Learning from Thailand's mistakes 25th August 1997 Join the APMF email list Monthly updates on new content Back to Asia Pacific Management News Menu | Asia Business News Portal | Asia Business News Feeds | Asia Pacific Management Forum

The most noble management skill is to learn from one's own mistakes. The smartest skill is to learn from other's mistakes... ..It costs you a lot less as well... As the Baht hit another record low on Friday, sanguine advice from IMF director-general Michael Camdessus, which perhaps all Asian business and political leaders could do well to heed, especially those who are of the "growth at all costs" school... In an interview with French financial daily Les Echos, Camdessus claimed that Thailand's delay in reacting to unfavourable economic signals, despite warnings from the IMF itself, caused the current regional foreign exchange crisis. An unwillingness to accept the underlying weaknesses of their financial institutions and expose it by floating the Baht 12 months ago, instead propping up delinquent management and ownership with massive injections of funds, meant that the punishment was most severe when the flotation eventually had to come. In the meantime, millions of Baht which could have been put towards urgent infrstructural or educational programs disappeared down a black hole of incompetence, corruption, and blind optimism. But that is history, a history which will haunt Thailand for many years. The positive side, especially for those neighbouring countries that do not have to pay as high a tutorial fee, is contained in further comments... When a country has followed a policy that has been enormously successful for at least 10 years, it is very difficult to convince it that things have changed and that it is time to make adjustments.. (Thailand) had to deal with a balance of payments problem and that of the banks, but did not realise their scale despite our efforts to convince it since the end of 1996 these two problems were undermining growth. On the contrary, the Thai government tried above all to maintain growth. Other countries in our region which are characterised by high growth do not have to learn the hard way, and they are in a much better position anyway duue to the much sounder financial sector and more accountable government. But it is disturbing to many to hear government leaders talk about increasing growth and generally pushing to one side questions on balance of payments and sustainability of that very growth. The taxes are starting to be implemented in Thailand, a 3 to 5% increase in VAT already imposed; on a smaller scale friends of the Rat report a new "music tax" imposed on any entertainment establishment that plays music to the tune of 2,000 Bht a month. The underground economy, which cannot be ignored in Bangkok, saw "subjective entertainment taxes" (a tax to bar owners based on a regular visit by authorities who sit in bars and tally the number of drinks sold in a night and base their income assessment on that) increased in some cases 500%, .. and many enterprising noodle sellers increased their prices on July 3rd.. one day after the floatation of the Baht. Pessimism in business people is widespread, with expatriates flocking to return home, and more Thai's looking for work in countries like Taiwan, where wages are higher and now more than 25% higher again when you take into account exchange rates than 2 months ago. There is an almost complete standstill on contract negotiations while parties wait to see what happens, and the number of cranes on the Bangkok city skyline decreases daily. Based on the Bjelke Peterson Crane Index of economic growth, (invented by an ex-Premier of Queensland, a northern Australian state, who said that he didnt read the newspapers to find out how good his economy was.. he counted the number of cranes from his office window...), Thailand is just starting to pay the cost for a "development at all costs policy" Let's hope that other governments can learn from other's mistakes, before they have to learn from their own....

© Asia Pacific Management Forum 1997
The views expressed here may not necessarily reflect those of Orient Pacific Century or partners

email updates | email this page | discuss | search | today's asian business strategy news | advertise | about

daily asian news, research & commentary for the international business strategy, market research & strategic management professional