ASIA'S ECONOMIC WOES
November 25, 1997
At the Asian Pacific Economic Cooperation (APEC) meeting in Vancouver, the 18 member nations endorsed a financial rescue plan for Asia's troubled economies. Following a Spencer Michels report on the developments, Elizabeth Farnsworth speaks with the Deputy Prime Minister of Thailand about Asia's economic health.
A RealAudio version of this segment is available.
November 25, 1997:
A background report on APEC.
November 24, 1997:
The APEC shows a grim economic forecast for Asia.
November 21, 1997:
An analyst and the president of the Phillipines discuss Asia's economic state.
October 28, 1997:
The instability of Asian stocks causes worldwide fluctuations.
October 23, 1997:
The Hong Kong stock market drops 10 percent.
November 25, 1996:
APEC agrees to eliminate tariffs on computers and telecommunications equipment.
November 21, 1996
A panel of experts discuss President Clinton's Asia-Pacific Tour.
Browse the NewsHour's coverage of economy, Asia and business.
APEC, the Web site of the Asia-Pacific Economic Cooperation.
The 1997 APEC Conference.
ELIZABETH FARNSWORTH: Mr. Supachal, thank you very much for being with us.
SUPACHAL PANITCSPAKDI, Deputy Prime Minister, Thailand: Thank you. It's a pleasure to be with you.
ELIZABETH FARNSWORTH: Before last July, Thailand was growing at about 8 to 10 percent a year. After July, your currency's fallen, what, 40 percent? You have zero economic growth, maybe even negative economic growth. Unemployment is climbing. What happened?
Thailand's economic problems.
SUPACHAL PANITCSPAKDI: Actually, original problem was purely the overheating of the Thai economy. As you know, we've been growing 8 to 10 percent for a couple of years. And that period in time that we began to borrow quite excessively from abroad, but it was not government's borrowing. It was borrowing done by the private sector to invest in the country, so our problem is a little different from the Mexican problem, wherein you find over-consumption is a major cause of the problem, as over-investment. Last year, we couldn't export as much as we did before for two reasons. One was a cyclical reason that was problems in the electronic sector; we could export less; and there were structural problems in our own competitive position because other countries could compete better than Thailand, so we lost our competitive position. When the foreign hedge funds noticed that we lost our ability to earn foreign exchange at the same time accumulating a lot of short-term debts, they know that we will have difficulty in bringing up the funds to repay our debts, so they start to sell own currency, the baht. This is because of all the things, of all the problems that came throughout the year.
ELIZABETH FARNSWORTH: And are people blaming the foreign financiers for this?
SUPACHAL PANITCSPAKDI: Former government, I think they misinterpret the messages, the signals that have been sent by foreign hedge fund. They were saying that they meant badly for Thailand, they tend to destroy the Thai economy. We try--we were in opposition in those days--we try to explain to the former government that these are just bad new messengers; they're just telling you the bad news. But the bad news had been created by our own economy, so it's our own fundamentals that have gone wrong, and we have to correct that--those fundamentals and not blame it on the foreign hedge fund, so in our government we won't be blaming the hedge fund people.
The economic impact on the Thai people.
ELIZABETH FARNSWORTH: How about the Thai people? The Thai people are suffering; they're losing their jobs, losing cars.
SUPACHAL PANITCSPAKDI: Yes.
ELIZABETH FARNSWORTH: Losing a way of life in many cases.
SUPACHAL PANITCSPAKDI: The first time in a long, long history of Thailand, modern history that the Thai people are going to really suffer. They've been suffering from high rates of inflation. We've been used to inflation rate of 3, 4 percent. This year we may have to bear the inflation rate of around 10 percent. Unemployment in Thailand used to be something like 2 to 3 percent of our work force. It may climb up to 10 percent by next year. Bankruptcies not yet started because banks just begun to foreclose on some of the bad loans. We are in the process of amending our bankruptcy law to make the whole process of bankruptcies as efficient as possible so that we can get rid of the bad assets. So we have told the Thai public that next few years will be a lot of painful adjustments. We have to cut down on our expenditure. There will be less money coming from the center--from the government. Interest rates will have to be hiked to a very high level to shore up the baht, because, again, if the baht weakens, then the vicious circle will start again. So next couple of years will be very hard time, indeed, for the Thai public.
ELIZABETH FARNSWORTH: And how--do you think you've hit bottom?
SUPACHAL PANITCSPAKDI: Not yet, but we hope in the next couple of months--three months from now--we will probably hit the bottom because in the next couple of months we will try to liquidate some ailing financial institutions, and there will come a time that people know that we are going to go to the bottom by those days, so about a few months from now.
ELIZABETH FARNSWORTH: Should the U.S. have acted sooner to help Thailand with this crisis? We've had--we've interviewed other Thai journalists and others who are here, and they've said the U.S. waited too long.
SUPACHAL PANITCSPAKDI: Yes. We--to tell the you the truth, we've been a little bit disappointed. We looked at other countries that have been obtaining some help, financial assistance, from the United States right from the beginning. We thought that maybe as a token system would have been quite satisfactory, but I was told--we were told by representative of the U.S. Government that they were caught unaware of our problems. We were the first to have entered into this crisis. So U.S. Government was a little bit unaware, but deep down I think they are worried about our situation, and they wish they had been earlier in extending some assistance to Thailand. We are now trying to tell them--the U.S. Government that it's still not too late--not too late because we may be needing some assistance, probably not in terms of liquidity of financial assistance but opening up of the market for our commodities, for our export products might also help by--in liberal terms--some of the--representative of U.S. Government would come out and give us strong support, that would also be a great help, to shore up the confidence in the Thai economy.
ELIZABETH FARNSWORTH: So that's one of the things you're asking for here at APEC in your meetings?
SUPACHAL PANITCSPAKDI: Yes. We've been trying to do that, to tell not only to U.S.--we've been trying to tell colleagues in APEC that crisis in Thailand and in East Asia should not be seen as a localized issue. It's not localized the region of East Asia, because has been marketplace for the rest of the world, and expanding it now, purchasing power from year to year very strongly, we are at least market 1/4 of products from the United States, also some similar segment of the market for Europe, and some of the countries, some of the countries, some of these countries in Asia also did finance--buying Treasury bonds and bills from the United States. So our problems could be transported--could be exported--and could become a world problem if we are left alone. So we need a global solution for this present East Asian economic turmoil.
ELIZABETH FARNSWORTH: How worried are you about this getting really quite a lot worse now that Korea's in trouble and Japan could be in trouble?
SUPACHAL PANITCSPAKDI: This is what has been threatening for so long. We have said right from the beginning that Asia is so much integrated that we are now being seen as one whole unit. It's only a matter of time that the problem will be taken over in Japan, and then will go to Taiwan, and it might go into the People's Republic of China, and the rest of Asia will be hit, and next year will be a critical year. So by now and in the next couple of months APEC and the rest of the Western world should at least come up with certain solutions to help in ways that together we can do.
ELIZABETH FARNSWORTH: In the next weeks or months, as you're dealing with the crisis, you've got officials from the International Monetary Fund looking over your shoulder.
SUPACHAL PANITCSPAKDI: Yes.
ELIZABETH FARNSWORTH: Do you feel like you've lost the freedom to run your own country?
SUPACHAL PANITCSPAKDI: Yes. I think we have lost the autonomy to determine our own macroeconomic policies.
ELIZABETH FARNSWORTH: And by macroeconomic you mean overall, national?
SUPACHAL PANITCSPAKDI: Overall, the interest rates, the budget expenditures, you know, the privatization schemes that have to be hastened because we need to have some cash. We have to sell some of our assets and things like that. It's an unfortunate situation that we never thought that Thailand would have to enter into this position.
ELIZABETH FARNSWORTH: Well, Mr. Deputy Prime Minister, thank you very much for being with us.
SUPACHAL PANITCSPAKDI: Thank you.