People face another crisis - that of faith
MR Chatu Mongol Sonakul,
the Bank of Thailand governor, recently raised concerns about a "crisis of
faith" among the Thai people. Even the central bank has yet to recover from
the crisis of faith from which it has been suffering over the past five years
since the Bangkok Bank of Commerce scandal and the subsequent financial crisis
of 1997. Speaking at the Economic Reporters' Club two weeks ago, Chatu Mongol
said: "Nowadays the Thai people don't have faith in any institutions,
except the monarchy.''
Chatu Mongol's striking
remark was made manifest last Saturday by the landslide Senate election victory
of Pramote Maiklad, a dedicated civil servant in the Irrigation Department who
for 20 years had faithfully served His Majesty the King in rural water
development projects. When Pramote decided to run for a Senate seat, most
pundits or political critics did not pay him any attention, believing that he
was just another face among many candidates. As it turned out, Pramote mustered
421,515 votes, a staggering record from a broad-based Bangkok constituency.
During his civil service
career, Pramote was frequently seen on TV, in newspapers or magazines,
accompanying the King to develop water projects in remote areas. When people
cast their votes for him, they were indirectly expressing their faith in the
monarchic institution.
"Pramote is a good man
because he used to work for the King. If he were not good, the King would not
have allowed Pramote to work for him," said Napaporn Chuenprasaeng, a
housewife. She also urged her husband and her relatives to vote for Pramote.
The Thai faith in the
monarchy is phenomenal at a time when, as Chatu Mongol has indicated, all other
institutions have been crumbling from years of cronyism, nepotism and
negligence. The monarchy is the only institution that is holding the country
together. But can Thailand move forward to achieve stability and prosperity if
all its other institutions are weak?
Danger lies ahead if faith
in the other institutions is not rebuilt. If you ask the average Thai whether he
trusts the government, the Cabinet, the central bank, the commercial banks, the
corporations, the police, the military, the political parties, the bureaucracy,
the court system, the legal and accounting professions, the educational
institutions, the Buddhist hierarchy or civic organisations, the answer would be
a big "no".
Institutional weakness was
one of the main causes that contributed to the deepening of the financial and
economic crises. For when the crisis erupted, there was no confidence in the
credibility of those institutions that are crucial for the orderly and efficient
functioning of the capitalist system. Over the past 30 years of economic
development, Thailand has not developed the sophisticated institutions needed to
meet the expectations of a modern economy.
From London, Pin Chakkaphak,
the financier who is locked in a legal battle with the Thai government on an
extradition charge, challenged the due process of the Thai justice system. He
declared: "I have no intention of going back to Thailand to stand trial
because I have no faith in the Thai justice system. I don't trust the Thai
authorities."
Understandably, Pin is
trying to defend himself against criminal charges of embezzlement. But his
challenge to the credibility of the Thai justice system is disturbing indeed.
For the rule of law that provides protection and fairness to all parties should
not be in question if we are to have a stable and prosperous society.
One of the main reasons
that foreign money managers have pulled some Bt10 billion out of the Thai stock
market over the past two months is that they have doubts about the judicial
system's ability to handle the framework of bankruptcy. This follows more than
two years of legal wrangling between Thai Petrochemical Industry Plc - saddled
with more than US$3.5 billion in debts - and its creditor banks.
There are another 60
companies on the Stock Exchange of Thailand awaiting debt restructuring. The TPI
case has sent a very negative signal about confidence in the debt restructuring
of the others, thus prompting a big sell-off of Thai stocks that have further
complicated economic problems.
Although the Thai banking
system had outstanding loans of Bt5-Bt6 trillion, it was not supported by a
modern bankruptcy framework until March of last year when bankruptcy and
foreclosure laws and a central bankruptcy court were introduced through
legislation.
In Germany, the liquidation
process of distressed assets is being accelerated to completion from six months
to within four weeks. This is to prevent damage from becoming more expensive. In
Thailand, it looks as if the process could drag on forever, with institutions
sitting on bad assets that will cost even more as time goes by.
For this reason, the
International Monetary Fund and the World Bank are pressing the Thai government
to strengthen its bankruptcy laws. Intrusive as the prescriptions about Thai
structural reforms are, Thailand cannot avoid facing the reality of embarking on
a comprehensive reform of its domestic institutions if it wants to achieve
sustainable growth.
The scale of this
institutional reform will be as drastic as, if not more so, than the one
introduced more than 100 years ago when King Chulalongkorn, or King Rama V,
launched a shake-up of Thai institutions to cope with the threat of imperialism.
The outcome of the Senate election and the general election that will follow
this year will determine the breadth and the depth of institutional reform, the
outcome of which will be crucial to Thailand's survival in an uncertain future.
BY THANONG KHANTHONG
