Thai capital after the Asian crisis

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

2. 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

3. Crisis macro • IMF deflationary package (1 year) • consumer stimulus private consumption

4. 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

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

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

7. Fig 1.1 Foreign direct investment, 1970-2006 % of GDP, right scale Source: Bank of Thailand

8. 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

9. Automotive industry

10. Fig 3.1 Number of hypermarket outlets, 1995-2006 Carrefour Big C Tesco Source: Nipon et al., 2002 and corporate websites.

11. 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

12. 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)

13. Impacts • Concentration • Export dependence • Capital market • Social development

14. 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

15. Fig 1.5 Top 150 business groups by assets, 2000 Source: Suehiro database

16. 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 • Trade:GDP up from 90 to 150%

17. growth accounting Source: Peter Warr, 2005: 30

18. Fig I. 11 Export shares by sector, 1985-2006 tech-based industry process industry labour-intensive industry resource-based industry other agriculture

19. Fig I.10 Trade as percent of GDP, 1995-2006 Exports Imports

20. 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

21. Fig I.8 Gross national savings, 1994-2005 Business Government Households Source : NESDB

22. Fig I.9 Gross domestic investment, 1994-2005 public private Source: NESDB

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

24. social pattern

25. urban informal white collar agriculture formal industrial other

26. Thank you