The lesson of Tarrin's plight: know your (time) limits

January 24, 2001

Finance managers can learn a thing or two from the example set by John Olds, the American executive who steered the Development Bank of Singapore to regional success, says Thanong Khanthong.

Had Finance Minister Tarrin Nimmanahaeminda followed the management plan of John Olds, he could have avoided the pitfalls that have destroyed his political career for now.

Olds joined DBS Group Holdings, the parent company of the Development Bank of Singapore, in August 1998 as vice chairman and chief executive after a 24-year stint at JP Morgan, the US investment bank.

Lee Hsien Loong, Singapore's deputy prime minister and chairman of its monetary authority, was responsible for recruiting Olds to run DBS. He reasoned that DBS would need a truly professional management team to achieve its goal of becoming a regional bank. Local talent was not enough to change the status of the bank in which the government holds a 40-per-cent stake.

Olds declared from the outset that he would stay for only two or three years to perform the necessary surgery.

His mandate was to make DBS a regional contender in banking and financial services. Olds realised that it would be a painful process and that he would create enemies. Therefore, he decided that once he had established the parameters, he should step down and let a new management team with a fresh mandate carry on the reform process.

Olds has been true to his promise. Last weekend, the bank's board announced his resignation as vice chairman and chief executive. He will continue to serve as a board member until May 12 and then become special adviser to the chairman. The announcement marked the completion of the first phase of the restructuring of DBS.

Tarrin took the finance job in November 1997 at the height of the financial crisis. His aim was to end the panic, restore confidence and put the country back on the path to economic growth. To do so, he would also have to wield the surgeon's scalpel.

Tarrin knew the financial and economic reforms would cause pain. A large number of finance companies and banks would have to go, big corporates would face bankruptcy and unemployment would rise. Furthermore, structural reforms, encompassing everything from the legal infrastructure to regulatory practices, would affect the Establishment.

He would also end up creating a lot of enemies.

But, unlike Olds, Tarrin had political-career goals. He did not set a target for himself, nor a timeframe for achieving his purpose.

Most economists believe that Tarrin has been guiding Thailand along the right path, although the economic recovery will take time.

"I think he has got it right with the remedies for the Thai economy, but the problem has to do with implementation. Everything appears to have come too late or too little," said a fund manager in Singapore.

Since Tarrin needed to protect his own political career, he was only able to introduce half-baked reforms and implementation was also often reluctant.

He could not take on the banking system, as he would have liked, in the face of resistance from the Establishment. He failed to introduce the tough legal infrastructure that would have effectively addressed corporate debt restructuring. He backed off when pitted against the defiant Bank of Thailand governor MR Chatu Mongol Sonakul.

Had Tarrin decided to step down after the passage of the bankruptcy and foreclosure laws in April 1999, let somebody else take over and become a special adviser to the prime minister, he would have salvaged his political career.

People would have regarded him as a champion of reform. The first phase of the Thai reform process was completed after the passage of the bankruptcy and foreclosure laws.

By clinging on to his job to the end, Tarrin eventually became a liability for the Democrat Party. In the three years since the crisis started, people became impatient at the slow pace of reform and bored with the government. They wanted change. And Tarrin came to be seen as a symbol of failure, although he had saved the economy from complete ruin. The details did not matter. The public wanted the Democrats to go.

Only two days before the January 6 election, Democrat leader Chuan Leekpai dumped Tarrin. He promised the electorate that Abhisit Vejjajiva would replace Tarrin as finance minister if the Democrats returned to power.

Tarrin's plight is also a lesson for managers in how to cope with a crisis - when you aim high, know your limits and set a time-frame for reaching them.