Thitinan’s Rakesh Saxena Encyclopedia

After one of the longest extradition battles in the history of Canada, fugitive Thai banker Rakesh Saxena recently arrived back home, in a Thai prison cell that is. A spokesman for Thailand’s attorney general said Saxena, an Indian national and a little man who was a big pest, has over 20 cases pending against him under the Securities Exchange Act. Thailand’s statute of limitations on charges under the law will run out in July 2010. The case continues to hold potential for causing trouble, because those who received dodgy loans include several still-prominent politicians.

Saxena was a financial adviser to Bangkok Bank of Commerce (BBC), which made millions of dollars of fraudulent loans to cronies of the management. If the likes of Krirkkiat, Newin, Banharn and Group of 16 ring a bell, you should probably read on. Dr. Thitinan Pongsudhirak*, Director of the Institute of Security & International Studies (ISIS) and Associate Professor at Chulalongkorn’s Faculty of Political science, has kindly and exclusively given us access to Chapter Four of his PhD thesis completed in 2001: “The Collapse of Bangkok Bank of Commerce – Bankers, Politicians and Regulators.”

Much of Puea Thai’s claimed information that would destabilize the government is probably mentioned in this thesis. The thesis is so detailed, I call it the “Rakesh Saxena Encyclopedia.” It’s Dr. Thitinan’s academic paper with references and footnotes, and not an unsubstantiated essay. Second, it was recognized and given a U.K. national prize as part of PhD thesis. Thitinan’s thesis “Crisis from within: the politics of macroeconomic management in Thailand 1947-97″ had been awarded the 2002 Lord Bryce Prize for Best Dissertation in Comparative and International Politics. So it has some credibility.

Feel free to download the whole Chapter Four here. Reading through the pages you’ll discover an elaborate networks of corruption between elected politicians of the then-ruling Chart Thai and BBC’s top management revolving around an intricate stock market racket financed by BBC loans. And not less surprising: most of the names you’ll read are still around. Lack of proof? What about culpability and accountability? Who deserves the full force of the law? Need people like Newin and Group of 16 also to be accountable? This is now up to the Thai justice system.

As a teaser here’s an extract from the subchapter “The role of elected politicians”:

(…) the September 1996 no-confidence debate traced BBC’s money trail all the way to Banharn himself. To win the 2 July 1995 election, the opposition alleged in the second censure debate of 1996, Banharn and the CTP (Chart Thai Party) accepted Bt300 million from Rakesh mostly for vote-buying purposes, a receipt which would have been in violation of a Thai law banning political parties from receiving donations from foreign nationals (Rakesh was an Indian national). The Bt300 million sum apparently came in three lots of Bt220 million, Bt40 million, and Bt20 million. In return for the Bt220 million and the Bt40 million payments, Rakesh was supposed to gain permission to open BBC branches overseas. The timing of these two payments took place two weeks before the 2 July 1995 polls when the CTP felt that its prospects of winning the election outright needed to be secured by a final round of blanket vote-buying, particularly in the Northeast region which harboured the largest number of MP seats (see Callahan and McCargo 1996). The CTP did edge out the DP in the 2 July contest, thanks to a decisive delivery of MPs from the Northeast (see tables 3.5 and 3.7). This victory, in turn, catapulted Banharn to the premiership for the first time. As the BBC crisis grew worse in the second half of 1995, culminating with the May 1996 censure debate when the bank’s untenable position was laid bare, Rakesh allegedly paid another Bt20 million to Banharn and his associates so that the government would delay the prosecution of the BBC case long enough for him to flee. Rakesh’s flight from Thai law thus transpired shortly after May 1996. Full of sound and fury, this tale as told in the September 1996 debate would have been no more than mere intrigue and innuendo had the opposition stalwarts lacked concrete proof. This they apparently did not lack.

So anything similar does not and can not happen again?

Concludes Thitinan:

Clearly, then, the BBC case appears to have foreshadowed Thailand’s economic adversity in 1997. As The Wall Street Journal put it, BBC was “patient zero of the Asian contagion.” To a senior BoT (Bank of Thailand) official, the BBC collapse “was the beginning of the snowball, which rolled into the 1997 economic crisis.” Indeed, BBC brought together an alliance of commercial bankers, elected politicians and senior central bankers who collectively undertook gross lending risks to benefit themselves and their associates. The elected politicians of the CTP, including its uppermost echelons, participated on a wholesale basis and on an unprecedented scale. This particular connection between bankers and politicians was not a novelty in such developing economies as Thailand, where the financial system has been fragile, the legal system congenitally weak, and law enforcement poor. But with the active involvement of the BoT’s senior management, the banker-politician alliance took on a third and brand-new dimension. This three dimensional alliance, as this chapter posited at the outset, was enabled by the politicisation of the MoF (Ministry of Finance) and BoT as a consequence of the democratic transition in 1988. With the MoF and BoT no longer working in tandem in the 1990s and with the BoT politicized and penetrated by vested interests, in relative contrast to pre-1988 years, Thailand’s financial system was ripe for a crisis of BBC’s proportions.

Admittedly, the Thai economy had become much larger and more open in the 1990s, thanks to a series of financial liberalization policies and a large influx of foreign capital, particularly the “short-term” variety. This made financial regulation and its related macroeconomic management a more daunting challenge than previously. But the larger economic base and substantial capital inflows arguably only worsened the scale of Thailand’s financial crisis (in 1997). They did not act as a catalyst for the crisis to take place at a particular time. The critical spark was ultimately ignited by individuals and/or institutions. To see how such crises can develop and how they can spiral out of control, one should look at how the BBC crisis transpired.

What did the BoT and MoF know about Rakesh Saxena’s wheelings and dealings?

And with the same old individuals still around … what can possibly happen to him?

* Dr. Thitinan Pongsudhirak is Director of the Institute of Security and International Studies (ISIS) and Associate Professor of International Political Economy at the Faculty of Political Science, Chulalongkorn University. He has authored a host of articles, books and book chapters on Thailand’s politics, political economy, foreign policy, and media as well as Asean and East Asian security and economic cooperation. He is frequently quoted and his op-eds have regularly appeared in international and local media, including a column in The Bangkok Post. Dr Thitinan has worked for The Nation newspaper, The BBC World Service, The Economist Intelligence Unit (EIU), and Independent Economic Analysis (IDEA) as well as consulting projects related to Thailand’s macro-economy and politics. He received his BA from the University of California, MA from the Johns Hopkins School of Advanced International Studies, and PhD from the London School of Economics where his work on the political economy of the Thai economic crisis in 1997 was awarded the United Kingdom’s Best Dissertation Prize, currently the only Asian recipient of this award.

His publications include: “Between Continuity and Change: Thailand’s Topsy-Turvy Foreign Policy Directions” in Global Asia, October-December 2009; “The Search for A New Consensus” in Journal of International Security Affairs, Fall 2009; “The Tragedy of the 1997 Constitution” in John Funston (ed.), Thailand’s Continuing Crises: The Coup and Violence in the South, Singapore: ISEAS, 2009; “After the Red Uprising,” Far East Economic Review, May 2009; “Why Thais Are Angry,” The New York Times, 18 April 2009; “Thailand Since the Coup,” Journal of Democracy, October-December 2008; “Thaksin: Competitive Authoritarian and Flawed Dissident” in John Kane, Haig Patapan and Benjamin Wong (eds), Dissident Democrats: The Challenge of Democratic Leadership in Asia, New York, NY: Palgrave Macmillan, 2008; “Mainland Southeast Asia, Asean and the Major Powers in East Asian Regional Order” in Jun Tsunekawa (ed.), Regional Order in East Asia: Asean and Japan Perspectives, Tokyo: National Institute for Defense Studies, 2007; “The Malay-Muslim Insurgency in Southern Thailand” in Andrew T.H. Tan (ed.), Handbook on Terrorism and Insurgency in Southeast Asia, Singapore: Edward Elgar, 2007; and “Thaksin’s Political Zenith and Nadir” in Southeast Asian Affairs 2006, Singapore: Institute of Southeast Asian Studies, 2006. Dr Thitinan has been selected as Stanford University International Scholar for spring 2010. He was Salzburg Global Seminar Faculty Member in June 2009, Japan Foundation’s Cultural Leader in 2008, and Visiting Research Fellow at ISEAS in Singapore in 2005, having lectured at many local and overseas universities.




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November 3, 2009 | Filed Under Business & Economics, Politics 

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