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Feared reform bills may actually help

 

Thanong Khanthong and Vatchara Charoonsantikul look at the priorities for passing the key bills to tackle the economic crisis as rabid nationalism starts to make its presence felt.

 

Thailand is up for cheap sale. This is what underlies the emotional debate sweeping the broad spectrum of Thai society as the Chuan government embarks on an ambitious structural reform to tackle the crisis.

The government aims to slam 13 bills through during this parliamentary session. These bills had been drafted to support wider foreign participation, facilitate debt restructuring through the bankruptcy and foreclosure law and attract foreign buyers in the property sector. Cramming these who-knows-what bills, five of which have passed the first reading, through the House and Senate almost at the same time is tantamount to asking for trouble.

This will be a disaster for the government because it has paid no attention to educating the public on the importance of these bills in restructuring the Thai economy. This can be explained by the absence of a public hearing about the bills, hence creating an impression that Thailand is just passing them to satisfy foreigners, creditors and the International Monetary Fund. The media, too, has failed in providing the public with in-depth coverage on the bills, and has instead politicised the issue and turned it into nationalistic fever.

Is Thailand indeed up for a cheap sale? When Thailand tried to secure a US$17.2 billion rescue package from the IMF in August 1997, it was already insolvent. With insolvency, Thailand, as judged by the international community then, was not capable of honouring its foreign debts of more than $90 billion because it had used most of its foreign exchange reserves to defend the baht. Without the IMF's standby credit replenishing the Bank of Thailand's reserves, the country would not have been able come this far in achieving a fair degree of financial stability.

In short, the then Chavalit government had already pawned Thailand to the IMF and international creditors. In exchange for standby credit, the IMF had imposed policy conditions which implicitly required Thai government agencies, the Cabinet and the Parliament to pass measures, resolutions and legislations supporting broad economic and financial reforms. The bills -- covering foreign participation, known as the Por Wor 281, the bankruptcy and foreclosure process and the foreign ownership in property -- are part of those painful policy conditions, which the Thai government, with no other choices, had committed itself to.

However, in order to avoid a political storm and public backlash, which could derail the entire finance and economic reform process, it might be wiser for the government to try and push the more urgent bills, like those covering bankruptcy, judicial court and foreclosure laws, through Parliament.

Without having debt restructuring unlock the more than Bt2 trillion in bad debts in the banking system, the door to Thailand's recovery may permanently be shut. It takes at least seven years for a bankruptcy case to make its way through the current Thai court system before a final decision is made. Debtors' struggles to avoid making repayments has left banks sitting on a mountain of bad debts because there has been no legal infrastructure to help them restructure them.

There is, of course, a vested interest in shooting these bills down because soon guarantors of debts will also have to pay their due. Most big-time businessmen and politicians have left finger prints on bad cheques, providing loan guarantees for their relatives or friends during the good times without any second thoughts. Now is the day of reckoning.

In fact, any civilised country is expected to have bankruptcy and foreclosure laws as well as an efficient judicial system. When high-flying Peregrine collapsed on the back of the rupiah crisis, it took a few months for Hong Kong regulators to liquidate its assets and use the proceeds to pay back creditors. This is normal business.

Foreign investors, impressed with Thailand's reforms so far, are now queuing to make a comeback and are only waiting for the passage of these crucial bills and progress in the debt restructuring. Should the Parliament block these bills, the entire reform process will become fruitless and the Thai economy will remain in the doldrums. On the contrary, should the bills be passed, confidence will be renewed and will pave the way for Thailand to become the first Asian country to find its way out of the crisis.

As for bills on the Por Wor 281 amendments, Dr Supachai Panitchpakdi, the deputy prime minister and commerce minister, has staked his political career on their passage. The Por Wor 281, or the Alien Business Law, which came into being in 1972, had originally been drafted to protect Thai interests. However, in practice, the law had been nullified by nominees, the Thai-US treaty and other legal loopholes.

A legal expert said: ''It is not a matter of life or death if the Alien Business Law is not amended. There are ways to circumvent the restriction. I think it is being pushed through because foreigners want us to take a beating.''

Embracing a liberal regime is part of Thailand's open door policy and its willingness to participate in the globalisation process. However, the passage of the Por Wor 281 laws are not as urgent as the bankruptcy and foreclosure laws. This is equally true to the amendment on the law governing foreign ownership of Thai land and condominiums. Foreigners can, in practice, own Thai land via the use of several loopholes, like setting up a local company to buy land, or acquiring land in an industrial estate.

In conclusion, the bravado of foreigners' buying Thailand cheap has more to do with style rather than with substance. Suchon Chalikrua, a senator, has promised to take a hard look at the bills related to tackling the economic crisis by forming a Senate working committee to scrutinise them.

''We need a committee because we have very little time but we need to promulgate the laws more cautiously and in a fashion that protects the interests of the Thai people,'' he said.

 

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