Lessons learnt the hard way
Time flies. Exactly 16 years have passed since the day the Thai baht was no longer pegged to the US dollar, thus allowing it to move according to its own economic fundamentals. With a huge current account deficit against little foreign income, the baht pl
Many suffered in the tumultuous years that followed. In contrast to the foreign exchange rate, the unemployment rate shot up to a historical high for the country of 4.5 per cent. Fortunately, the huge agricultural sector could absorb a large number of workers. In 1997, tens of thousands of white-collar workers were laid off when 56 financial houses were shut down. A number of banks had to merge as non-performing loans shot up to nearly 50 per cent.
Years of hardship finally ended and it seemed we learnt lessons the hard way from the crisis. Several individuals were in the spotlight thanks to their return from the abyss. Among them was Thitinart Na Pattalung. At 20, she held two master’s degrees in economics, and management and business administration from the University of London. She went into business for herself at 25, but tragically lost her husband at 27 when her son was only eight months old. In addition to that crisis, she shouldered massive liabilities from businesses she and her husband had set up together. Her bestselling books “Kem-Tid-Chee-Wit” (the “Compass of Life” I and II) sold like hot cakes, as many wanted to know how she had saved herself.
Sirivat Voravetvuthikun was another. After graduating from the University of Texas at Austin in 1974, he worked in the finance and securities industry for 16 years. In 1990, he started his own business, investing in the stock market for individual clients. All gains were wiped out when the market crashed. His condominium project also collapsed. He lost all his money. A sandwich business was started with help from his employees. Earning Bt500 on the first day, his business is now established with booths at office buildings and hospitals. Sirivat today has returned to the stock market, but as a cautious investor.
Many other individuals remember the pain of those days and have learnt not to forget. A post on Pantip.com (http://topicstock.pantip.com/silom/topicstock/2012/08/B12469889/B12469889.html) tells another businessman’s story. Most of his clients went bankrupt at that time. He spent days collecting debts, only to recover enough to cover interest expenses. He realised that his business had huge assets, but as they could not be turned into cash quickly, they were just liabilities. Now, he has learnt to trust cash more than credit.
Many workers with degrees were left without work, some with roots in provinces. They started small projects cashing in on global trends, and “organic products” then became a buzzword.
Because of the crisis, bank executives have become more cautious. Thailand’s credit market once again matches the country’s GDP, but the financial system’s NPLs are in the extra low level, below 5 per cent. Meanwhile, the capital base is nearly 20 per cent, more that twice the pre-1997 level.
We have learnt well from the repercussions of a wrong foreign exchange policy. It is up to us to learn from others what a wrong fiscal policy could lead the Kingdom to.
In an interconnected world, Thailand just can’t be isolated. Years of low rates in the US, which spurred excessive consumption, resulted in the 2008 financial crisis and the huge injection of printed money that has now reached nearly $4 trillion. That cash injection has “benefited” many countries including Thailand and China, which has emerged as our main trade partner. Just a sign that the cash injection may be scaled down could send a big shockwave.
On the 16th anniversary of the baht’s devaluation, we could experience that shockwave in a hard way. From extreme optimism on the back of huge capital inflows, pessimism could seep in as huge foreign capital flows out. Our financial markets suffer the most and exporters are next. Individuals have to seek advice on how to protect their little wealth. Stock analysts have to scramble for reasons to explain why the market rose today and fell the next day.
It meant a lot when I heard that one of my news sources was about to get married. Working in the financial market, he admitted that the past weeks had been extremely hectic and he had no time to prepare for the wedding this week. Yet, he sounded happy and excited about the wedding.
Yes, we know that things will never be as simple as in the past. But what can we do but to live, learn and pray that our future path will be smooth.
