do-righters do well where Asia crisis began

It looks like a flashback to the days of Thailand's boom, before the crisis began here almost a year and a half ago.

In a Bangkok brokerage house, eager investors huddle around banks of computers, watching the stocks - and their fortunes - rise and fall.

They have good reason to be eager. In the past month, Thailand's sagging stock market has regained some of its erstwhile vigor, rising by as much as 70 percent. Its currency, the baht, has climbed against the dollar, rising from a low of 56 baht to the dollar last January to stabilize at about 36 baht to $1. Currency stability has helped push interest rates down from about 15.5 percent early this year to 11.5 percent. Recovery, say some, could be just around the corner.

Glued to the blinking displays on the trading floor of a local securities firm, investor Khun Teera senses the optimism. "People are starting to come back," says Mr. Teera. "Now they think they can earn more with their money in the stock market than by depositing it in the bank."

Thailand's speculators may be back but analysts in this Southeast Asian nation of 60 million are holding their breath when it comes to prospects for a quick recovery. The official outlook is grim. The economy will contract at a rate of 8 percent in 1998, says the government. Optimistic forecasts suggest a possible return to positive growth of 1 percent in 1999; pessimists foresee a continued recession of 1 to 2 percent. In the meantime, the pain is deepening. Unemployment is expected to rise to 2.8 million this year, compared with just 500,000 in 1996.

Shoppers are keeping the purse strings tight, holding back from the carefree consumption that was a hallmark of the boom. Once the high temples of Thailand's economic miracle, many of the city's malls are now dotted with abandoned stores. Those that remain open have little choice but to offer reductions of 50 to 70 percent.

Even Bangkok's traffic may ease off thanks to the crisis. "Vehicle sales are a quarter of what they were two years ago," says Andrew Henderson of Clarion Securities in Bangkok. Former Finance Minister Virabongsa Ramangkura sees more gloom. "You can ask me about prospects for recovery in about five years," announced the man who negotiated Thailand's $17.2 billion International Monetary Fund bailout package after the baht plummeted in July last year.

Ironically, Mr. Virabongsa believes the IMF's prescriptions, including tax hikes and increased borrowing to boost national reserves, will lead the nation into a dead end. Siva Kumar, Thailand country director of the World Bank, is more upbeat. "You have the macropreconditions for a recovery," he chirps. "There are indications that recovery is just around the corner."

On paper at least, Thailand is doing things right. Having closed two-thirds of the nation's finance companies, the government has promised to push a series of legislative reforms in finance and banking.

"You have to give them high marks for what they've done. They've taken some painful political decisions," says Mr. Kumar, who notes that Thailand's open democratic process has put politicians, whose corruption is seen as a cause of the crisis, under popular pressure to reform. At the top of the agenda are controversial foreclosure and bankruptcy laws, as well as the planned sale of assets and loans left behind by 56 defunct finance companies.

Supporters of the laws say the reforms are essential to rebuilding confidence and bringing business practices into line with international standards. "We don't have a choice," says investor Teera. "Everything we have been doing is designed to re-create confidence for investors in the financial system," explains Amaret Sila-On, chairman of the Stock Exchange of Thailand and of the Financial Sector Restructuring Authority, which is overseeing the sale of assets on the open market.

"The crisis might not have started if Thailand had a useful foreclosure law. Here, if you don't pay your debt nothing happens to you," adds Mr. Henderson. He notes that without a reliable legal framework to fall back on, local and international banks are unlikely to extend significant new loans to Thai creditors.

CRITICS charge that the proposed laws amount to a sellout, allowing foreigners to snatch up local assets at bargain basement prices. "I call them the slave laws. These laws are a way of selling off our nation," grumbles Thai investor Boonlert Charoensuk, as he clicks away at a computer graph of his stocks.

Behind the reform debate, the nationalist gripes, and the hazy predictions about recovery, lies the more fundamental task of transforming Thailand's business culture, where collusion, corruption, and opaque accounting practices have become rampant. "Thailand's illegal economy "is equivalent to 8 to 13 percent of GDP," note the authors of "Guns, Girls, Gambling, Ganja," a recent report that investigated the extent of Thailand's illicit economy. "Nothing will change so long as the corrupt directors of Thailand's finance companies are not put in jail," adds a Bangkok analyst who asked to remain anonymous.

A number of corporations have already shown that they want to change, if only to keep pace with international competition. "We had over 200 applicants for a course on corporate restructuring with just 60 places," says the World Bank's Kumar.

Overhauling ingrained business practices will take time though. "You can't force it," explains a philosophical Mr. Amaret. "Hopefully, with the proper education, people will come to grips with the new kind of world we are going to live in."

In the meantime, most analysts agree that what Thailand's economy needs most is cash. Hobbled by massive nonperforming loans, local banks have cut the flow of credit to a trickle, starving businesses of capital. It's a vicious cycle, warns Henderson. "People don't want to spend money because they don't know if they can keep their jobs, because they know that their employers don't have any more money, because the banks aren't lending anymore."

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