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

Thai capital after the Asian crisis

Pasuk Phongpaichit and Chris Baker

A Decade After, Bangkok, 12-14 July 2007

Thailand: postwar to crisis

stable macro management

US tutelage

natural and human resources

immigrant entrepreneurs

competitive clientelism

0

10

20

30

40

50

60

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005'0

00 b

aht a

t 198

8 pr

ices

high savings and investment

export orientation

domestic family conglomerates

real per capita GDP

Crisis macro

IMF deflationary package (1 year)

consumer stimulus

5,000

6,000

7,000

8,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

baht

at 1

998

pric

es

private consumption

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

0

2000

4000

6000

8000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

billi

on b

aht

otheroverseasgovernmentconsumerother commercialindustry

Fig I.5 Distribution of commercial bank lending, 1990-2006

Source: Bank of Thailand

real sector

No policy to rescue

fire-sale of distressed assets

hands-off debt restructuring

lift equity restrictions in manufacturing

selective protection of services

0

1

2

3

4

5

6

7

8

9

10

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

US

$ bi

llion

0

1

2

3

4

5

% o

f gdp

Source: Bank of Thailand

Fig 1.1 Foreign direct investment, 1970-2006

% of GDP, right scale

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

services1988: 122 of top 450 MNCs, 214 projects2000: 248 of top 500 MNCs, 630 projects

pre-crisis post-crisis

assemblers c. 12, mostly Thai-majority joint ventures

main assemblers c. 100% MNC-owned

first-tier

(oem parts)

c. 400 firms, mix of domestic, JV, and MNC firms

20 domestic groups, rest are MNCs and their international partners

second-tier

(components)

c. 500 firms, mostly domestic

fdi by MNC international partners

suppliers mostly domestic fdi by specialists from Japan, US, Europe

Automotive industry

2 512 14 17

2433

4352

6070 75

611

19 2020

23

29

33

36

40

44

49

2

67

9

11

15

17

19

20

23

24

0

25

50

75

100

125

150

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006Source: Nipon et al., 2002 and corporate websites.

Carrefour

Big C

Tesco

Fig 3.1 Number of hypermarket outlets, 1995-2006

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

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)

Impacts

Concentration

Export dependence

Capital market

Social development

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

0

250

500

750

1,000

1,250

25 50 75

100

125

150

billi

on b

aht

Source: Suehiro database

Fig 1.5 Top 150 business groups by assets, 2000

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%

1999 2000 2001 2002 2003

exports 5.0 10.1 -2.6 7.3 4.2

consumption 2.3 2.7 2.1 2.7 3.5

investment -0.7 1.1 0.2 1.3 2.3

GDP 4.4 4.8 2.1 5.4 6.7

export % 113 210 * 135 63

growth accounting

Source: Peter Warr, 2005: 30

0%

25%

50%

75%

100%

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2001

2003

2004

2005

2006

agriculture

process industry

tech-based industry

labour-intensive industry

other

resource-based industry

Fig I. 11 Export shares by sector, 1985-2006

30

40

50

60

70

80

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

% o

f GD

P

Imports

Exports

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

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 substitutesmall, radically affected by speculative i/n flows

political manipulation

values do not reflect company performance

0

10

20

30

40

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

% o

f GD

P

Fig I.8 Gross national savings, 1994-2005

Source : NESDB

Households

Government

Business

0

10

20

30

40

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

% o

f GD

P

Source: NESDB

Fig I.9 Gross domestic investment, 1994-2005

public

private

0

2000

4000

6000

8000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

billi

on b

aht

otheroverseasgovernmentconsumerother commercialindustry

Fig I.5 Distribution of commercial bank lending, 1990-2006

Source: Bank of Thailand

social pattern

41%

26%

15%

8%

10%

agriculture

urban informal

formal industrial

white collar

other

Thank you