24th August 1997


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Thailand: down Mexico way

The middle and upper- middle class of South Asia that look forward eagerly to a shopping spree in Singapore or Bangkok do envy their rich ASEAN cousins. But Singapore was often too expensive. Bangkok was the weekend nirvana for the SAARC shopper, an English -educated newspaper reader usually.

Well, the same daily paper may have published agency reports in recent weeks of the economic crisis that has seized Thailand. The myth of “Tiger economies” has been exploded. David Sanger of the New York Times summed it all up with fine journalistic skill!

“By the time they make it from the airport to the hotel, first time visitors to the “tiger economies” of South -East Asia almost all blurt out the same question.” Where did all the money come from?

“In Kuala Lumpur , the Malaysians are putting the finishing touches to the world’s tallest twin towers, and the national car, the Proton, competes for space with Mercedes on the street below.

“Bangkok, once known as the Venice of Asia for the tree- lined canals, has filled every watery centimetre with concrete to support office waters that stretch into the polluted mist. Even the Philippines once Asia’s basket case, finally has its act together. So the financial crisis that has shaken the region in recent weeks - huge currency devaluations, the I.M.F. sweeping to prop up the Philippines and virtually take over the Central Bank of Thailand - naturally raises the question of how much of this phenomenal growth is a chimera”.

Yes it does. And the issue is more serious than the question David Sanger raises. Are the tigers just large house cats? Or is Thailand going the Japan way? Not quite. In fact, the Thai Finance Minister, Thanong Bidaya has appealed to Japanese banks to roll over their short- term loans to the country as part of a broad rescue package for Thailand in the aftermath of the recent currency turmoil, says correspondent Gillian Tett.

And how does the United States, looking forward to a new century as the uncontested superpower, assess the crisis? The Thai currency crisis, observed Deputy Treasury Secretary Lawrence Summers, highlights the need for an open world financial system. “The Thai crisis has increased the U.S. desire to work to strengthen the world’s financial system”.

Indonesian Response

How does ASEAN’s largest member, Indonesia, read the situation and respond to the challenge? For more than a decade, Yusuf Wanandi has been known to Asian scholars, the region’s defence specialists, political scientists and journalists (the seminar circuit in short) as director of Djakarta’s Institute of Strategic Studies. And in this era, economic policy and its impact on living standards, has been increasingly a legitimate sphere of both political science and strategic studies.

It is a home-truth accepted by the region’s academic and non-academic seminar circuit. Now chairman of an organisation quaintly titled ASEAN-ISIS ( a shot-gun marriage surely of the two disciplines?) Dr. Wanandi chooses to study these problems in terms of the region, conflict and defence.

And thus his emphasis on Cambodia and the need for a regional initiative on “conflict resolution”. He has a precedent to support his case - ASEAN intervention in the 1980’ s when an anti -Marcos movement was likely to “unleash a bloodbath, with possible regional ramifications.

“The issue is regional stability and security. Does an armed conflict or the regime’s response to a serious internal threat, have a spill-over effect? So, ASEAN, must make an”exception” to its principle of non-interference in the domestic affairs of nations. Does this “doctrine” have any relevance to SAARC. The Indian intervention in Sri Lanka was “intervention by invitation”. The impact of the Thai crisis is already regional.

Thai Impact

The I.M.F. and Japan took the lead in the 16 billion dollar loan package. It was made possible by the prompt response of seven Asian countries. It is the biggest “Support “package since the U.S and other donors, responded to an I.M.F. initiative on Mexico in 1995.

“This is a major step forward since the I.M.F. and the donors led by the U.S made about 50 billion dollars available to Mexico - what is important is that it shows that the Asia-Pacific region is approaching these issues with solidarity” remarked Mr. Eisuke Sakakihara, the Japanese Deputy Minister for international financial affairs.

China’s readiness to contribute is even more significant. Its reaction is seen by area specialists as directly connected to Beijing’s hopes for Hong Kong in the next decade. For a start, the restoration of stability for the Thai bhat would ease pressure on the Hong Kong dollar.


The danger is that this huge sum of money could leak out into the real economy. Then the currency would sink even lower as reserves stay low and the monetary bases. This possibility has been highlighted by a team of economists, say four F.T. reporters who concluded their despatch by predicting that the I.M.F. would be compelled to “play a strict policing role” .

Once again we see the long shadow of Mexico fall on ASEAN. For the students of regional politics the most interesting question relates to Japan. Will Japan , Asia’s economic titan, accept the role of the U.S in the Mexican crisis?

Thailand, once regarded an ASEAN showcase, and envied by the westernized South Asian elite, is in serious trouble.

So is the answer a ‘national government’ ? A group of prominent Thai intellectuals ( academics were well represented) met Mr. Prem Tinsulanonda, a trusted aide of the King, and persuaded him to impress on the monarch to assume a more assertive role. But would that be too little too late?

The latest report by Roy Ramos, a Goldman Sachs bank analyst, says: “With the baht unpegged, the value of the curreny and the economy in decline, interest rates rising and no comprehensive financial sector restructuring in sight, all bets are now off where ( the banks ) non- performing loan ratios will peak”.

Thailand’s debts have already exceeded Mexico’s peak levels , the report added.

Aid, a political weapon once more

By Jonathan Power

LONDON - Using aid as a political weapon goes in phases and fashions, fits and starts, lulls and storms. The only consistent factor is that invariably it is the U.S. that sets the tone. Other Western and Middle Eastern aid givers follow in a straggle. Sometimes they do, more often they don’t, as Japan has just made plain over Cambodia, much to Washington’s chagrin.

With Jimmy Carter as president it was a sword to be wielded in every direction and certainly in Latin America, combined with a high decibel rhetoric on human rights, did help in the battle to vanquish tyranny and restore democracy. Since Carter’s days there has been the occasional spate of activity but of a less spirited kind. But now the Carteresque fervour is back in vogue. Madeleine Albright’s State Department is charging at every windmill. Although it is far too early to say whether she will have any more success than Sancho Panza it comes as a breath of much needed air into what was in danger of becoming, under her predecessor, Warren Christopher, the politics of the doldrums. Cambodia is one target, Kenya another. Moreover, one remarkable aspect of this swordsmanship is that this time America is not alone. The stodgy, consensus-seeking International Monetary Fund (IMF) is also flexing its financial muscle, which means that the US, as always the IMF’s most powerful governor, has won over for this new policy of toughness not just the West Europeans, Canadians and Japanese but most of the Third World’s financial heavyweights.

On August 1st the world’s monetary institution of last resort suspended a loan programme to Kenya of $220 million. This was followed a few days later by the publishing of new guidelines that instruct IMF staff to become more political. No longer will only economic and financial criteria be the deciding issues in giving loans. From now on “governance” will be factored into decision making. In other words, corruption and mismanagement will be weighed and, if found wanting, governments will find their capacity to borrow curtailed. Kenya is the first test. The IMF finally decided to pull the plug after the government fired the independently minded and honest head of customs and excise.

These remarkable developments in policy come not very long after the IMF decided to examine, when analyzing a country’s credit worthiness, not just the civilian budget but the once off limits military budget too. Some countries have been told they ought to rein in runaway arms purchases.

All this raises the sensitive and demanding question, if the White House has decided to become more rigorous on human rights and good governance where does it stop, or rather how far does it go? Is it only aimed at poverty ridden, relatively dependent countries like Kenya and Cambodia or will the White House once again change tack with Beijing and link human rights to trade concessions? Is it also going to lead to a more aggressive use of military aid - out of fashion since the end of the Cold War - making the world better for the “good guys”? This seems to be the message from Rwanda where recent revelations of American military aid and training suggest Washington may have had a hand in the Tutsi armies’ recent overthrow of Zaire’s long-time dictator, Mobutu Sese Seko.

One of these questions can be answered quickly. No, policy is not going to change towards China. Washington knows that the Chinese economy is too big and too robust for it to be able to gain political leverage by punishing China for human rights abuses with trade sanctions. The Nixonian policy of embracing China will continue, interrupted as it was for only the briefest of moments by Tienanmen Square.

The Rwanda/ Zaire affair is more convoluted and, let us say, after the Somalian imbroglio, unexpected. What on earth is America doing poking around in African civil wars? Were the old time Marxist analysts right after all - the capitalist countries will slit each other’s throats in order to win favoured access to African minerals? This policy was discredited by the killing fields of Angola where east and west competed for the prize of its post-colonial government and its diamond fields. The murderous consequences of Africa’s worst war still linger on. Surely Washington doesn’t believe it should compete with capitalist Paris as it did for so long with communist Moscow? (And vice versa.)

But suspending aid to small, dependent countries is another matter. This must be a very good thing to do and the new tough America and IMF policies are well overdue. In too many countries aid and loans have been poured into the coffers of countries that have misspent and corrupted them away. In Africa, in particular, aid has not had a good track record in fostering economic growth and the alleviation of poverty. Although during the 1960s, 70s and 80s aid contributed to many important individual achievements, overall they were negated by the counter productive policies of governments.

Belatedly, but rather wonderfully, a significant number of African countries have put their fiscal house in order. Take Ethiopia. After decades of protracted civil war and corrupt government it now has much improved governance and a growth rate last year at the unbelievable East Asian rate of 12.4%.

Aid Ethiopia. Cut-off Kenya. Embrace China and stay out of Africa’s wars. Who said aid as a foreign policy tool was a simple weapon? More activity is all to the good but getting it right is even better.

(This column is syndicated to Bankok Post, Boston Globe, Dawn, Japan Times, Los Angeles Times, Manila Chronicle, New Straits Times, Philadelphia Inquirer, San Fransisco Chronicle, Statesman, Toronto Star)

Burger King rushes to restock restaurant beef

WASHINGTON,Saturday - One of the nation’s biggest fast-food hamburger chains tried to persuade customers to switch to chicken or fish sandwiches on Friday after the U.S. government forced a record recall of beef.

Agriculture Department officials would not rule out taking further action once they find the source of the tainted beef, one day after the government forced Hudson Foods Inc to close a Nebraska plant and recall a record 25 million pounds (11 million kg) of frozen hamburger patties.

Agriculture Secretary Dan Glickman said a “SWAT team” of investigators would continue combing through records to determine which of six slaughterhouses supplied the bad beef to Hudson.

Neither the department nor Hudson would identify the six firms, which together operate 10 plants, saying it would be unfair to name names until the investigation is completed. “Once we’ve identified the slaughterhouse we will go back there to make sure their sanitation plans are in order and are being carried out,” said a spokeswoman for the department’s Food Safety and Inspection Service.

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