The Democrats, Foreign Money & Populist Socialism
Yes, you can compare apples and oranges. Back then after the financial crisis of 1997, when the Thailand under the Democrat Party received the $17.2 billion bailout package from the International Monetary Fund, the IMF widely dictated Thailand’s financial policy. Thailand had to obey the IMF’s strict regime.
Now, again under the Democrats’ leadership, Thailand is again borrowing from abroad. Of a total of 270 billion baht 200 billion shall come from local banks and 70 billion from overseas, likely from the World Bank, the Asian Development Bank and the Japanese International Cooperation Agency JICA.
The strings attached are not yet clear, but it’s not gonna be a repeat of foreign dictates. The amount is pocket change in comparison to 1997. But in 1997 ailing banks and financial institutes were left to die – as ordered by the IMF. Thailand emerged stronger. This time around the borrowed money shall mainly keep bankrupt state enterprises afloat.
Back then we had a catharsis, a crisis of purification. Populist Thaksin Shinawatra didn’t have to do much when he became prime minister. His timing was perfect. Thailand was ready to do business again. It was comparatively easy to pay back the foreign loans and be successful economist.
All Thaksin had to do is presenting himself as Thailand’s saviour from the claws of foreigners. Truth though is that he was mainly reaping the fruits of the Democrats’ labor.
Today the Democrats fail to turn the crisis into a chance. Unproductive state enterprises will receive even more subsidies. Expensive money is thrown at lost causes, but the Democrats lack the backing to even mention the words privatization or market forces.
Even in the best of times Thailand’s state enterprises can’t manage liquidity. Not to mention in times of crisis.
On paper they will have to draft their financial plans, as nearly bankrupt Thai Airways has to do, and propose them to the Ministry of Finance before the funds can be released. But right, I don’t have to explain.
Or maybe you can’t compare apples and oranges.
Comparing mangoes and blueberries – funny you mention the privatisation taboo, and pardon my ignorance: Isn’t privatization a reaction of a bullish economy – we hear talk of nationalizing the banks and institutions in U.S. & U.K.? Enlighten me please.
Nothing left to nationalize in Thailand …
In short: Privatization – on paper – equals more profit equals less social security.
There was lots of privatization talk in Thailand some years ago, but the lobbies – and monopolies! – of those costly state giants are well entrenched.
You’re spot on stefan, today’s global trend is rather “backwards” towards protectionism and, yes, nationalization – with the declared aim of unloading state investments to “re-privatize” once the crisis is over.
So Abhisit follows the trend, with the difference that injections of state capital into failed companies in the West may lead to asset stripping and healthier companies.
Not here. From what I can tell is free liquidity will be pumped into losers. That’s postponing and even inflating a problem. Not solving it.
BangkokDan
Frank Sinatra would have had a field day in politics here – I did it MY way – Perhaps the cab driver that once told me “I know money can’t buy happiness, but I would like to find that out for myself” was right, and this applies to Thailand’s need to take her own course, though I wonder if it is “her” course or where are they borrowing their models from?
Thanks for the heads-up on that Dan, great article as always.