Soros to enter enemy territory

January 25, 2001

THE man accused of triggering the country's financial crisis - international financier George Soros - will enter the lion's den and give a dinner talk in Bangkok on February 1.

His subject will be "the crisis of global capitalism". The event has been organised by the Foreign Correspondents Club and the venue is the Oriental Hotel.

At the height of the economic crisis, Soros, chairman of Soros Fund Management, the principal investment adviser to the Quantum Group of Funds, was vilified by Thai authorities for his role in attacking the baht. He was accused by Malaysian Prime Minister Mahathir Mohamad of being the leading player in a Western conspiracy to bring an end to the Asian economic boom.

Soros admits to having played a role in the baht crisis.

The Soros Fund, recognising the structural imbalances of the Thai economy and the overvalued baht, began to attack the Thai currency in early 1997.

"It must be admitted that hedge funds like mine did play a role in the Asian currency turmoil. Because hedge funds tend to be more concerned with absolute rather than relative performance, they are more likely to be actively involved in precipitating a change in trend," he writes in his latest book, "Open Society: Reforming Global Capitalism" (New York: PublicAffairs, 2000).

"Of course, this exposes them to criticism when the change is undesirable, but if a trend is unsustainable it is usually better if it is reversed sooner rather than later. For instance, by selling the Thai baht short in Jan 1997, the Quantum Funds, managed by my investment company, sent a market signal that the baht may be overvalued.

"Had the authorities responded to the depletion of their reserves, the adjustment would have occurred sooner and be less painful. But the authorities allowed their reserves to run down; the break, when it came, was catastrophic."

The Thai banking authorities floated the baht on July 2, 1997, after depleting the country's foreign exchange reserves in a futile defence of the baht. Shortly afterward, the financial contagion became regional, spreading to South Korea, Malaysia, Indonesia and the Philippines.

But Soros was not making money from all of his bets. He admits that his Soros Fund Management was badly hurt by the Indonesia rupiah crisis.

The Soros Fund bought the rupiah, which started out at a pre-crisis level of 2,430, at 4000 to the dollar. But it subsequently plunged more than 16,000 to the dollar.

In his book, Soros spells out his ideal of a global open society. He says the current global financial system is skewed in favour of the major financial centres - the US, Europe and Japan - while countries on the periphery countries are left to fend to cover their own heads.

BY THANONG KHANTHONG