Turmoil in Thailand

Thailand’s worst recession in living memory has highlighted mismanagement and corruption within the Thai government.

Contrary to many analysts’ predictions of a temporary recession in Thailand, the Thai economy is undergoing what may be considered its worst economic crisis ever. As Thailand’s economy steadily sinks, more and more attention is being focused on the leader of the country, Chavalit Yongchai-yudh. Although there is no question of his qualifications or his abilities as a far-sighted statesman, his integrity and his management of the political and economic situation in Thailand demands some serious scrutiny.

The new prime minister of Thailand took office on November 29, 1996, amidst political turmoil during which his predecessor was removed by a no-confidence vote. The whole affair enjoyed the backing of the then 64-year-old General Chavalit Yongchaiyudh. During the decades that he eyed the office of Prime Minister, Chavalit Yongchaiyudh built up his political strength through the position of commander-in-chief of the Thai Royal Army. In 1996 he was listed in Asiaweek’s coveted list of the fifty most powerful people in Asia. Although he has been accredited with the “depoliticizing” of the “once-threatening” military (which supported the May 1992 coup that resulted in political chaos and the eventual overthrow of the military leader) and leads one of the dominant political parties in Thailand, Chavalit has long been plagued with accusations of bribery and corruption. He was often cited as the prime minister-in-waiting, regardless of the fact that not many educated Thais trusted his integrity to lead the country.
After many failed bids to obtain the office of prime minister, Chavalit seized the opportunity in mid-1996 when numerous scandals involving the corrupt former prime minister Banharn Silapa-Archa came to light. Taking advantage of the scandal-ridden incumbent and the staggering economy, Chavalit and many members of parliament successfully removed Banharn from office with a vote of no-confidence. Chavalit’s party gained the most votes in the ensuing elections, despite a poor showing in Bangkok: his rival won 29 out of 35 seats in Bangkok. Incessant “rumors” of behind-the-scene undemocratic electoral practices, again, hurt the people’s confidence as the new prime minister, who also held the position of defense minister, took office.

After the depression of 1984, the Thai economy took off with unprecedented growth rates averaging seven to eight percent a year, earning it the status of a Newly Industrialized Country (NIC). The late 80’s saw Thailand’s economy burgeon with liberalized industrial and financial sectors. Unfortunately, no safeguards or controlling mechanisms were put in place as the Thai economy became a significant world player, fueled by speculation.1 Fortunes were made practically overnight. However, the economy staggered as domestic production failed to match overseas spending and as political uncertainties began to take center stage. The staggering condition of the economy became apparent in the 17-month Banharn government. The whole economic situation undoubtedly contributed to its downfall. As Chavalit’s incoming administration succeeded Banharn’s administration, the markets remained stable, unsure of the direction to take.

Perhaps the statistics tell it all: within 9 months, the Stock Exchange of Thailand (SET) lost approximately 60 percent of its total value. From early July to mid September, as a result of floating, the Thai currency fell from 25 baht per dollar to a staggering 36 baht per dollar. This amounted to a dramatic depreciation of 45 percent despite the government’s initial assurance that the baht would not fall to more than 30 baht per dollar. Fifty-eight out of ninety-one of the country’s finance companies were suspended indefinitely by August 5, as fortunes made overnight were lost just as quickly.2 No relief, not even the $16 billion aid from IMF, seems to be helping. The economy appears caught in a downward spiral even jeopardizing Thailand’s role as host of the 1998 Asian Games.
Perhaps the biggest question still needs to be answered: to whom can one attribute this economic downturn? It is easy to accuse other elements, as Chavalit’s government has constantly done these past months. Regardless of the fact that the deep roots of this complicated crisis go back to the bubbling of the economy in the late 80’s, Chavalit has been incessant in his accusations of those that he feels are responsible for current region wide depression.3 His main scapegoats have been past governments, the opposition party in the coalition government, and other countries in the region. Yet he did announce on May 18, that he himself will be in charge of the country’s economic policies. As one anonymous economist remarked, “General Chavalit passes the buck to others whenever there are mistakes. He is never responsible.”4 Many Thais, both overseas and in the country, are calling for his resignation. In an interactive poll, a startling 100 percent of respondents answered “yes” to the question, “Do you think the economic and political climate in Thailand will worsen if the Prime Minister remains in office?”5 Many economists now claim that the government itself is responsible for the current state of the economy, stating that the government had “delayed suspending troubled finance firms because it feared political repercussions because it wanted to protect some vested interests and refused to take corrective action.”6
Perhaps the problem can be attributed mostly to the political situation in Thailand. Thailand’s government is a coalition government, with the head of the majority party filling in the office of Prime Minister. In addition, the opposition coalition also has seats, which undoubtedly leads to deep-rooted conflicts within the system. A drafting of a new constitution has recently been completed, but, fearing an erosion of power, the current government has yet to accept the new constitution unamended. Many conservatives and right-wing activists, as well as many members of the parliament are opposed to this new constitution. In fact, even a high ranking government official has groundlessly declared that the new draft constitution is written to support the communists, which have not been a visible force in Thai politics for decades. Premier Chavalit himself has only marginally supported the newly drafted constitution because troubles, such as increased political tensions and an increase in already-present rumors of revolution, would certainly be unavoidable if the draft is voted down.5 Yet the newly drafted constitution is only a chapter in the endless story of trivial political disputes that politicians engage in to protect their interests and financial well-being. There is no end in sight to the almost ridiculous state of politics in Thailand, a sad state which is contributing to the weakness of the Thai economy.
Yet, government officials continue to plead with the Thais to have more confidence in their ability to solve the country’s current economic problems. This plea seems to be a repeat of the government’s promise to take care of the then-staggering Thai economy nine months ago. Perhaps Thais should believe Chavalit when he tells them to buy and use more Thai goods, travel in Thailand, and use Thai services. Yet it is common knowledge that his wife constantly takes one-day shopping trips to neighboring countries like Hong Kong and Singapore. Perhaps Thais should believe Gen. Chavalit when he says that his mission is to “save the country.” Yet it is widely believed (although tight censorship and dictatorial tendencies, including a cancellation of an opinionated call-in radio program, have attempted to close all news) that, through speculation against his own currency, Gen Chavalit has amassed a fortune amounting to no less than 8 billion baht (at least 225 million dollars) in less than two months.6 Then again, perhaps Thais should believe what they see, what they have proof of: in a televised parliamentary meeting, a government official in the background was staring at the camera, picking his nose, and laughing at the Thai people.