Thailand is the "good child" of the Asian crisis.
As thousands of angry South Koreans protest rising unemployment and Indonesia's shattered economy slides into oblivion, this easygoing nation of 60 million is setting quietly about reform.
Led by Prime Minister Chuan Leekpai, a soft-spoken lawyer with a reputation for honesty, the Thai government has begun to remodel a political and economic system that, though broadly democratic, had become riddled with corruption.
Thailand on May 26 asked the International Monetary Fund to relax the terms for its $17.2 billion rescue package, warning of a more severe recession than expected. But overall progress has been impressive. In less than a year, Thailand has approved a new reform-orientated constitution, instituted a shake-up of its archaic central banking system, and begun drawing up laws that will give enhanced rights to creditors and investors alike.
Many of those held responsible for Thailand's economic collapse now face the prospect of trial or dismissal. "They're going to turn the Central Bank upside down," says analyst Martin Clutterbuck, referring to the shake-up in which the central bank head was forced to resign.
Moves like that, the promise of a new bankruptcy law, and a ruling that will require listed companies to institute thorough internal auditing are restoring confidence. But it will take more economic hardship to break the habits of decades. "It's certainly difficult to change relationships in a short time," says Richard Bernhard of the Kenan Institute in Bangkok. "You need to get the right mechanisms in place."
During the boom, when economic growth seemed like an unshakable certainty, much of Thailand's corporate culture revolved around a relatively small clique of families, politicians, and friends. Family-run banks often handed out massive unsecured loans on the basis of personal connections.
Starved of cash and laden with debt, the banks and corporations that grew fat during the boom must now learn to be leaner and meaner. "The crisis is forcing people to think differently," says Youssef El Khouri, a financial analyst at Cathay Capital Securities in Bangkok. "The more you suffer, the more you learn."
For many, that learning process means abandoning the cozy habits of cronyism and facing up to the rigors of international competition. "The crisis has accelerated liberalization," explains Somjai Phagaphasvivat, an economist at Bangkok's Thammasat University. "Increased foreign participation will force local businesses to keep pace."
Family businesses won't disappear overnight though. To ensure their survival, some family-owned corporations are working hard to transform themselves. At Bangkok Bank, which is still run by members of the founding Sophonpanich family, a senior executive predicted that the trend was now toward professionalism and away from family-run businesses.
During the boom, the Charoen Pokphand (CP) Group was seen as an example of how a family-owned firm could transform itself into a successful multinational. At its peak before the crisis, CP employed 80,000 people in 20 countries and was one of China's largest foreign investors.
Now chairman Dhanin Chearavanont hopes to pull his debt-laden empire through the crisis with the same pragmatism that fueled his success. Originally a chicken-feed producer, CP has already sold its stake in a motorcycle factory in China and plans to abandon a joint venture with Heineken in Shanghai. Exotic investment plans have been shelved in favor of operations sure to turn in a profit.