HONG KONG ­ The annual World Bank/International Monetary Fund (IMF) meeting starts today in Hong Kong with Thailand being singled out as a country that represents everything that could have gone wrong.

It is a complete embarrassment for a country that as recently as 1992 won critical acclaim from the IMF over its sound macro-economic management, efficient team of technocrats, openness to global trade and financial markets, high level of private investment, strong export base and healthy economic growth.

Now all the elements that contributed to Thailand's spectacular economic growth over the past decade have fallen apart. With a currency and banking crisis and massive indebtedness beyond the ability of the private sector to service, Thailand needs a bailout from the IMF and its neighbouring countries.

Sadly, Thailand is broke. Even more tragic is the fact that most local politicians, bureaucrats and farmers hardly realise the depth of the trouble the Thai economy is in.

''The politicians are acting as if nothing is happening to the economy. This is because they never have had to make a living. While the country is on fire, they're still fighting for toys," said a retired Cabinet member.

The bureaucrats, too, are complacent, with a narrow self-interest born of the confidence that they will always receive government pay cheques at the end of the month. Well, the cheques might not be forthcoming in the coming months.

The farmers are not sophisticated enough to understand the economic situation, yet they will be sharing the pain that they had nothing to do with creating.

The bankers, financiers, property developers and industrialists are trying to get away with indebtedness of 80 per cent of the US$90 billion that they have recklessly built, by blaming the government for inaction. The lack of governance and the inability to make tough decisions ­ fiscal tightening and trimming the current account deficit, for instance ­ have allowed the financial malaise to develop into a full-blown crisis.

The financial crisis in Thailand has had a contagious effect, spreading turmoil throughout the regional markets that will cause regional economic growth to slow down over the years to come. The tiger economies have been domesticated, with most of the blame hovering over Thailand. However, the IMF's recent endorsement of Thailand's painful economic adjustments cannot be taken for granted. There is still the grave danger of the country declaring a debt moratorium if its financial system continues to bleed.

Crucial will be the role of Thanong Bidaya, the finance minister, and Chaiyawat Wibulswasdi, the Bank of Thailand governor. They will need to convince international investors about Thailand's commitment to living within its means and its tough policy to deal with the 58 ailing finance companies.

They will be trying to urge foreign creditors to roll over some of the US$30 billion in short-term debts due this year.

The financial crisis in Thailand raises the big question as to what degree an economy should liberalise its financial services sector. The free float of the baht in the offshore market, the liberalisation of the banking sector through the BIBF, the rigid foreign exchange policy, the creation of debt by the private sector without any control, poor supervision of financial institutions and the lack of coordination among the government agencies over the country's economic management have all contributed to the present crisis.

As a developing economy, Thailand is ill-prepared for the globalisation of the finance industry. Capital flows are double-edged. International bankers and investors act on a herd instinct. They swamped Thailand with hot money in the good times, overheating the economy. They are suddenly calling back their money in bad times, leading to a severe liquidity crisis.

Thailand and other developing economies are merely the hostages of the foreign funds. There has been little control or little understanding over capital flows.

Despite this fundamental flaw in the international financial system, there have been calls, particularly from the United States and other developed economies which control most of the savings in this world, for countries to liberalise further. The World Trade Organisation is scheduled to conclude its financial services liberalisation talks before the end of this year.

Thailand's banking crisis has automatically led to a liberalisation of the financial industry. All the 58 ailing finance companies and the remaining 33 finance companies and 15 banks are up for grabs. It's give-away time.

Once these financial institutions have been acquired, through joint ventures, takeovers or mergers, the Thai financial system will be saved, but at what price? Foreign owners will be calling the shots in the Thai banking industry and their behaviour could be just as unpredictable.