FOCUS on APEC
____________________________________________________________________
FOCUS-ON-TRADE NUMBER 17
SPECIAL ISSUE – CURRENCY TURMOIL IN SOUTHEAST ASIA
A regular bulletin produced by Focus on the Global South (FOCUS)
Bangkok, Thailand
Number 17, August 1997
Focus-on-Trade continues, under a new name, the electronic bulletin
formerly known as Focus-on-APEC. The new name reflects the expansion
of the concerns of Focus on the Global South to trade forum and
organisations beyond APEC, including the World Trade Organisation
(WTO) and the ASEAN Free Trade Area (AFTA).
Focus-on-Trade contains updates on trends in world trade, but its
emphasis will be analysis of these trends from an integrative,
interdisciplinary viewpoint that is sensitive not only to economic
issues, but also to ecological, political, gender and social issues
related to developments in world trade.
Your contributions and comments are welcome. Please contact us c/o
CUSRI, Wisit Prachuabmoh Building, Chulalongkorn University, Bangkok
10330 Thailand. Tel: (66 2) 218 7363/7364/7365, Fax: (66 2) 255 9976,
E-Mail: admin@focusweb.org, Website: http://focusweb.org
Focus on the Global South is an autonomous programme of policy
research and action of the Chulalongkorn University Social research
Institute (CUSRI) based in Bangkok.
______________________________________________________________________
SPECIAL ISSUE ONTHE CURRENCY TURMOIL IN SOUTHEAST ASIA
Part 1
Siamese Twins: the Currency Crisis in Thailand and the
Philippines, by Walden Bello
Don’t Blame Soros for Currency Woes, The Nation, Bangkok
Part 2
The end of the ‘South East Asian Miracle’? by Walden Bello
———————————————————————
Siamese Twins: The Currency Crisis in Thailand and the Philippines
by Walden Bello*
The peso has stabilized. The economy is back on course. The trade
deficit is under control, and the projected GDP growth rate of 7 per
cent will be achieved. People in the Philippines are today being
bombarded with these reassuring statements from President Fidel Ramos
and his economic team in the wake of the July 11 de facto devaluation
of the peso, which followed on the heels of the depreciation of the
Thai baht over a week earlier.
Most important of all, Mr. Ramos and his advisers tell Filipinos, the
Philippines is definitely not Thailand–that the so- called
“fundamentals” of the two countries are different.
The likelihood, however, is that the peso will continue to be
subjected to speculative attacks that will continue to drag its value
down, with all the consequences of this development in the form of
higher inflation, a lower growth rate, and deterioration of the
country’s external accounts. Indeed, in a few months’ time, it will
be de rigeur for a candidate in the country’s coming presidential
elections in 1998–be it Ramos’ anointed one or a challenger–to run
against the Ramos economic record rather than on a “continuist”
platform.
Why? Because both the short-term indicators, on which foreign
investors and speculators base their moves, as well as the
“fundamentals” which determine whether the economy will remain on a
steady growth path, point the wrong way.
Sensitive Indicators Point the Wrong Way
The two most sensitive indicators that investors and speculators look
at are the trade deficit and the current account deficit, which, among
other things, indicate if a country has the capacity to pay for its
imports and service its foreign debt. The trade deficit in 1996
stood at $12.8 billion, or a doubling in just three years! And owing
to the higher prices of key imports, such as electronic components, it
is unlikely that the net effect of the recent depreciation will be a
reduction from the pre-peso-float projection of $14.6 billion in 1997.
But not to worry, say Philippine government analysts. The current
account balance, which brings to bear on the positive side of the
ledger the remittances from the Philippines’ vast army of overseas
workers, is manageable; and the current account is, more than the
trade deficit, what foreign investors, analysts, and speculators look
at in assessing the strength of the peso. But even if one were to
grant this argument, things look shaky. In 1996, according to
estimates based on official figures, the current account deficit of
$3.5 billion stood at 4 per cent of GNP. Worrisome but not alarming,
say some.
However, when one tightens up the methodology for calculating the
figure to account for unexplained errors and omissions in the balance
of payments, as one prescient HG Asia study did last year, one comes
up with realisation that the real current account deficit is around 7
per cent of GNP– or uncomfortably close to the eight per cent deficit
experienced by Mexico and Thailand before their economic meltdowns
began. With a deficit of that size, the pressure increases on
economic managers to close the deficit by devaluing the currency
relative to the dollar, thus making the country’s exports more
competitive in dollar terms.
It was the uneasiness in foreign investor circles over the strong
possibility of a devaluation that fostered the climate of uncertainty
that invited the attacks on the peso from speculators, fund managers,
and investors. The crisis of the baht in neighbouring Thailand was
simply the match that lit a volatile situation.
Siamese Twins
The perceived weakness of the Philippine currency, however, springs
from more than just the current account deficit. The weak peso is a
sign of the growing lack of confidence among foreign investors in the
country’s economic “fundamentals,” to use a word much in vogue in
financial circles. It is a symptom of a larger problem, and that is
the current foreign capital-driven model of growth followed by the
Ramos administration.
This is, of course, the Thai model of development, and while
officials in Manila deny the comparison at every opportunity, in
fact, the Philippines has followed closely on the footsteps of its
Southeast Asian neighbour. Indeed, to use a particularly appropriate
metaphor, the two are Siamese twins.
The Thai path was to drive high-speed growth through the massive
infusion of foreign capital. The Thais’ special target was the
massive pool of institutional funds circling the globe in search of
profitable investment outlets, which has increased in exponentially in
the last decade. Their formula was simple: 1) liberalise rules
governing the entry of foreign capital, including allowing the
lending of dollars onshore; 2) set local interest rates high in order
to attract foreign money; and 3) ensure foreign investors against
currency risks by pegging the baht to the dollar at a stable rate of
exchange of around 25 baht to the dollar.
The formula was disturbingly similar to that followed by Mexico prior
to the December 1994 crash. And, as in Mexico, the scheme was
immensely successful in attracting foreign capital. Thailand became
the favourite Asian destination of foreign investment, with its
offshore lending institution, the Bangkok International Banking
Facility attracting over $50 billion in scarcely three years since it
was launched in the early 1990’s.
Following the Thais, the Philippine government eliminated foreign
exchange restrictions and liberalised foreign capital entry by among
other measures, opening up the banking system to the participation of
12 foreign banks.
Like the Thais, the Ramos administration pegged the peso to the
dollar at a stable rate of exchange of around P26.50 to the dollar to
eliminate currency risk for foreign investors in the stock market and
local recipients of dollar loans, so that for the whole of 1996, for
instance, there was only a two percent fluctuation in the peso-dollar
rate.
Like the Bank of Thailand, the policy of the Philippine Central Bank
(BSP) was to keep local interest rates high–some 12 to 15 per
cent–in order to suck in foreign capital. This could then be relent
in dollars to local businesses at much less than the local interest
rate that governed peso loans.
And like Thailand, the Philippines enjoyed a rapid infusion of foreign
investment, with some $9.4 billion coming in 1996 alone. Some 75 to
80 per cent of that investment, according to some estimates, was not
foreign direct investment– which is considered more secure because of
a longer-term commitment–but portfolio investment seeking quick and
high returns in the stock market or the bond market.
The Glut
Not surprisingly, a great part of this hot capital went into
speculation in the stock market or into real estate and financial
services, like auto loans and credit cards, instead of productive
areas like agriculture and manufacturing. Real estate loans in
Thailand were estimated by the Bank of Thailand at 10 per cent of the
total exposure of banks and 20 per cent that of finance companies, but
most experts discounted these figures as gross underestimates.
According to some calculations, property-related loans accounted for
50 per cent of all investment, and property development in all its
aspects contributed some 30 to 50 per cent of annual growth of the
gross domestic product.
In the early 1990’s, the building cranes dotting the Bangkok
landscape were a sign of the boom. By 1996, they were a sign of
doom, as developers were stuck with unsold housing units totalling
about $20 billion in Bangkok. By 1997, half of the loans made to
developers were non-performing, some of the country’s top financial
companies were bankrupt, and the credit rating of some of the
country’s biggest banks were downgraded by Standard and Poor.
These developments triggered a deflation of foreign investor
confidence; and the move of fund managers to convert their baht into
dollars and get the hell out of Thailand formed the context for the
speculative attacks on the baht in the last few months.
The same search for quick and easy profits drove foreign capital to
real estate, financial services, and financial institutions in the
Philippines, with the exposure of commercial banks in these sectors
coming to 21 per cent of total loans by 1996. The BSP claims that
real estate loans account for only 9.2 per cent of outstanding loans,
a figure doubted by many experts, who place the figure at more around
15 to 25 per cent. Indeed, the Central Bank’s recent move to restrict
real estate loans to the dangerously high figure 20 per cent of
banks’ loan portfolios–instead of a safer 10 per cent limit –is an
admission that many banks are nearing or have breached the 20 per
cent mark.
In any case, the building boom that began in 1994 paralleled the one
in Bangkok that took place several years earlier, with the same
results: overextended, highly indebted developers such as Megaworld,
which nearly went under last April, and an oversupply of property
units. The issue is no longer whether there will be a glut. It is
how big it will be. All Asia, one local investment house, predicts
that, owing to overbuilding, by the year 2000, supply of high rise
residential units will exceed demand by 211 per cent, while supply of
commercial developments will outpace demand by 142 per cent.
Some local developers say that they are aware of the coming glut, so
they are diversifying away from residential and commercial
construction by building golf courses and tourist resorts!
Productive Sectors Stagnate
As the property sector has moved to a bust, the truly productive
sectors of the economy have stagnated in both countries. Drawn by the
lure of easy money, many Thai manufacturers have gambled on real
estate instead of investing in skills-upgrading and new machinery,
leading to a decline in the competitiveness of the country’s exports.
Export growth was zero in 1996.
In the case of the Philippines, manufacturing is on a downspin, as is
agriculture, as the radical liberalization of trade and investment
regulations that have paralleled financial liberalization are making
production less and less profitable for domestic producers. Duty free
shops are flooding the country with cheap imported manufactures, and
cheap, subsidised rice and corn imports are coming in volumes that far
outstrip the minimum access volumes that the government committed
itself to under the GATT-WTO.
Thailand is now experiencing economic meltdown, with the country is
moving into its first recession in more than 10 years. Some true
believers in the Philippine economic miracle still believe that the
Philippine-Bangkok comparison is false because the Philippines is in
an early growth phase while Thailand, having had a decade of rapid
growth, is naturally tapering off. But the foreign fund managers that
drive your economy couldn’t care less if you are in an early or late
phase of the growth process. If they lose confidence, as they have in
Thailand and are in the process of doing so in the Philippine version
of the Thailand model of development, they will bolt.
Philippine economic managers should have learned from the bursting of
the bubble economy in Mexico in 1994 that relying on massive capital
inflows to drive growth is a surefire way to disaster. But even as
their model unravels next door, Philippine technocrats are drawing
the wrong lessons, trying to highlight marginal differences between
Thailand and the Philippines in an effort to assure foreign capital
that the latter’s “fundamentals” are okay.
It won’t work.
*Walden Bello is co-director of Focus on the Global South, a program
of policy research of Chulalongkorn University in Bangkok, and a
professor of sociology and public administration at the University of
the Philippines. He is the author of several books on Asian
development. He is currently a book on Thailand’s economic
development, A Siamese Paradox: Development and Degradation in Modern
Thailand.
———————————————————————-
Blaming Soros is no solution to currency woes
Editorial, The Nation, Bangkok, 26 July 1997
Billionaire speculator and quaint pro-capitalist democracy supporter
George Soros does see eye to eye with Malaysian Prime Minister
Mahathir Mohamad on one particular issue. For years, Mahathir has been
a staunch supporter of the besieged Muslims in Bosnia; a country which
Soros has aided with his own money from philanthropic foundations. And
for that, Mahathir had lauded Soros’ magnanimous efforts.
Not anymore. On returning from his two-month sojourn in Europe,
Mahathir spoke darkly of a certain ”American financier” who was
undermining the economies of Southeast Asian countries by
destabilising their currencies. He did not name Soros. But it was
clear that he was referring to him.
Blaming Soros whenever a currency is being raided is not new. What is
new, however, is Mahathir’s assertion that the current bear run on
Southeast Asian currencies is part of a conspiracy by Soros to punish
Asean for embracing Burma.
There is no doubt that Soros was one of the key speculators against
the baht, an attack which has since spilled over to other currencies
in the region. But while Soros may have led the foray, the real push
came from other speculators; institutional investors such as mutual
and insurance funds, and non-financial corporations. Some of these
speculators are Southeast Asians.
That’s not surprising. For once there is a profit to be made, despite
fervent calls for patriotism, few speculators would think twice in
partaking in the run on their own country’s currency. In this country,
we have seen Thais reaping enormous profits from the recent attacks on
the baht, and the same is likely to be true for other Southeast Asian
countries.
But if Mahathir thought that Soros would spare poor economies from his
forays, he was dead wrong. Currency speculation is never a charitable
activity; not even for a philanthropist. It does not profess any
political agenda, nor does it differentiate the poor from the rich.
Mahathir’s outburst, however, is a case of sour grapes. It is known
that Bank Negara, Malaysia’s central bank, often dabbled in currency
speculation. A few years ago, it had its hand badly burnt when it was
caught short while speculating on the US dollar, resulting in losses
running into billions. Surely, Mahathir cannot cry foul when the
speculative game is not going his way.
To blame Soros for the crises sweeping through the currency markets of
Southeast Asia is not addressing the real issue.
When Southeast Asia jumped on the global bandwagon, it should have
prepared for the downs as well as the ups. Instead, many have allowed
the region’s spectacular economic growth to lull them into a false
sense of invincibility and security.
By pegging its currencies, Southeast Asian economies have ensured a
certain degree of stability to help lure foreign funds. But such easy
money is too often splurged on non-productive property markets and
wasteful mega-projects. To add to the woes, billions are squandered
through unmitigated corruption. Such excesses are now being ruthlessly
punished by the currency market.
Mahathir is known for his feisty and virulent attacks on the West on
everything from incest to human rights. There is a ring of truth to
some of his remarks. But often his criticisms are no more than
fig-leaves to deflect detractors. One such diversionary remark was his
accusation that the West was jealous of Malaysia’s economic success,
especially when Malaysian companies were chided for their cavalier
attitude in other Third World countries. His blaming of Soros for
Southeast Asia’s economic woes is vintage Mahathir. While his
far-fetched conspiracy theories may receive a measure of domestic
support given his firm grip on the Malaysian media, for the rest of
the world he is beginning to sound like an angry old man.
1997 Nation Multimedia Group. All rights reserved
Focus on Trade #17, end part 1 of 2
FOCUS-ON-TRADE NUMBER 17
PART 2 OF 2
SPECIAL ISSUE – CURRENCY TURMOIL IN SOUTHEAST ASIA
A regular bulletin produced by Focus on the Global South (FOCUS)
Bangkok, Thailand
Number 17, August 1997
Focus-on-Trade continues, under a new name, the electronic bulletin
formerly known as Focus-on-APEC. The new name reflects the expansion
of the concerns of Focus on the Global South to trade forum and
organisations beyond APEC, including the World Trade Organisation
(WTO) and the ASEAN Free Trade Area (AFTA).
Focus-on-Trade contains updates on trends in world trade, but its
emphasis will be analysis of these trends from an integrative,
interdisciplinary viewpoint that is sensitive not only to economic
issues, but also to ecological, political, gender and social issues
related to developments in world trade.
Your contributions and comments are welcome. Please contact us c/o
CUSRI, Wisit Prachuabmoh Building, Chulalongkorn University, Bangkok
10330 Thailand. Tel: (66 2) 218 7363/7364/7365, Fax: (66 2) 255 9976,
E-Mail: admin@focusweb.org, Website: http://focusweb.org
Focus on the Global South is an autonomous programme of policy
research and action of the Chulalongkorn University Social research
Institute (CUSRI) based in Bangkok.
______________________________________________________________________
SPECIAL ISSUE ONTHE CURRENCY TURMOIL IN SOUTHEAST ASIA
Part 1
Siamese Twins: the Currency Crisis in Thailand and the
Philippines by Walden Bello
Don’t blame Soros for currency woes, The Nation, Bangkok
Part 2
The end of the ‘South East Asian Miracle’? by Walden Bello
———————————————————————
The End of the “Southeast Asian Miracle”?
by Walden Bello*
Does the currency crisis in Thailand, Malaysia, Indonesia, and the
Philippines spell the end of the Southeast Asian model of development?
In contrast to the path followed by the “newly industrialising
countries” (NICs) in Northeast Asia, development in Southeast Asia was
financed to a great extent by huge inflows of foreign investment
instead of domestic savings.
Deus Ex Machina
The countries of the region were headed toward the same dire fate as
that which engulfed other highly indebted countries of the South in
the mid-eighties when they were retrieved from recession and spun into
prosperity by what amounted to a deus ex machina: the massive inflow
of Japanese direct investment. The trigger was the Plaza Accord of
1985, wherein the yen was forced to drastically appreciate relative to
the dollar owing to pressure from the US, which sought to reduce its
gaping trade deficit with Japan by “cheapening” its exports to that
country and making its imports from Japan more expensive in dollar
terms to US consumers.
With production costs in Japan rendered prohibitive by the yen
revaluation, Japanese firms moved the more labor- intensive phases of
their production processes to cheap-labor sites, mainly in Southeast
Asia. What occurred was one of the largest and swiftest movements of
capital to the developing world in recent history. One conservative
estimate is that between 1985 and 1990, one conservative estimate is
that some $15 billion worth of Japanese direct investment flowed into
Southeast Asia. In the case of Thailand, for instance, the Japanese
investment that flowed into the country in 1987 exceeded the
cumulative Japanese investment for the preceding 20 years.
By 1996, about $48 billion worth of Japanese direct investment was
concentrated in the core ASEAN countries of Indonesia, Singapore,
Malaysia, Thailand, and the Philippines. In FY 1995, the ASEAN
countries received 10.6 per cent of Japan’s total foreign direct
investment, in contrast to only 7 per cent in FY 1990.
Formerly focussed mainly on raw material extraction, Japanese
investment in the late eighties and early 1990’s was aimed as turning
ASEAN into an integrated production base for Japanese conglomerates
that assembled manufactures for export to the US, Europe, and Japan
itself. And as economic growth spawned a middle class in the ASEAN
countries, the region itself became an important consumer of Japanese
products.
Foreign direct investment was, of course, but one channel of Japanese
capital. The region was the prime recipient of Japanese aid, as well
as a favoured destination of Japanese bank credit. For instance, in
1996, 40 per cent of the foreign debt of Thailand’s private sector
was accounted for by loans advanced by Japanese banks.
The critical importance of Japanese investment to ASEAN was
underlined in a recent report of the Japan Economic Institute: “By
virtually any measure, corporate Japan’s presence in Southeast Asia
is massive. Japanese affiliates employed an estimated 800,000 people
across ASEAN economies in 1994, and the figure rises yearly. In a
number of key industries Japanese firms have staked out a commanding
regional position. Matsushita Electrical Co. Ltd’s operations alone
are said to account for between 4 per cent and 5 per cent of
Malaysia’s gross domestic product. Japanese manufacturers currently
control about 90 per cent of the automotive market in most ASEAN
countries.”
Portfolio Investors Move in
The prosperity triggered by Japanese investment was critical in
turning Southeast Asia into a prime destination for global capital
flows in the early 1990’s. Especially attracted were the mutual and
hedge funds that tapped into the vast pool of savings and pension
funds in the North and ploughed them into profitable short-term
investments. With interest rates and stock prices at low levels in
the United States, Japan, and other industrial markets, these funds,
much of them American, were steered to “emerging markets” in search of
higher returns. And with their high growth rates fuelled by Japanese
investment, East and Southeast Asian countries became key magnets for
speculative capital.
The attention was not only welcomed; it was cultivated. In Thailand,
economic managers saw portfolio investment as a valuable supplement to
Japanese direct investment to fill the gap between limited domestic
savings and the massive capital investment that was required to keep
the economic miracle going. At the same time, since much of these
funds were American, the portfolio investment inflow would ease what
until then was an overwhelming dependence on the Japanese.
For the Philippines, which had missed out on the vast movement of
Japanese capital into Southeast Asia in the late eighties owing to its
political instability, portfolio investment inflows, mainly from the
US, were seen as the engine that would allow it to catch up with
neighbours that had been launched into high-speed growth by Japanese
investment.
In varying degrees, most Southeast Asian governments adopted policies
to attract portfolio investment or what some writers termed “hot
capital.” Three measures, in particular, were put in place:
First, foreign exchange restrictions were abolished or eased, stock
exchanges were opened to foreign investors, and foreign banks were
attracted with more liberal lending rules, including allowing making
dollar loans to local borrowers.
Second, interest rates were kept high–higher than comparative
benchmarks like US interest rates–in order to suck in foreign
capital.
Third, the local currency, while not formally fixed to a particular
rate of exchange, was informally pegged to a stable rate of exchange
to the dollar via periodic interventions in the foreign exchange
market by the central monetary authority. This was to eliminate or
reduce currency risk for both foreign investors and local borrowers.
Net portfolio investments to the region rose from an annual average
of $1 billion in 1985-89 to $4 billion in 1993, according to the
Asian Development Bank. The figure had gone considerably higher by
1996, with Philippines alone drawing in $9.4 billion worth of foreign
capital, some 75 to 80 per cent of which was portfolio investment.
Thailand’s Bangkok International Banking Facility attracted over $50
billion in just three years’ time.
Foreign Investors Fuel the Real Estate Crisis
It soon became clear, however, that portfolio investment was not an
unmixed blessing. They were, for one, extremely volatile, coming in
one day, leaving the next, as it were, in search of higher return
elsewhere. As the managing director of the Philippine Central Bank
put it, in an era of globalised markets brought about by financial
liberalization, billions of dollars worth of funds can be moved across
the globe “at the tap of a finger.”
Also, these funds zeroed in on those parts of the domestic economy
that promised a high rate of return with a quick turnaround time, and
invariably, from Bangkok to Kuala Lumpur, this was the real estate
sector. Manufacturing and agriculture were dismissed as low-yield
sectors, where decent rates of return to capital could, moreover, be
achieved only with significant amounts of investment over the long
term. Mutual fund shareholders and hedge fund bondholders could not
wait that long.
Not surprisingly, the property sector soon became overheated in
Bangkok, Manila, and Kuala Lumpur. By 1995, the inevitable glut came
to Bangkok, with the consequent domino effect of developers with
unsold spanking new residential and commercial units dragging their
financiers into bankruptcy with their non-performing loans. With
similar gluts expected to develop in Manila, Kuala Lumpur, and
elsewhere, portfolio investors began to grow skittish and withdraw
their capital from these markets, resulting in plunges in stock market
indicators throughout the region.
It was this growing lack of confidence among foreign investors that
created the climate for the recent speculative attacks on the Thai
baht, the Philippine peso, the Malaysian ringgit, and the Indonesian
rupiah. A currency is only as strong as the “fundamentals” of the
economy, as investors say, and with their widening current account
deficits, anaemic local manufacturing sectors, troubled or stagnant
agricultural sectors, and overheated real estate sectors, the
fundamentals of most of the ASEAN countries are starting to look bad.
The Decline of Asian Capital Markets
Portfolio investment inflows into Thailand are drying up, and though
probably not as drastically, inflows into Malaysia, the Philippines,
and Indonesia are also expected to decline. The new darling of the
fund managers are Latin American markets, which rose almost 40 per
cent on average this year as Asian markets fell by five per cent. As
the Financial Times points out, Brazilian equities, which have risen
70 per cent since the end of the year, look very good to fund
managers. So do Russian equities, which have more than doubled since
the start of this year, and Chinese “red chips,” which have gone up by
90 per cent. It might be sometime before the investment analysts
encourage their customers to go “overweight” in Southeast Asian bonds
and equities.
Japan’s Strengthened Position
Will foreign direct investors now follow portfolio investors in
drawing down their presence in the region? With the slow growth in
the region’s exports and the spread of deflationary tendencies, new
foreign investors are likely to be deterred from making new
commitments.
Ford and GM, for instance, are now probably regretting their decisions
last year to invest in major car assembly plants in Thailand, based as
they were on erroneous judgments that the automobile markets in that
country and the rest of region would continue to grow at a torrid
pace. In the case of Thailand, the projection that it would be the
world’s fourth largest market for cars was based on the expansion of
consumer credit. With the credit crunch, however, cars are not being
sold; they are being repossessed from insolvent buyers by finance
companies that are also facing bankruptcy.
But while these conditions may scare off prospective American and
European investors, they are likely to have much less impact on the
Japanese, who are far ahead of their American competitors in making
the region an integrated production base. In Thailand alone, more
than 1,100 Japanese companies are well ensconced and only a massive
economic downturn can reverse the momentum which has built up. As one
Japanese executive told The Nation, “It [Japanese investment] is a
long term investment strategy where investments are increased on a
year-to-year basis, so I don’t think a 10 to 20 per cent de facto
devaluation will force Japanese investors to change their investment
strategies for Thailand.”
Indeed, with most of their production aimed at other markets, a
decline in local demand owing to an economic downturn will not have
too big of an impact on the profitability of Japanese firms. In fact,
it may well work to their advantage by dampening the pressures for
wage raises. At the same time, with the assets of many Thai companies
being downgraded by devaluation and debt, Japanese investors may take
advantage of the current crisis to buy a controlling interest in local
firms and extend their reach into the local manufacturing sector.
In sum, though the financial crisis sweeping ASEAN may well mark the
end of the Southeast Asian miracle, its long term result may be a
strengthening of the already dominant position of Japanese capital in
the region.
*Walden Bello is co-director of Focus on the Global South, a program
of policy research of Chulalongkorn University in Bangkok, and a
professor of sociology and public administration at the University of
the Philippines. He is the author of several books on Asian
development. He is currently a book on Thailand’s economic
development, A Siamese Paradox: Development and Degradation in Modern
Thailand.
———————————————————————-
Other electronic bulletins on APEC and trade issues:
News from the Canadian network organising for the Vancouver People’s
Summit Send email to: majordomo@list.web.net with the message:
subscribe apecforum-l
BRIDGES, a regular trade bulletin produced by International Centre for
Trade and Sustainable Development Send email to: majordomo@igc.apc.org
with the message: subscribe tradedev.
Asia Pacific Regional Environment Network (APRENet)
Distributed by the Nautilus Institute for Security and Sustainable
Development Send email to: aprenet_mgr@nautilus.org with the message:
subscribe aprenetlist <<your email address>
APEC Secretariat, Singapore.
Telephone: (65) 276 1880; Fax: (65) 276 1775; Email:
dr@apec.stems.com. Please also check the website for APEC documents
and other information: http://www.apecsec.org.sg
———————————————————————-
FOCUS-on-Trade is produced by Focus on the Global South
(FOCUS). Contact information: c/o CUSRI, Wisit Prachuabmoh Building,
Chulalongkorn University, Bangkok 10330 Thailand. Tel: (66 2) 218
7363/7364/7365, Fax: (66 2) 255 9976, E-Mail: admin@focusweb.org,
Website: http://focusweb.org
Focus-on-Trade #17, end part 2 of 2
______________________________________________________
Focus on the Global South (FOCUS)
c/o CUSRI, Chulalongkorn University
Bangkok 10330 THAILAND
Tel: 662 218 7363/7364/7365
Fax: 662 255 9976
Web Page http://www.focusweb.org
Staff email addresses:
———————-
Walden Bello W.Bello@focusweb.org
Kamal Malhotra K.Malhotra@focusweb.org
Chanida Chanyapate Bamford C.Bamford@focusweb.org
Junya Prompiam J.Prompiam@focusweb.org
Nicola Bullard N.Bullard@focusweb.org
Joy Obando Joy@focusweb.org
Focus Administration admin@focusweb.org
______________________________________________________