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Dr Peter A. Jackson
The past month saw Prime Minister Chuan Leekpai's government continue its "steady as it goes" managerialist approach to political and economic reform. The rhetoric of "good governance" was matched by both symbolic and concrete moves to position Thailand for medium-term recovery, being welcomed by international investors as indicated by the baht's stabilisation at 38-39 to the US dollar. In early May a Parliamentary commission released its report into the Bank of Thailand's failed attempt to support the baht in mid-1997. The "baht defence fiasco" depleted foreign reserves from US$ 36.6 billion to US$ 2.5 billion in under a month, and triggered the subsequent economic meltdown. As expected, former Bank governor Rerngchai Marakanond and then Prime Minister Chavalit Yongchaiyudh were blamed for gross mismanagement, and incumbent governor Chaiyawat Wibulsawasdi was implicated. Within days of the report, Chaiyawat resigned and was replaced by Chatumongol Sonakul, a career civil servant who stated that his priority was restructuring the Bank's supervisory role. The appointment of the new governor was welcomed by business and finance circles, being viewed as a vital symbolic transition in purging the bureaucracy of those linked with failed economic policies. Legislative and administrative preparations proceeded for national elections towards the end of 1998 or early 1999. These elections will be the first under the new constitution introduced last year and will see a considerable professionalisation of Thai politics with all MPs now being required to be university graduates. In a possible indication of national electoral success for incumbent PM Chuan Leekpai, his Democrat Party won a majority of seats in Bangkok municipal elections in early May. Plans to privatise state enterprises to pay off state debt proceeded, and funding has been secured for ongoing work on most major infrastructure projects including tollways and the Bangkok subway. The Government considered a scaled-down version of the abandoned Hopewell elevated road-rail project as well as some new essential infrastructure projects, with Bangkok airport expansion plans being a priority in coming months. Chuan's Government was bouyed by data which showed that Thailand posted trade and current account surpluses in each of the 6 months to February 1998 and inbound tourism had risen considerably, with January 1998 figures up by 13.6% on those of a year before. Inflation is now high but manageable at 10.1%, a few notches below the IMF's projected 1998 level of 14%. A cloud on the political horizon is a vocal nationalist movement led by prominent critic Dr Prawet Wasi which criticises globalisation, emphasises self-sufficiency, and calls for openness in ongoing IMF negotiations and for the institution of nationalist economic policies. However, as Indonesian riots spread Thailand remained stable with a national perception that there are now glimmers of light on the mid-term economic horizon.
WATCHPOINT: The possible emergence of a popular anti-government, anti-IMF coalition of NGOs and grass roots organisations demonstrating for greater social welfare and against "selling off" government assets to foreign investors.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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