic data paint a dismal picture--almost two years after the collapse of the baht triggered a region-wide recession. Exports have remained flat, despite the currency's massive depreciation against the dollar, and so has domestic demand. With 46% of loans categorized as non-performing and half of manufacturing capacity going unused, prospects are slim for fresh investment in pretty much any industry. An estimated 3 million Thais are now out of work--9.4% of the work force--and there is not enough land to go around in the drought-stricken countryside. The government predicts economic growth of 1% this year, though many independent economists are skeptical. "If we can get minus 2% or minus 3% this year, that will be good," says Graham Catterwell, former managing director of Deutsche Morgan Grenfell in Bangkok.
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