Experts Warn of New Economic Slump in Thailand by Truong Hong Khanh 28-2-2000 A Thai senate committee warned that Thailand could plunge back into severe economic crisis at any time. The Senate Subcommittee on Fiscal, Banking and Financial Institution Affairs, headed by economic guru Dr Virabongsa Ramangkura, said in a recent report that the government's efforts in fixing economic problems since the crisis had proved unsuccessful because the country's nascent economic recovery was not sustained yet. It says that a series of economic stimulus measures gave a below-than-expected result, given that the government spent too much of its financial resources in getting the economy back on track, which the report says could backfire later on. Furthermore, the venanl and intransparent business culture Thailand involving incestuous relations with senior government bureaucrats had not changed meaning that the root causes of economic failure in Thailand still remained. According to the report, several unsolved problems still cast a dark cloud over the Thai economy, and if they were not tackled urgently in the proper way the country's economic crisis could resurface. The report said problems requiring urgent attention were unsoundness of the country's financial system, rising public debt, declining trade surplus and increased venal behaviour and greed among the country's bureaucracy and the economic and political elite. Internal problems aside, Thailand also was expected to be hit badly by historically high oil prices as well as the upward trend in global interest rates. "These problems are undermining local corporations' competitive edge to compete against foreign rivals," the report noted. In the first three-quarters of 1999, the report noted, gross domestic product growth rose slightly by 0.6 per cent while the country's trade surplus fell by 137 Baht billion (1 US Dollar = 37.8600 Thai Baht). In other words the Thai economic recovery was not broad-based, which meant local business prospects looked sluggish. As a result, unemployment continued to rise and was expected to surge to 2.52 million by the middle of 2000 while many businesses were going bankrupt. Local consumption demand was also low. Such unfavourable prospects would discourage financial institutions from extending new loans. The institutions were afraid of a rise in problematic loans because this meant they would have to set aside additional provisions if borrowers faile to honour debt obligations. d The report was released to the press not long after offshore investors dumped Thai shares heavily and shifted their investment into other markets, amid renewed doubts over the quality of the country's economic fundamentals. The committee said that the government's stimulus measures in fact greatly benefited local corporations that had foreigners as major shareholders. The downside was that the overall economy risked falling back into crisis, as imports could rise higher than exports. "The country is expected to experience a deficit next year," the report disclosed. To get the country completely out of economic crisis, the report urged the government to review its economic policy, suggesting it help rehabilitate ailing financial institutions, adopt a proper foreign-exchange policy supporting export-oriented industries, and deal with increased venal and greedy behaviour among the country's bureaucrats and the economic and political elite.