Asian Financial Crisis

Vitoon Panyakul
A few years ago, if someone says the Thai economy would come to a brink of collapse soon, everyone would laugh. But now it is the reality, even though many people not yet awake from the shock and come to the term with it yet. Despite the government kept give assurance that the present crisis is still manageable and Thailand would soon return to the fast track of being the miracle tiger of Asia again, everyone else has already suffered from a series of serious economic recession and has no idea whether they can live through it.

It is beyond the scope of this article to analyze the history of the economic crisis nor to assess what it the impact of IMF structural adjustment programme (SAP) on Thai society as this is perhaps already being done by many academic and “economist experts” elsewhere. I would rather focus, from a NGO’s perspective, the discussion on the impact on local people, especially the poor.

The economic recession began to take place since middle of 1996 but it was covered up by government measures through financing and subsidizing the declining business, most of which are speculative sector such as stock exchange and real estate development. The really first hit came with the rapid fall of stock exchange since middle of 1997 followed by the devaluation of Thai currency (Baht). The immediate impacts was all foreign debt and import of goods which must be paid in foreign currencies double their prices. Many business were close down while imported essential goods, especially petroleum and plastic, suddenly become expensive. So, the first squeeze was the a large scale lay-off and inflation. Those small business who mange to survive the first stroke must cut down expenditure and improve their internal efficiency, exploiting more from their workers. However, the raise of interests by the government in order to attract foreign capital dries out any possible for domestic borrowing which created cash shortage among private sector. Therefore, it is just a matter of time when all the companies to close down their business. This would of course further contribute to a massive unemployment problem. However, the collapse of the Thai business would allow foreign companies to come in and cheaply buy up all assets and take a firm control of the Thai economy.

This is particularly true when consider the IMF’s bail-out programme which pressure the Thai government to amend the law to allow foreigners to buy and own 100% companies and real estate in the country. With the neo-colonical mentality of the government (who believe that the only way to save the Thai economy is to accept IMF’s SAP and attract foreign capital), many people in Thailand are convinced that we could reach this scenario within the next couple month.

For rural sector, as many as 2 million people is expected to loss their job by this year (official figures from the Ministry of Labour), these unemployed would have little choice but to return to their home village in the countryside. But because the rural sector has long been neglected by the government’s development programme and there exists very little infrastructure to absorb these sudden flood of labour, the possibility for these returned workers to find any productive work is very dim. In fact, there is already many report that crime has increased in the rural areas. Farmers must guard against their storage house fearing of theft to steel the paddy at night, a phenomenon never occurs in Thailand before as steeling of paddy is considered the worst sin in Thai-Buddhist culture.

For agriculture which is now being seen as the saver of the country (through export of agricultural products to raise foreign currency for the country), the prospect is not so bright either. Although the ratio of foreign dependency of Thai agriculture is around 15-20% (every 100 baht export require 15-20 baht imported inputs, excluding petrol costs), these input are very crucial to maintain the productivity of the export crops, i.e. seeds, fertilizer and pesticides. The prices of imported inputs would become very expensive beyond the reach of small-scale farmers due to the Baht depreciation and may even become shortage. Export-oriented farms are so much dependent on these inputs would suffer from low productivity. And if this is coupled by the drought (due to El Nino effect), the agricultural production would reduce to an unprecedented level. With the drive to export, there could even be a serious food shortage/food insecurity in Thailand.
The worst is therefore yet to come.
So, unless there is a shift of government policies or an emergence of strong civil movement to embark on alternative development, Thailand could be heading to social tension as serious as the chaos in Indonesian now.