THE Chuan government must push the bankruptcy and foreclosure bills through all three readings in this parliamentary session or else the entire financial and economic reform efforts would be derailed in the final lap, officials and analysts said.

An economic analyst said Prime Minister Chuan Leekpai underestimated the political mood by going against a suggestion made by his economic tsar Tarrin Nimmanahaeminda that the government should try to pass the key bankruptcy and foreclosure bills in three readings in October this year. By delaying the bills to this parliamentary session, Chuan has faced the unexpected: a strong political resistance against the bills on the grounds that all Thais could be forced by creditors into bankruptcy.

When these bills are crammed into Parliament along with the Alien Business Law amendments and property laws almost simultaneously, it creates an impression that the government is trying to sell Thailand cheap.

''Amid this confusion, it is easy for politicians, particularly in some quarters in the Senate, to incite nationalism and fears of colonialism,'' said the analyst.

However, if these bills are blocked in Parliament, the consequences will be dreadful since Thailand is still facing a financial crisis and the economy has not yet bottomed out.

''Passage of these laws is not one of the available options but the only way out for the country,'' said Dr Pisit Lee-ahtam, the deputy finance minister.

These crucial laws are the only way out for the country because it will allow the bankruptcy and foreclosure process to unlock more than Bt2 trillion in bad debts in the banking system. Banks are sitting on this mountain of bad debts, which represent more than 40 per cent of their total loans. If these debts are not restructured through an efficient legal system, the banks won't be able to start lending money again to jump-start the economy.

''The foreign investors -- who believe Thailand can stage an economic recovery -- are ready to bring their capital back to Thailand. All they want to see at this stage is the implementation of the bankruptcy and foreclosure laws to facilitate the debt restructuring process,'' said Banthoon Lamsam, the president of the Thai Farmers Bank.

Any country serious about economic growth should have efficient foreclosure laws, he said.

The irony is that the Chuan government should have faced a stronger political resistance in the middle of this year when it tried to pass the key laws to bail out the financial system by committing the national budget to pay for this cost, which is estimated to rise to 30 per cent of the country's gross domestic product.

While he was attending the World Bank/IMF meetings in October, Tarrin said one the toughest problems was how to explain to the public the need to use public funds to bail out the banking system. ''Luckily, I was able to get away with it,'' he said.

The Chuan government was able to get away with the public bail-out for the banks because sentiment towards the Thai economy remained lacklustre. Now with the stock market almost doubling from 200 to 391 points, overnight interest rates falling from 24 per cent to 3-4 per cent, the baht strengthening from Bt56/US dollar to Bt36/US dollar, foreign exchange reserves replenishing at US$28 billion, there are misguided beliefs that the economy is improving and no additional measures should be taken.

In particular, debtors -- a growing number of whom have decided not to repay their debts even though they have the capacity to do so -- are making a desperate attempt to hold on to their wealth by arguing that the bankruptcy and foreclosure laws will force them into bankruptcy and they will have nothing to live on.

''The debtors are having an upper-hand. They realise that if they don't pay, the banks will go bankrupt,'' said a financial executive.

As far as the authorities are concerned, taking on the debtors of more than Bt2 trillion in the banking system is more difficult. The authorities may rely on the commercial banking or the Bank of Thailand laws to force the banks into taking any course of action in bad times, but they do not have the regulatory oversight on the debtors.

If the bankruptcy and foreclosure laws fail to be passed, the problems in the banking system will not be resolved.

Banthoon said it will lead other good debtors to stop paying their debts, hence increasing the amount of non-performing loans in the banks' books and, in doing so, risk the collapse of the entire system. As a result, confidence will evaporate leading the stock market to plunge again, the currency to wobble, interest rates to go sky-high to stem capital flight and all the reform efforts will have to start all over again.

''We have to admit that it is an abnormal time. The depositors are not happy. The banks are not happy. The investors are not happy. The borrowers are not happy. All the people are not happy because their wealth has been significantly eroded,'' said Banthoon.