To adapt an old saying, central bank chiefs may leave their positions, but their hearts will always remain in central banking. Vijit served the Bank of Thailand for more than 30 years, and then became, like myself, chairman of the securities regulator. We first met when I was an economist at Bank Negara Malaysia and he was a rising star in the Bank of Thailand economics department, having become chief economist in 1972. At the time, ties between the neighbouring national banks were particularly close, thanks especially to excellent personal relations between the celebrated Bank Negara governor Ismail Mohd Ali (1962-1980) and his Thai counterparts Snoh Unakul (1976-1979) and Nukul Prachuabmoh (1979-1984). Indeed, Ismail knew the renowned Bank of Thailand chief Puey Ungphakorn (1959-1971), since both had studied at the London School of Economics.
From their friendship and mutual trust was born the Asean Swap Arrangements, first signed in 1977, when Vijit was assistant director of the banking department. That arrangement became the precursor to the Chiangmai Initiative to provide liquidity to Asean central banks in their efforts to sustain regional stability in financial markets.
Through our regular exchanges, Vijit and I became close friends because we shared similar backgrounds. Both of us were educated in England (he at Manchester University and later Yale for his Masters), and as policy-wonks shared a devotion to the technical issues of central banking and regional efforts to reform and restructure financial systems. From him, I learned the importance of strong communication with the other agencies of government, particularly in making sure that the central bank was closely engaged in policy formulation not just in the financial field, but also fiscal, social and international arenas.
Vijit belonged to the second generation of post-war Thai technocrats, following on from Governor Puey, who helped lay the foundation by launching the Bank of Thailand scholarship programme to send the best and brightest young Thai minds to study at prestigious institutions overseas. Vijit was among the first batch of students to benefit from a BoT scholarship, and one of the first among his cohort to become governor. The scholarship programme was to have far-reaching consequences for Thai bureaucracy, making Thai officials among the best-educated and international-minded in Southeast Asia. Even today, the Bank of Thailand is superbly equipped to debate policy issues with the best that Washington can offer.
The long period of technocrat-officials had a major influence on the growth of the Thai economy through the 1970 and ’80s, rivalled in tenure only by the so-called Berkeley group of US-educated officials boasted by Indonesia.
One tends to forget that Thailand achieved an average 10 per cent annual growth in the 1980s and moved during this period from a military-led government towards democratic politics. Vijit was fortunate to have stepped down in 1996, before the Asian financial crisis one year later. Although some observers criticised the launch of the Bangkok International Financial Facility in 1993 as opening a channel for capital inflows that triggered the crisis, the ideas embodied in financial liberalisation were mainstream thinking that pervaded both the region and the Washington Consensus of the International Monetary Fund and the World Bank.
To be fair, no one – including myself, then working at the World Bank – could have foreseen the dangers of volatile capital flows, the risks of fixed exchange rates and rise of financial derivatives (now called “weapons of mass destruction”). It was later analyses at the regional level by myself and others (“From Asian to Global Financial Crisis”, Cambridge University Press, 2009) that revealed that the capital flows originated not just from hedge funds, but from Japanese banks’ withdrawal from the region after their own banking problems.
In short, the Asian financial crisis featured internal financial fragilities, but also external and global weaknesses that were neither monitored
or fully understood.
As a friend, I could always count on Vijit to give me a frank and balanced assessment of regional and global conditions. A private person with a great sense of humour and irony when you got to know him, he understood how bureaucracy, business and politics functioned.
US political scientist Allen Hicken argues that Thailand’s political structure of coalition governments made up of multiple, factionalised parties presented enormous obstacles for would-be reformers. In the 1980s, there was an informal compromise between party politicians and technocratic reformers that enabled reforms that laid the foundation for the economic boom of the late 1980s and early ’90s. But these broke down and laid the foundations for later problems.
Vijit was always interested in education, and in 2003 he found time in his already busy schedule to take on duties as Dean of the Business School at Siam University, helping to educate many MBA students.
He was a wise, astute and insightful friend. I consulted him often on issues of central banking, securities markets and also how we could advance the deepening of Asian financial markets. Few in Asia could rival his profound understanding of how markets and business worked within the complex political and bureaucratic sphere. Our last meeting was a lunch date on the bank of the Chao Phraya, where we debated the failures of the 2007 Global Recession and how Asian public intellectuals should work together to formulate an alternative narrative to the Washington Consensus. In his modest way, he urged me to push that envelope.
I shall miss him, as will many of his former central bank and securities regulator friends. His legacy will stay in our memories as an important contributor to Asean and regional friendship and trust.
The Buddhist chanting ceremony for Vijit takes place daily from 6.30pm at Sala 12, Wat Phra Sri Manathat, Bang Khen until Sunday night.
Andrew Sheng was formerly with Bank Negara Malaysia, the Hong Kong Monetary Authority (1993-1998) and was chairman of the Hong Kong Securities and Futures Commission (1998-2005).
Published : February 14, 2018
By : Andrew Sheng Asia News Network