Note: Remarks as prepared for delivery
Excellencies, Distinguished Guests, Ladies and Gentlemen,
I would like to thank the Council on Foreign Relations and the Asia Society, for hosting this reception. I also would like to thank all the distinguished guests for honoring me and my delegation with your presence here this evening.
I am very delighted to be back in the United States, back to a great country that has always held a special place in the hearts of the Thai people.
Ours is a friendship which goes back 165 years, back to 1833 when Siam became the first Asian country to establish diplomatic ties with America. It is a friendship which has withstood the challenges of time, distance and differences. It is a friendship which, over the years, has become a partnership for peace and prosperity. And, I am proud to say, it is a friendship which is now based upon a growing convergence of values, especially those related to democracy, freedom, social justice and the rule of law.
Excellencies, Ladies and Gentlemen,
Last year has seen a dramatic reversal of East Asia’s fortune. In the space of a few months, many of the region’s “miracle” economies became embedded in crisis or near-crisis situations. Almost overnight, optimism was replaced by prophecies of doom.
Unfortunately Thailand was the first country to experience this reversal of fortune. And presently, we are going through a very difficult period of adjustments.
But from day one of my present government, I have insisted that responsibility is the key. I have insisted that we must be brave enough, courageous enough, to face up to our responsibilities. We must know what we did wrong, and we must seek to put things right. Nor can we put things right, if we do not help ourselves first and only expect others to help us.
Excellencies, Ladies and Gentlemen,
What went wrong?
During the period of rapid economic growth, we were too complacent. In the good times, we forgot many important truths and neglected many important tasks:
- We opened up our economy, but our stated plans to pursue discipline were not followed up;
- We attracted massive flows of cheap foreign capital, which we did not always spend or invest with enough prudence in spite of our original plans to channel funds to productive investments;
- We created wealth but were perhaps negligent in creating competitiveness;
- We were successful in our economic performance, so much so that we did not examine the fundamentals of our politics and governance or tackle issues such as bureaucratic inefficiency, lack of transparency and lack of accountability;
- We became a part of the globalised world and felt proud to belong to the twenty-first century, while much of our law and governance and many of our instruments for macro-economic, financial and business management are waiting to be modified, modernised, and upgraded to international standards and practices.
There is immunity in success. As long as we continued to succeed, this complacency could go unpunished. But once the cracks appeared, we compounded the mistakes by committing much of our fiscal reserve to shore up insolvent finance companies and our foreign currency reserve to defend the baht. Naturally, we were quickly and severely disciplined by the market.
Excellencies, Ladies and Gentlemen,
When my Government took office just over four months ago, my colleagues and I were fully aware of what we were up against. Yet we never felt that our cause was hopeless.
We knew that there was much that was right and still is with our country: constitutional monarchy; democracy; free press; social stability; a strong and competitive agricultural sector making us one of the world’s five net exporters of food; a very large pool of experienced managerial talents and potentially dynamic entrepreneurship; an adaptable and hard working labour force; a good natural resource base; and networks of friends and partners both in the region and beyond.
And we knew that there are very few things in life which hard work and honesty cannot accomplish.
Of course, we are not the best judges of our own performance. But I honestly feel that, in the last four months, we have moved in the right direction.
Our relationship with the International Monetary Fund is key to the revival of market confidence and economic recovery. We see commitment, consultation and transparency as the cornerstones of this relationship.
We have fully met the IMF’s requirements to strengthen our fiscal, monetary and financial discipline, by making the tough decisions to reduce our expenditure, to raise taxes, and to close more than half of all our finance companies. Preparations are also underway for the further recapitalisation and regulation of the financial and banking sectors, as agreed upon. In some areas, notably on reducing the current account deficit, we have even exceeded the set targets. The Finance Minister has kept the IMF fully informed of our progress, providing its officials with all the necessary facts and figures. On the basis of such consultation, the IMF has only last week approved our third Letter of Intent, which outlines modifications of budgetary and other provisions to make them more consistent with changing domestic and regional realities.
Knowing that these reforms entail a painful adjustment process and that these reforms, together with the economic downturn, will have adverse social impacts, my Government has also worked closely with the World Bank, the Asian Development Bank and other institutions to strengthen our existing social safety nets. Measures include a number of provisions for extensive retraining and retooling programmes. With unemployment certain to rise in the short term, we can not depend only upon the cushion provided by our traditional extended family networks and the absorptive capacity of the agricultural sector. Special consideration has therefore been given to the poor, the unemployed, and the disadvantaged.
Reform is not only a matter of commitment to the IMF’s conditions. It is also for our own good in the longer term. To this end, we have been making extensive preparations for strengthening and modernising the legal and institutional fundamentals of our economic development. A number of legislations are being processed. The new bankruptcy bill has recently been approved by parliament and we are expediting bills on other issues, ranging from better foreclosure procedures to the fight against money-laundering and to the amendment of the alien business law to make Thailand an easier place to do business. A massive privatisation of state enterprises is also being accelerated. Moreover, plans are being implemented to upgrade accounting practices and instruments for the supervision and regulation of the financial and banking sectors to international standards.
The most crucial component of reform is, of course, political reform. Clean politics is wise politics.
It enables the country to avoid costly mistakes and to revive and sustain market confidence. We believe that good governance, greater transparency, greater accountability, and greater popular participation in public affairs are necessary to bring about, not only economic recovery in the short term, but also stronger, more stable economic growth in the longer term. And while we may not be able to make every one equally rich and prosperous, we can and must provide every one with equal rights and opportunities, especially before the law. To this end, my Government is going full steam ahead with the process of political reform, which had been started by the passing of the new Constitution in October 1997. By this year’s end, substantial progress will have been made in all the draft laws required by the Constitution.
Excellencies, Ladies and Gentlemen,
Yes, I believe we are moving in the right direction. But reform, rejuvenation and recovery will take time to complete. A great deal remains to be done. At this juncture, the immediate priorities must be further stabilising the Baht, creating liquidity for the private sector, increasing foreign exchange earnings, and caring for the poor and unemployed.
And yes, we must go on doing all we can to help ourselves. For, as I said before, we must have the courage to face up to our responsibilities.
However, it is a fact of life that, in the globalised world we live in, the fates of nations, the fortunes of societies, are inter-dependent. No country can determine its own destiny entirely.
We will do our best, but our best may not be good enough, if our friends, partners and allies do not lend a helping hand.
We need time and space, time and space to work our-selves out of the present crisis and to become once more a contributing force to global prosperity, time and space which only our creditors can give us.
We need from potential investors honest and informed appraisals of our present and prospective performance, not those based upon hearsay and emotions.
We need support for retraining and retooling our labour force, so that the economic and human costs of the present crisis can be kept in bound.
We need assistance, so that we ourselves can lend a helping hand to those who suffer most from the present crisis-the poor, the unemployed, the less educated.
And we need all members of the international community, especially members of the G7/G8 who represent much of the world’s economic might, to look long and hard at all the existing global systems, so that they can be reformed and rejuvenated where necessary to ensure that the new growth cycle will be equitable and sustained.
Excellencies, Ladies and Gentlemen,
To a certain extent, countries in the Southeast Asian region have learnt their hard lessons from the current crisis. The so-called ‘penalties of capitalism’ have already taken their toll. They are going through an adjustment process. However, their fundamentals are still relatively strong. I believe that eventually all of them will bounce back—although at different paces, in slightly different ways, according to their respective sets of circumstances. They are all determined to cross over these “troubled waters” by accepting great pains and sacrifices. They deserve your sympathy, your support and your respect.
It is my hope that East Asia’s financial and economic crises do not spread to other parts of the world, as they will surely do if left untreated. The world is too inter-dependent for any one to remain immune forever.
It is my hope that the international community will use these crises as an opportunity to learn, to gain valuable experiences, and to make preparations to make sure that such tragedies will never happen again so that liberalisation, which I firmly believe to be the right path, can proceed in countries like Thailand in consonance with global trends.
It is also my hope that our friends and partners will assist us during this critical period of economic adjustment, building upon the momentum we have already started as we turn the comer.
We in Thailand will play our part in the making of a better world.
We are confident that we can do so.
One of history’s greatest statesmen once said, and I quote, ‘The future is not for parties playing politics ... We are witnessing a renaissance of public spirit, a reawakening of sober public opinion, a revival of the power of the people, the beginning of an age of thoughtful reconstruction ... With the new age, we shall show a new spirit.’
The statesman was President Woodrow Wilson. The year was 1910. The country referred to was America.
Excellencies, Ladies and Gentlemen,
I also believe that President Wilson could have been talking about Thailand in 1998.
His Excellency Mr. Chuan Leekpai
Prime Minister of Thailand
March 11, 1998
Question & Answer Session:
George Soros, Presider: If I may use the privilege of the chair and ask the first question. What concrete objectives do you hope to accomplish during your visit to the States?
Prime Minister Chuan Leekpai: Well, one of my objectives of the visit in the business area is to inform the business community of America of the reality of the situation in Thailand. The decision to invest in Thailand is yours to make, the decision to engage in Thailand is yours to make, but we are here to tell you the truth both bad and good. We in Thailand regard ourselves as close to the American people, having a long relationship not only based on the 165 years that I have mentioned.
Looking back over the long history of our relationship we can see that we have been through many crisis together, we have stood shoulder to shoulder going through many trying times together. In fact, the king of Thailand offered to send elephants to help you during your Civil War. During times of war, of tension in Asia, times of war in Southeast Asia, and in particular the war in Indochina, if you may recall, the Thai people stood with you and with your soldiers who fought there. After the Cold War there was a lessening of tensions but certainly our trading relationship continued to strengthen. The United States remains Thailand’s second-largest trading partner after Japan. We still look forward to and we still need American investors to go to invest in Thailand, American businessmen to go to do business in Thailand.
In the political arena we feel that there has been some distance from Thailand among the American politicians. We would also like to have the politicians who are in Congress to fully understand the reality of the situation in Thailand. And I would like to see my fellow politicians in the American Congress feel a sense of closeness and be as close to Thailand as they were before in the past.
On the administrative side, since I am here at the invitation of the president I would also like to have frank talks with administration members to create a similar understand. Not only bilateral issues but also regional issues that affect all of us. And certainly I have some particular points that I would raise with the president. Especially, I don’t have the money to buy the F-18s.
Questioner: Excellency, given the contagion factor among the troubled Southeast Asian economies and that the full recovery of each is effected by the recovery of all, I wonder if you would comment on the current confrontation between the IMF and Indonesia.
Prime Minister Chuan Leekpai: Certainly when there is a situation of crisis in one country it will have an impact upon other countries. To what extent, whether it will be greater or lesser in extent will depend upon the linkages of those countries. When the crisis occurred in Thailand, in South Korea, it was I who told President Clinton in Vancouver at the APEC meeting that the crisis in Asia has the potential to effect other regions as well. I informed the president of this because the reality of our age is that of globalization of trade. It is my assessment that trade is interdependent. The U.S. trades with Asia, the U.S. buys a lot from Asia, and Asians buy a lot from the United States. Purchasing power is an important factor. Purchasing power in Asia has now been reduced and we are therefore less able to buy American goods. At the same time, there is a possibility of Asian goods flowing even in greater quantities into the United States.
Certainly the situation in Indonesia has the potential to impact upon other countries whether it be to a lesser or greater extent in various countries. However, the situation, the crisis in Thailand, in Indonesia, in South Korea has differing fundamentals, differing characteristics, and, therefore, the solution to them has to differ in each country. Indonesia deserves our sympathy and our understanding. The country has special characteristics. Apart from the 204 million people in Indonesia, they also have 10,000 islands scattered across their country. Therefore, the living conditions of the people in that country differ from that in the United States and even from that in Thailand. Nevertheless, in my estimation there are no other alternative resources of funds that would be able to assist Indonesia apart from that available to the IMF. Therefore, in our assessment it is essential for the IMF to assist Indonesia. And, at the same time, it is essential for Indonesia to receive and to welcome IMF support. In the Thai experience when we received support from the IMF there was a school of thought that this should lead to the end of the problem, that this was the solution in itself. But that was a misunderstanding because problems cannot be resolved overnight. When we entered the IMF program it was only the beginning of the solution.
Questioner: Excellency, what is your reasonable expectation of time to recovery and what, if any, specific actions would you like the American government to take? If Mr. Soros would also comment on this.
Prime Minister Chuan Leekpai: Well, in the short and straightforward answer if we owe you something can you extend the terms of payment? I can guarantee you that you will be repaid but in the short term we have a liquidity problem which we have to overcome. Recovery cannot be accomplished overnight but I strongly believe that with the strong economic fundamentals of Thailand we will be back.
Questioner: Mr. Prime Minister, I don’t think I’m alone tonight in admiring the candor and precision of your message and also to say how many friends Thailand has in this country. But if you could take a bit deeper into your remarks and give us your judgment as to what steps you think the G-7 can take now to begin to deal with the volatility of flows of private funds in the international market place?
Prime Minister Chuan Leekpai: I believe the major economic powers, the G-, have an important role to play because they are the major creditors of the countries in crisis. And those countries, the G-7 countries, could serve as important markets for the countries in crisis. For example, if Japan were to open its markets more it would have an important effect on the resolution of the crisis in the affected countries. As a concrete example, in the case of Germany, we owe them debt for armaments that we have purchased from them. They have agreed to roll over this debt without interest for a period of two years. This has helped the short-term liquidity problem in Thailand. In some way I believe they can help by helping us to help ourselves. Not to help by giving us just a one time financial assistance.
Another concrete example would be the Thai students who are currently studying here in the United States, the number of which is above 13,000, the expenses that they have to pay for, that have to be sent to them by their families from Thailand is more than double now with the depreciation of the baht and therefore some assistance has to be given to them. And I understand the U.S. government is trying now to find ways and means to help these students in the United States. And I take this opportunity to thank the American people for their assistance on behalf of the Thai students here.
Questioner: The Japanese government has floated the idea of establishing an Asian currency zone somehow linked to the yen. I wonder how your government feels about this proposal?
Prime Minister Chuan Leekpai: Well, I think the person who proposed it is my minister of finance. Which I don’t think is that different from the attempt by the European countries to set up their own currency, the Euro. But in practice it might be a bit harder. What can be done at this time perhaps would be for the use of national currencies, local currencies, the yen could become a more important factor in debt and payment for exports and imports. But I still believe that the world is in love with the U.S. dollar and if that is the case I have confidence in the U.S. dollar. As for other countries, you can think about it, you can float it, but I don’t think at this time it will fly. Thailand and Malaysia have also discussed ways to make more extended use of local currencies, both our currencies have depreciated . . . [sound drops out] . . . it’s a way for us to utilize local currencies in the trade among ourselves. And my deputy prime minister in charge of economic affairs is studying this matter very closely.
Questioner: Your excellency, when people suffer the kind of privations that they now are suffering in these countries, particularly yours, of low employment, of economic dislocations, historically we’ve seen political upheavals accompany that. Is there a possibility of or fear of political upheaval in your country or any of the countries neighboring you?
Prime Minister Chuan Leekpai: For Thailand even though we are undergoing an economic crisis we have a strong agricultural sector which can produce enough food so therefore I don’t believe that we will be undergoing privations in the area of food. One of the outstanding features of Asia is that of the extending family network. So, therefore there is some comfort in that regard that family members will not neglect one another, they will not discard one another in times of need. So, therefore we will not see massive numbers of people going homeless even though their own situation is poor. So, therefore I believe that even in the midst of the economic crisis in Thailand there will be hardship but I don’t believe unemployment will be so massive as to create social instability or unrest. And, in addition, the World Bank and the Asian Development Bank realize the importance of this issue and they have approved loans for the Thai government to take care of this issue.
Questioner: Your excellency, I was in Thailand last summer at a conference sponsored by the USIA where I met some very brilliant economists who were then in opposition. I complement you on your taste because the most brilliant of these now seem to be in your government. They really made a deep impression. But I would like to follow up that last question a bit more specifically and ask how many people do you think will be unemployed in Thailand as the crisis in the real economy peaks and how much money does it look like there will be available for unemployment relief and other similar measures?
Prime Minister Chuan Leekpai: The figures for unemployment for Thailand are not as clear as they are in industrialized countries because there is another type of unemployment in Thailand, those who are unemployed after they are finished harvesting their crops. During the off-season they will also be regarded as unemployed. Nevertheless, the World Bank and IMF has estimated that during the second and third quarter of this year when the economy is slackening and there is a negative growth unemployment could be in the range of 1.5 to 2 million. The government is taking preventive measures. First, to assist business to continue to conduct business, to give them better liquidity so that they do not have to lay off workers. But in the case that they are laid off, they are unemployed, then we are preparing remedial measures such as retraining, finding new jobs for them, taking them back to the agricultural sector from which most of them originally came. Thailand has a total population of 60 million.
Questioner: Mr. Prime Minister, you are a legal expert. You mentioned law reform. You know foreign investors prefer a secure legal environment. Could you say something about reform of the court system in Thailand?
Prime Minister Chuan Leekpai: Thailand uses a system of written and codified laws. I have to admit that many chapters of our economic laws are now outdated. We are in the midst of revising those economic laws. For example, the Bankruptcy Act was passed by Parliament just two weeks ago. And there are other laws such as the so-called Alien Business Law that my deputy prime minister is now in the process of modifying and altering. And other processes, regulations are also being modified and updated, for example, those pertaining to accountants.
In summary, there are still outdated laws which pose an obstacle to doing business in Thailand but we are in the process of amending them, altering them to make them conform to international standards. But on the whole our legal system is in consonance, with international influences. We have received influences from developed countries in the formation of our laws and many of our legal experts, and lawyers and judges have been trained in the United States and in Europe at the beginning.
George Soros: There are many more questions but unfortunately our time has run out so it remains to me to thank the prime minister for his frank and enlightening remarks. Thank you very much.