16 sep 2003

Last month, Vijit Supinit was unanimously elected chairman of the Securities Exchange of Thailand (SET). This is the latest in a series of reappearances by financial figures whose careers seemed to have collapsed with the baht in 1997. But Vijit’s rehabilitation is also one of the most spectacular. Five years ago he seemed to symbolise so much of what had led Thailand into disaster.

Vijit Supinit was a brilliant student. He joined the first batch of Dr Puey Ungphakorn’s Bank of Thailand (BOT) scholars sent to study overseas in 1961. In 1990, he rose to the governorship of the central bank.

In 1995, Ekamol Khiriwat, was forced to resign as secretary-general of the Securities and Exchange Commission, and dismissed as deputy governor of the central bank. Ekamol had been under surveillance by security agencies. BOT officials later told the Nukul Commission, tasked to investigate the causes of the 1997 crisis, that they were “frightened by the way evidence was dug up against Ekamol”. The Commission concluded that the BOT management failed during the slide into the 1997 crisis because of its “appalling working environment”. Ammar Siamwalla identified Vijit’s governorship as the “critical point” in the decline of Thailand’s technocracy.

As a director of Siam City Bank, Vijit bought several thousand shares in a subsidiary of the Bank at par value, and then chaired a meeting of the Stock Exchange Commission which approved the company’s listing. Vijit’s action may not have been illegal, but seemed to involve a conflict of interest.

In 1991, the BOT discovered that non-performing loans at the Bangkok Bank of Commerce amounted to 27 percent of total assets. Two years later, they had risen to 40 percent. Yet the BOT’s regular reports on banking to the finance ministry showed nothing out of the ordinary. A letter from the finance minister directing Vijit to investigate BBC vanished into thin air. The Nukul Commission criticised Vijit for failing to change the BBC management, and failing to write down its asset value. Vijit insisted only that BBC increase its capital. Later it was found that BBC bought its own capital, through offshore companies. Vijit contributed 6 billion baht from state financial institutions – a sum he later described as “little”. BBC was also allowed to draw over 100 billion baht from the Financial Institutions Development Fund (FIDF) – a major element of the people’s debt resulting from the crisis.

Krirk-kiat Jalichandra, president of BBC, had been a BOT colleague of Vijit. The press speculated that Vijit was defending a friend. The Suthee Singsaneh committee deputed to investigate the BBC crash concluded that “in the exercise of legal authority, there was abuse of power or dishonest intention to evade the spirit of the law”. The BOT began proceedings against Krirk-kiat, but failed to submit a brief to the Attorney-General in time before the case lapsed under the statute of limitations.

The Nukul Commission noted Vijit’s approach “favoured the old shareholders who were the main perpetrators of the bank’s problems”. This approach “lacked transparency” and the whole affair “raised questions about the central bank’s impartiality”.

Vijit’s defence was that he wanted to clean up the BBC mess quietly to avoid causing a wider panic. The Nukul Commission found this totally unconvincing. The Commission concluded: “Vijit Supinit was the single most important policy-maker mismanaging the BBC case.”

It is now generally agreed that Thailand fell into crisis in 1997 because it liberalised its capital account while keeping the baht pegged and failing to impose stricter standards on banks. As BOT governor through this critical period, Vijit was in overall charge of exchange rate policy and banking supervision. According to the Nukul Commission, he “enthusiastically pursued” the plan for an offshore banking facility (BIBF), which was the channel for destabilising inward money flows. From 1992, the BOT’s own internal researchers argued that the BIBF scheme was flawed, and the baht ought to be floated. But under Vijit’s governorship, the BOT resisted suggestions that Thailand could not keep the baht pegged once it had liberalised its capital account.

By all accounts, Vijit’s recent election as SET chairman was mandated by the government. Already by late 2000, Vijit was described as “close to the Thai Rak Thai Party”. Already by that time he was advocating several policies – strong fiscal stimulus, relaxation of IMF-imposed restrictions on banks and businesses – which the Thaksin government has followed and which have undoubtedly contributed to the economic recovery.

There is a generous interpretation of all this. Vijit and other rehabilitated financial figures represent pools of talent and training that still have value. Experience is the greatest teacher, and they have had the opportunity to make big learnings from big mistakes. Thaksin is clever to bring them back because they know the pitfalls. The timing is good, because governance is not a big issue when the bulls are running. The news of Vijit’s election as SET chairman did not cause the SET index to skip a single beat.

But maybe there is a wider dimension. Vijit has resurfaced at the same time as several other ghosts of the go-go early 1990s. GDP-ism is back. Political leaders are talking up the economic growth rate just like they did after the political crisis of 1992. Luxury property development is back with a bang, along with the tell-tale touch of fantasy. Bangkokians were recently informed that the height of chic is to sit in your apartment with a cheetah on a leash. Luxury imports are booming again. The financial elite again has ambitions to make Bangkok the financial centre of a wider region. That, if you remember, was the idea behind BIBF.

All these revivals invite us to imagine that the last six years were an aberration, a bad dream, perhaps even something that never really happened. The crisis? What crisis?