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COVER:
CHUAN INTERVIEW:
SILVER LINING:
VIEW FROM WASHINGTON:
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ASIA | March 30, 1998 VOL. 151 NO. 12 |
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The problem of a shrinking economy is something Thais hadn't been expecting. From 1985 to '95, they had the world's most robust economy-average annual growth was 8.4%-fueled by soaring exports, huge infusions of Japanese investment and massive building of factories, office towers and hotels. By 1996, however, the export engine had sputtered and growth was slouching toward zero. But revving things up again won't be easy. Cautions Chulakorn Singhakowin, chief executive at Bank of Asia, the institution that was taken over by Dutch abn-amro last week: "Too much optimism can be dangerous. It might slow down efforts to restructure the economy." The IMF reported this month that the economy is likely to shrink by as much as 3.5% this year. Even with a depreciated currency, Thailand is facing ever-stronger international competition and the threat from worldwide overcapacity. And Thailand doesn't have the skills to move up the value-added ladder quickly. Its transition from sewer of garments to assembler of electronics has been stalled "Thailand's crisis is not just financial," says Kamal Malhotra, co-director of Focus on the Global South, a Bangkok policy research group. "Its export-competitiveness crisis is the result of its crisis in education, which is why it can't move beyond light manufacturing." Indeed, just 17% of the workforce has had any secondary education. At the same time, bad loans are ballooning at Thai banks; the large-scale effort to recapitalize banks means diverting funds from healthier parts of the economy, which in turn strangles any other expansion. Acron Plastic Technology, for example, a small acrylic sheet manufacturer in Bangkok, had its line of credit cut just as its import bill for raw materials doubled. "The first to be hit by a credit crunch are small and mid-sized businesses," says Joseph Ng, the firm's deputy managing director. For Chuan, the challenge is reforming the economy with the IMF's tough medicine while maintaining support among Thais, some of whom feel the austerity measures are too severe. A big question is whether Chuan's slim parliamentary majority will last long enough for him to accomplish much. Thai politicians are famous for their bickering, and if urban workers and farmers see their livelihoods crimped for too long, they'll be ripe for appeals from Chuan's rivals. The most difficult tasks-restructuring the banking system, improving education, reducing corruption-still lie ahead. Nonetheless, the steps Chuan has already taken-and, just as important, the speed with which he has taken them-have clearly helped restore confidence in Thailand's economy. If Chuan continues his fleet-footed ways, he'll be needing a new nickname. -With reporting by Kim Gooi and Rahul Jacob/Bangkok |
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orse for chuan, the economic slide is no longer just an urban phenomenon. Laid-off factory hands, construction workers and hotel and restaurant staff are heading home to the countryside, where 80% of Thailand's 65 million people live. They won't find jobs in the rural areas, either, though they will find a traditional family structure that, for a short time anyway, can absorb them. In the village of Ban Na Tham in northeastern Udon Thani province, 50 of the 60 households have at least one family member who left home to work in industrial zones in and around Bangkok. Now the exodus is in reverse. "Almost everybody has lost his job and come back," says Somyod Khonyang, 35, who worked for a construction company in Rayong until a month ago. Somyod earned 200 baht a day and sent half of it home. Such remittances helped families in villages like his build better homes, buy better food and pay for their children's schooling. Back in Ban Na Tham, there's not much for Somyod to do. Every afternoon he casts a net into a canal near his house, hoping to catch fish for the night's dinner. He and his neighbors aren't desperate, yet. "If somebody doesn't have enough food one day, somebody else takes care of them," says Somyod. Indeed, on a recent afternoon, a dozen villagers sit on the floor of one man's house sharing a meal of sticky rice and fish. "People have to change, there's no choice," says Lukmok, 56, the village headman. "But we're afraid of the problems we might have as more people are out of work, things like crime and fighting."