Thai capital after the Asian crisis

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Thai capital after the Asian crisis
Pasuk Phongpaichit and Chris Baker A Decade
After, Bangkok, 12-14 July 2007
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Thailand postwar to crisis

• stable macro management
• US tutelage
• natural and human resources
• immigrant entrepreneurs
• competitive clientelism

high savings and investment export
orientation domestic family conglomerates
real per capita GDP
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Crisis macro

• IMF deflationary package (1 year)
• consumer stimulus

private consumption
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Finance

• Collapse of credit culture
• Surgery on financial institutions
• Selective rescue
• Lift bar on foreign investment
• Regulation, prudence
• Big four survive
• Medium and small closed, sold, merged
• End of relationship banking
• 5-year shrinkage

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Fig I.5 Distribution of commercial bank lending,
1990-2006
other overseas government consumer other
commercial industry
Source Bank of Thailand
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real sector

• No policy to rescue
• fire-sale of distressed assets
• hands-off debt restructuring
• lift equity restrictions in manufacturing
• selective protection of services

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Fig 1.1 Foreign direct investment, 1970-2006
of GDP, right scale
Source Bank of Thailand
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FDI

• crisis decade vs boom decade
• x 3 in US
• x5 in baht
• x2 as of GDP
• export manufacturing
• finance
• construction-related (cement, steel)
• big retail
• property
• services

1988 122 of top 450 MNCs, 214 projects 2000 248
of top 500 MNCs, 630 projects
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Automotive industry
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Fig 3.1 Number of hypermarket outlets, 1995-2006
Carrefour Big C Tesco
Source Nipon et al., 2002 and corporate websites.
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Companies

• Quarter of companies de-listed from exchange
• Quarter of top 50 corporate groups slid to bottom
  ranks
• Quarter of top 220 corporate groups disappeared

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Win or lose? Sector and structure

• Sector
• manufacturing partner
• secondary finance
• Structure
• authoritarian conglomerate
• (unreformed kongsi, absolute patriarch,
  little/no outside professional management,
  bank-dependent, non-transparent)

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Impacts

• Concentration
• Export dependence
• Capital market
• Social development

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Concentration

• By MNC buyout/expansion
• three mega-retail chains
• two mobile phone suppliers
• etc.
• Few winners, many losers effect
• merger of steel firms
• top five banks
• liquor/beer
• etc

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Fig 1.5 Top 150 business groups by assets, 2000
Source Suehiro database
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export dependence

• Recovery through exports
• currency depreciated
• companies reorient to export to replace home
  market
• Almost all growth attributable to exports
• Large and growing share by MNCs
• TradeGDP up from 90 to 150

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growth accounting
Source Peter Warr, 2005 30
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Fig I. 11 Export shares by sector, 1985-2006
tech-based industry
process industry
labour-intensive industry
resource-based industry
other
agriculture
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Fig I.10 Trade as percent of GDP, 1995-2006
Exports
Imports
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capital market

• Decline in savings and investment
• credit promotion to boost consumption
• rising household debt, lower household savings
• Banks shrink lending to business
• reorient to consumer
• Stockmarket no substitute
• small, radically affected by speculative i/n
  flows
• political manipulation
• values do not reflect company performance

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• Fig I.8 Gross national savings, 1994-2005

Business
Government
Households
Source NESDB
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Fig I.9 Gross domestic investment, 1994-2005
public
private
Source NESDB
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Fig I.5 Distribution of commercial bank lending,
1990-2006
other overseas government consumer other
commercial industry
Source Bank of Thailand
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social pattern
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urban informal
white collar
agriculture
formal industrial
other
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Thank you