Post-crisis restructuring: Foreign ownership, corporate resistance and economic nationalism in thailand

Contemporary Southeast Asia

Volumn 26, Issue 1, 2004, Pages 45-72

  Dixon, Chris ^a  

^a LONDON METROPOLITAN UNIVERSITY   (United Kingdom)

Author keywords

[No Author keywords available]

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EID: 85120770498     PISSN: 0129797X     EISSN: None     Source Type: Journal    
DOI: 10.1355/CS26-1C     Document Type: Article

References (130)

1. See, for example, W. Bello, S. Cunningham, and Li Kheng Poh, A Siamese Tragedy: Development and Disintegration in Modern Thailand (Zed: London (1998); N. Bullard, "Taming the IMF: How the Asian Crisis Cracked the Washington Consensus", in Rethinking Development in East Asia: From Illusory Miracle to Economic Crisis, edited by P. Masina (Curzon: Richmond, 2002), pp. 149—51; N. Bullard, W. Bello, and H. Mallhotra, "Taming the Tigers: The IMF and the Asian Crisis", Third World Quarterly 19 (1998), pp. 525, 540; N. Bullard with W. Bello, and H. Mallhotra, "Taming the Tigers: The IMF and the Asian Crisis", in Tigers in Trouble: Financial Governance, Liberalisation and Crises in East Asia, edited by K.S. Jomo (Zed: London, 1998), pp. 121-24, 126-27; C. Dixon, "The Developmental Implications of the Pacific Asia Crisis", in Rethinking Development in East Asia, op. cit., pp. 102-103; C. Dixon, "The Developmental Implications of the Pacific Asian Crisis: The Thai Experience", Third World Quarterly 20 (1999), p. 449; R. Wade, and F. Veneroso, "The Asian Debt Crisis: The High Debt Model versus the Wall-Stieet-Treasury IMF Complex", New Left Review 228 (1998), pp. 3-23.
2. R. Dornbusch, "A Bailout Won't Do the Trick in Korea", Business Week, 8 December 1997, p. 26.
3. UNCTAD, World Investment Report: Cross-border Mergers and Acquisitions and Development (Geneva: UNCTAD, 2000); A. Mody, and Shoko Negishi, "Cross-border Mergers and Acquisitions in East Asia: Trends and Implications", Finance and Development 38, no. 1 (March 2000): 7.
4. M. Woo-Cummings, Economic Crisis and Corporate Reform in East Asia (Council on Foreign Relations, Washington, D. C, 2001), p. 1.
5. Mody and Negishi, "Cross-border Mergers and Acquisitions in East Asia: Trends and Implications", p. 7.
6. B. Gilley, "Buying Binge", Far Eastern Economic Review, 20 August 1998, pp. 42-44; Sender, H. "Few Takers So Far at Asia's Great Firesale", Far Eastern Economic Review, 5 March (1998), pp. 52-54; for a discussion, see Krugman, "Fire Sale FDI", , accessed 8 December 1998.
7. BangkokPost, 12 November 1997.
8. Bangkok Post, 23 February 1998.
9. P. Phongpaichit and Chris Baker, Thailand's Crisis (Singapore: ISEAS, 2000), p. 166.
10. 10However, the restrictions on ownership did not prevent significant amounts of foreign capital becoming established in a number of sectors, notably: motor vehicles and cycles, tyres, textiles, petroleum products, milk products, soft drinks and detergents. See C. Dixon, Thailand: Uneven Development and Internationalisation (Routledge: London, 1999), p. 107; KJ. Hewison, "The State and Capitalist Development in Thailand", in Southeast Asia: Essays in Political Change, edited by R. Higgott and R. Robison (London: Routledge Kegan Paul, 1985), p. 274; Akira Suehiro, Capital Accumulation in Thailand: 1855-1985 (Tokyo: Centre for East Asian Cultural Studies, 1989), p. 204. While foreign involvement in the Thai corporate sector was almost entirely based on minority holdings and joint undertakings of various sorts, the way these interlocked often gave greater levels of control than the level of ownership would suggest; this was particularly the case for Japanese investment (see: Hewison op. cit., pp. 273-74; K.J. Hewison, Bankers and Bureaucrats: Capital and the Role of the State in Thailand, Yale Centre for International and Area Studies Monograph no. 34 (New Haven: Yale University, 1989), p. 197; Somsak Tambunlertachai, Japanese and American Investment in Thailand's Manufacturing Industries (Tokyo: Institute of Developing Economies, 1977). In addition, Thai concerns tended to be heavily dependent on foreign technology, and expertise (see Dixon, Thailand: Uneven Development, p. 107). However, it should be stressed that that establishing the extent of foreign ownership is always extremely problematic and data on Thailand is particularly sparse (see Somsak Tambunlertachai, "Manufacturing", in The Thai Economy in Transition, edited by P. G. Warr (Cambridge: Cambridge University Press, 1993), p. 137.
11. 11Piyanuj Ratprasatporn and Kobkit Thienpreecha, "Foreign Investment in Thailand: Review of the Current Legislative Regime" (Bangkok: Tilleke and Gibbins International Limited, 2002), p. 2; pp. 15-19.
12. 12Foreign participation had been long banned from this sector — with the notable exception of American International Assurance, which operated under the 1966 Thai-US Treaty of Amity and Co-operation and came to dominate the life insurance sector with 50 per cent of the market share.
13. 13K. Jansen, External Finance in Thailand's Development: An Interpretation of Thailand's Growth Boom (London: Macmillan, 1997), pp. 147-88; Dixon, Thailand: Uneven Development, pp. 128-39.
14. 14See, for example, comments on productivity, costs and competitiveness in J. Glassman, "Economic Crisis in Asia: the case of Thailand", Economic Geography 77 (2001): 122-47.
15. 15World Bank, "Thailand Economic Monitor 2001", , accessed 10 July 2002, p. 8.
16. 16P. Brimble, and J. Sherman, "Mergers and Acquisitions in Thailand" (Geneva: UNCTAD, 1999).
17. 17Mody and Negishi, "Cross-border Mergers and Acquisitions in East Asia: Trends and Implications", pp. 6-7. In terms of sectors 22 were in industry, 17 in wholesale and retail, 2 in transport and 5 in utilities (ibid.; p. 7).
18. 18P. Brimble, "Foreign Direct Investment: Performance and Attraction: The Case of Thailand", paper presented at the Workshop on Foreign Direct Investment: Opportunities for and Challenges for Cambodia, Laos and Cambodia, Hanoi, 16-17 August 2002.
19. 19D. Nikomborirak and Somkiat Tangkitvanic, "Corporate Governance: The Challenge Facing the Thai Economy", in Corporate Governance in Asia: A Comparative Perspective (Paris: OECD, 2001), pp. 407-22, citation p. 411.
20. 20It should be noted that the figures for FDI refer to investment in foreign banks, the Bangkok International Banking Facility (BIBF) and Provincial International Banking Facility (PIBF) as well as Thai commercial banks, while Table 2 refers only to Thai commercial banks.
21. 21On the latter point see: P. Régnier, Small and Medium Enterprises in Distress: Thailand, the East Asian Crisis and Beyond (Aldershot: Gower/Ashgate, 2002); comments on banking in section 3.
22. 22Between 1998 and the end of 2001 foreign stakes were established in 13 of the 25 Thai registered life insurance concerns (Economist Intelligence Unit, Country Finance: Thailand, 2003, p. 16).
23. 23OECD Observer, "Corporate Governance in Asia", 22 April 2003.
24. 24EIU, Country Profile: Thailand (London: EIU, 2003), p. 40.
25. 25K. Hewison, "Thailand's Capitalism Before and After the Economic Crisis", in Politics and Markets in the Wake of the Asian Crisis, edited by R. Robison, M. Beeson, Kanishka Jayasuriya and Hyuk-Rae Kim (London: Routledge, 2000), p. 208.
26. 26On these recurrent crises see Ammar Siamwalla, "Picking up the Pieces: Bank and Corporate Restructuring in Post-1997 Thailand", paper presented at the Subregional Seminar on Financial and Corporate Sectors Restructuring in East and South-East Asia, Seoul, Korea, 30 May-1 June 2001, pp. 7-10.
27. 27K. Hewison, "Thailand's Capitalism: Development Through Boom and Bust", in Tiie Political Economy of South-East Asia, edited by G. Rodan, K. Hewison, and R. Robison (Oxford: Oxford University Press, 2001), pp. 71-103; Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 202.
28. 28Jansen, External Finance in Thailand's Development: An Interpretation of Thailand's Growth Boom, pp. 55-65.
29. 29RJ. Muscat, Thailand the Fifth Tiger: A Study of Thai Development Policy (Tokyo: United Nations University Press, 1994), pp. 113-17; Pasuk Phongpaichit and Chris Baker, Thailand: Economy and Society (Kuala Lumpur: Oxford University Press, 1995), p. 122.
30. 30P. Handley, "Politics and Business, 1987-96", in Political Change in Thailand: Democracy and Participation, edited by K. Hewison (London: Routledge, 1997), pp. 94-113, citation pp. 96-98.
31. 31Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 199; Phongpaichit and Baker, "Power in Transition: Thailand in the 1990s", in Hewison 1997, pp. 21-42; Phongpaichit and Baker (2002), pp. 170-72.
32. 32See, for example, Handley, "Politics and Business, 1987-96"; K. Hewison, "Of Regimes, States and Pluralities: Thai Politics Enters the 1990s", in Southeast Asia in the 1990s: Authoritarianism, Capitalism and Democracy, edited by K. Hewison, R. Robison, and R. Rodan (St Leonards: Allen and Unwin, 1993), pp. 177-80.
33. 33Cited Régnier, Small and Medium Enterprises in Distress: Thailand, the East Asian Crisis and Beyond, p. 43.
34. 34See: Naris Chaiyasoot, "Commercial Banking", in The Thai Economy in Transition, edited by P.G. Warr (Cambridge: Cambridge University Press, 1994), pp. 236-38; Muscat, Thailand the Fifth Tiger, pp. 113-17.
35. 35Hewison, "Thailand's Capitalism: Development Through Boom and Bust", p. 94.
36. 36Ibid.
37. 37Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 204; Phongpaichit and C. Baker, Thailand's Crisis (Singapore: ISEAS, 2000), p. 222; SET data accessed, 4 July 2003.
38. 38The restricted licence allows the issuing of cheques and provision of overdraft facilities after five years of operation — then effectively making it a commercial bank.
39. 39See, for example, Asian Wall Street Journal, 6 December 1997.
40. 40EIU, Country Finance: Thailand, 2003, p. 13.
41. 41Oxford Analytica, 20 February 2002.
42. 42Bangkok Post, 27 September 2002; 3 October 2002; 30 November 2002. The sale of shares reduced the state's percentage holding from 99.99 to 49.0, but 23 per cent were not taken up and were absorbed by the underwriters. The response to the sale was particularly disappointing given that the BankThai was regarded as one of the most attractive of the domestically controlled banks interns of levels of capitalization, NPLs and profit (Bangkok Post, 24 July 2002).
43. 43In August 2003 it was reported that the debt encumbered Thai Military Bank was negotiating with the ANZ Banking Group and the IFC for the sale of a 25-30 per cent interest. See EIU, Country Report: Thailand, August, EIU, London (2003), p. 33.
44. 44Importance of these linkages was brought out in the interview with Finance Minister Tarrin Nimmanahaeminda, published in the Far Eastern Economic Review, 4 November 1999, pp. 10-13, when he commented on the number of banking executives that were relatives, golf partners or frequent dinner guests.
45. 45Ibid.
46. 46Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 207.
47. 47Pasuk Pongphachit and Baker, Thailand's Crisis, pp. 221-22.
48. 48Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 207.
49. 49See Bhanupong Nidhiprabha and P. Warr, "Thailand's Experience with Reform in the Financial Sector", in Reform and Recovery in East Asia: The Role of the State and Economic Enterprise, edited by P. Drysdale (London: Routledge, 2000), p. 109; EIU, CountryFinance: Thailand 2002 (EIU: London); EIU, CountryFinance: Thailand, 2003 (EIU: London).
50. 50See, for example, comments by R. Tasker, "Banking: Powerful Partners", Far Eastern Economic Review, 2 September 1991, p. 47.
51. 51EIU, Country Finance: Thailand, 2002; EIU, Country Finance: Thailand, 2003.
52. 52Kasian Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand: The Resurgence of Economic Nationalism", Critical Asian Studies 34 (2002): 323-56, citation, p. 348, note 9.
53. 53For a general discussion of this see Wade and Veneroso, "The Asian Debt Crisis: The High Debt Model versus the Wall-Street-Treasury IMF Complex", pp. 3-23.
54. 54The average debt/equity ratio of Thai companies was between 2:1 and 3:1 before the crisis, by 2002 it had fallen to 1.5:1, as against the Western norm of 1:1. See Kasian Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand: The resurgence of economic nationalism", p. 325, citing: Wade and Venerasco, "The Asian Debt Crisis", pp. 3-23; Supat Tansathitikorn, "Defining Economic Self-sufficiency", The Nation, 26 November 1999.
55. 55Hewison, "Thailand's Capitalism", p. 203.
56. 56Woo-Cummings, Economic Crisis and Corporate Reform in East Asia, p. 1; World Bank, World Development Report 2002 (Washington: World Bank, 2002), pp. 55-74.
57. 57NCGC, No. 24, 2 April 2003.
58. 58See, for example, SEC, Enhancing Good Corporate Governance of Thai List Companies, SEC, Bangkok, 1999.
59. 59World Bank, Thailand Economic Monitor 2001, , accessed 10 July 2002, p. 26; World Bank Thailand economic monitor 2002, , accessed 10 March 2003, pp. 42-43; World Bank, Thailand Economic Monitor October 2003, , accessed 26 January 2004, pp. 13, 30-33; World Bank Thailand Economic Monitor 2002, , accessed 10 March 2003, pp. 42-43.
60. 60Deunden Nikomborirak and Somkiat Tangkitvanic, "Corporate Governance; the Challenge Facing the Thai Economy", p. 404.
61. 61Brimble, "Foreign Direct Investment: Performance and Attraction: The Case of Thailand", p. 20.
62. 62World Bank, Thailand Economic Monitor 2000, Washington, p. 19.
63. 63See for example, Crispin, S.W. "Serious Questions Over Bankruptcy Law", Far Eastern Economic Review, 4 September 2003, pp. 44-45.
64. 64Kanishka Jayasuriya and A. Rosser, "Economic Crisis and the Political Economy of Economic Liberalisation in South-East Asia", in The Political Economy of SouthEast Asia, edited by G. Rodan et al. (2002), p. 242.
65. 65World Bank, "Thailand Economic Monitor 2002", pp. 10-11, p. 40, pp. 42^3.
66. 66EIU, Country Profile 2001: Thailand, EIU, London p. 18.
67. 67Ibid., pp. 23-24; World Bank, "Thailand Economic Monitor 2002", pp. 33^3.
68. 68Webb, S., "Asia's Race to Consolidate", Far Eastern Economic Review, 13 June 2002, pp. 44-46, citation p. 45.
69. 69Bangkok Post, 1 July 2001; 4 January 2000.
70. 70S.W. Crispin, "Steel Deal", Far Eastern Economic Review, 15 August 2002, p. 43.
71. 71Ibid.
72. 72World Bank, "Thailand Economic Monitor 2002", p. 37.
73. 73Ibid., p. 35.
74. 74Kasian Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand: The Resurgence of Economic Nationalism", p. 329 refers to Sawat as the "infamous author" of Thai debtors "Three don'ts battle cry" — "don't pay interest, don't negotiate, don't run away". However, there is a long history of heavily indebted entrepreneurs fleeing the country to avoid their creditors. See, for example, Muscat, The Fifth Tiger, p. 259.
75. 75Crispin, op. cit.
76. 76Régnier, Small and Medium Enterprises in Distress, p. 95.
77. 77Muscat, The Fifth Tiger, p. 259.
78. 78See Tejapira, "Post-crisis Economic Impasse", pp. 329-30, citing Thanong Khanthong, "How to Staunch the Bleeding of Capital", The Nation, 21 November 2002.
79. 79On the later see the Economist, "South-East Asia's Problem Trio", 2 December 2000, pp. 93-94; Tejapira, "Post-crisis Economic Impasse", p. 325.
80. 80Cited by Nikomboriak and Tangkitvanic, "Corporate Governance", p. 412.
81. 81See comments in Ammar Siamwalla, "Picking up the Pieces: Bank and Corporate Restructuring in Post-1997 Thailand", pp. 6-7; Akira Suehiro, Capital Accumulation in Thailand: 1855-1985, p. 224.
82. 82Il Chnong Nam, Yeongjae Kang and Joon-Kyung Kim, "Comparative Corporate Governance Trends in Asia", in Corporate Governance in Asia: A Comparative Perspective (Paris: OECD, 2001), pp. 99-100.
83. 83See K. Richardson, "Bright Spots", Far Eastern Economic Review, 19 September 2002, pp. 42-43.
84. 84Ammar Siamwalla, cited by Crispin, S.W., "Election Trade-off", Far Eastern Economic Review, 28 December 2000, pp. 28-34.
85. 85Woo-Cummings. Economic Crisis and Corporate Reform in East Asia, p. 2.
86. 86Ibid., pp. 5-6.
87. 87Régnier, Small and Medium Enterprises in Distress, p. 17.
88. 88Ibid., pp. 103-48.
89. 89Jang-Sup Sin, "Restructuring After the Financial Crisis in South Korea: Corporate Reforms, Institutional Transition and Transitional Costs", Nordic Newsletter of Asian Studies (May 2002), p. 17.
90. 90Woo-Cummings, Economic Crisis and Corporate Reform in East Asia; Jang-Sup Sin, "Restructuring After the Financial Crisis", pp. 18, 31; Jang-Sup Sin and Ha-Joon Chang, Korea Inc. — Financial Crisis, Corporate Reform and Institutional Transition (London: Routledge, 2002).
91. 91See Phongpaichit and Baker, Thailand's Crisis, for some details of key debates.
92. 92Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand", pp. 323, 327.
93. 93Glassman, "Economic Crisis in Asia: The Case of Thailand", p. 141; Phongpaichit and Baker, Thailand's Crisis, pp. 140^1.
94. 94Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 206.
95. 95This was reinforced by views of the inept handling of the crisis by the New Aspiration-led government of Chavalit Yongchaiyudh. See N.A. Englehart, "Democracy and the Thai Middle Class: Globalisation, Modernisation and Constitutional Change", Asian Survey, 43 (2003): 271.
96. 96Crispin, "Election Trade-off", p. 29.
97. 97Ibid., p. 30.
98. 98There were also an increasing number of protests over issues that were not directly related to the crisis, notably rural poverty, the environment and dam building. For an overview of popular protests, see J. Glassman, "From Seattle (and Ubon) to Bangkok: The Scales of Resistance to Corporate Globalisation", Environment and Planning D: Society and Space 19 (2001): 517-24.
99. 99J. Glassman, Thailand at the Margins: Internationalization of the State, Uneven Industrial Development and the Transformation of Labour since World War II (Oxford: Oxford University Press, 2003).
100. 100Reported in the Far Eastern Economic Review, 27 December 1998, p. 13.
101. 101Bangkok Post, February 2, 1997. See Phongpaichit and Baker, Thailand's Crisis, p. 165, for a selection of similar statements.
102. 102Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand", pp. 331, 326.
103. 103The Nation, 24 November 2002, cited in Pasuk Phongpaichit and Baker, Thailand's Crisis, p. 59.
104. 104Crispin, "Election Trade-off", p. 32.
105. 105Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand", p. 330.
106. 106Glassman, "Economic Crisis in Asia", p. 142.
107. 107Glassman, Thailand at the Margins: Internationalization of the Wtate, Uneven Industrial Development and the Transformation of Labour since World War II, p. 267.
108. 108D. S. L. Jarvis, "Problems and Prospects in Thaksin's Thailand", Asian Survey 42 (2002): 298.
109. 109Ibid., p. 289.
110. 110S.W. Crispin, "Thaksin Turns Back Clock", Far Eastern Economic Review, 19 April 2002, p. 47; Jarvis, "Problems and Prospects in Thaksin's Thailand", p. 316.
111. 111Ibid., Far Eastern Economic Review, "Buy Thai Policy Goes Overboard", 10 May 2001, p. 10.
112. 112Cited EIU, Country Report: Thailand, May 2001, p. 20.
113. 113The dismissal of Chat Mongol Sonakul and his replacement by Pridiyathorn Davakula in May 2001, seemed to indicate the politicization of the appointment to the Directorship, with the new appointee being hand-picked by the Prime Minister. See Jarvis, "Problems and Prospects in Thaksin's Thailand", p. 312.
114. 114EIU, Country Profile 2001: Thailand, EIU, London, p. 27.
115. 115Glassman, "Thailand at the Margins", Bangkok Post, 12 January 2001; 3 May 2001; 26 January 2001.
116. 116See, for example, the Far Eastern Economic Review, executive surveys.
117. 117Jarvis, "Problems and Prospects in Thaksin's Thailand", p. 298. For an account of the Malaysian protection, see Khoo Boo Teik, "Economic Nationalism and its Discontents: Malaysian Political Economy After July 1997", in Politics and Markets in the Wake of the Asian Crisis, edited by K. Robison et al., pp. 212-37.
118. 118Bangkok Post, 30 January 2002.
119. 119Shin Corp, SET Company Profile, accessed 4 July 2003.
120. 120See comments by S.W. Crispin, "Thaksin at the Crossroads", Far Eastern Economic Review, 7 February 2002, pp. 18-22.
121. 121BangkokPost, 2 November, 2001.
122. 122Crispin, "Thaksin at the Crossroads", p. 18.
123. 123EIU, Country Report: Thailand, February 2003, p. 35; World Bank, "Thailand Economic Monitor", October 2003, p. 36; Foreign Relations, "PM lures Thai investors", 3, no. 1162, 15 December 2002, , accessed 7 March 2003.
124. 124Cited in Crispin, "Election Trade-off", p. 33.
125. 125Whether the growth of GDP and export earnings during 2002 and 2003 are indicative of the beginning of a sustained recovery remains debatable at the time of writing.
126. 126P. Krugman, "One in the Eye with American Pie", Rangkok Post, 17 February 2002; P. Krugman, "When Workers Help Themselves", Bangkok Post, 23 May 2000.
127. 127Mody and Negishi, "Cross-border Mergers and Acquisitions in East Asia", pp. 7-8.
128. 128Hewison, "Thailand's Capitalism Before and After the Economic Crisis", p. 194.
129. 129Tejapira, "Post-crisis Economic Impasse and Political Recovery in Thailand", p. 325.
130. 130This situation has combined with greater access to an increasingly diversified system of consumer credit to significantly expand the role of consumption in economic growth. See EIU, Country Finance: Thailand 2002; EIU, Countryfinance: Thailand 2003.