For the recovery will come to pass only when private investment, which has been sliding by more than 10 per cent every month since 1997, starts to pick up substantially. But when you turn to investors nowadays, they all talk about downsizing. New hotels won't be constructed because of the oversupply of rooms. Cement, steel or petrochemical factories won't be expanding their production because there is an excess of capacity. The point is that nobody knows where to put their money or what projects will benefit the future of Thailand.

Research by Dresdner Kleinwort Benson raises a troubling question as to where Asia is heading. Its members who have been faithfully following Japan in a flying-geese strategy, are in disarray. After World War II, Japan revved up its economy and became the first country to catch up with the United States and Europe in living standards. It was the first in Asia to do so. South Korea, Hong Kong, Taiwan and Singapore were the second flock to follow Japan, followed by the Philippines, Indonesia, Thailand and Malaysia. The final group consisted of China, Bangladesh, Burma, Cambodia, Laos, Vietnam, Papua New Guinea and Sri Lanka.

During the current decade, the Japanese geese began hitting the wall. It was no longer competitive against the Western world in high-definition televisions, fifth-generation computers, aerospace engineering, biotechnology, the Internet or computer software. In these areas, which are the future of economic prosperity, massive capital investment and research is required. Instinctively, the Japanese are trying to avoid hitting the wall. But all the other trailing geese do not seem to realise that they too will soon hit a wall.

''We don't know where we are going,'' said Vichai Punpocha, country manager of Dresdner Bank. ''We are one of the members of the flying geese strategy, which is now hitting the wall. Even if we can tackle our banking problems and problem loans, we still do not have promising or viable projects in which to invest. This is because we do not have the same level of research and development as industrialised countries, which have continued to invest heavily in new computer software and artificial intelligence.''

This is an immediate as well as a longer-term problem for Thailand and Asia. But at issue now, as widely-debated in political circles, is how the private sector can re-access liquidity after a collapse in the credit system. The Chat Pattana Party wants the government to push out an equity fund worth Bt5 billion to help the small- and medium-enterprises (SMEs). On top of this is a loan package worth Bt10 billion from Krung Thai Bank, which is earmarked as the lead bank to aid the real sector. The party threatened not to support Tarrin prior to the vote in the no-confidence censure if the finance minister failed to implement the SME package.

Banthoon Lamsam, president of Thai Farmers Bank, on Monday came out against the setting up of an official fund to bail out the private sector, saying that SMEs are likely to operate in a high-risk environment. Besides, channelling the money effectively into viable projects is not going to be easy either. Late last year, MR Pridiyathorn Devakula, the president of the Export and Import Bank of Thailand, floated a proposal of a Bt100 billion equity fund to help viable companies that were caught in a liquidity trap and that otherwise would not be able to export or carry out their operations, later adding to the loan problems of commercial banks.

Vichai of Dresdner Bank agreed that it might be difficult, in practice, for the government to implement an equity fund and to prevent it from being abused.

However, companies will not receive fresh money from banks in a timely fashion because it will take time for banks to recapitalise for the corporate debt restructuring to bear fruit.

''We just have to let those processes run their course. But the important point is that we have to try a new method,'' he said.

Vichai supported a proposal to set up a special vehicle company to help securitise the debt of viable companies, particularly export-oriented firms which can raise money without having to rely on bank loans. Basically, the special vehicle companies can issue bonds guaranteed by the Financial Institution Development Fund. The bonds, issued as export-backed finance, may carry a coupon rate of 9 per cent, higher than the present deposit rate of 5 to 6 per cent.

In this way, a portion of the private deposits of Bt5.63 trillion in the banking system will be shifted to holding these bonds.

''I think this could be done quickly, in four weeks, because we only need to dust off the Securities and Exchange Commission regulations. The foreign investors will jump in if this kind of investment opportunity arises,'' said Vichai.