Thailand seeks support from the United
States as it tries to recover from a serious economic crisis. The
March 12, 1998, visit of Thailand's Prime Minister, Chuan Leekpai,
offers the United States the opportunity to affirm its support for
an important U.S. ally. In addition to their long-standing military
alliance, Thailand and the United States share a concern about
China's intentions in Southeast Asia and cooperate in fighting
drugs. To affirm the U.S. alliance with Thailand, the Clinton
Tell Prime Minister Chuan that the
United States remains committed to its alliance with Thailand.
Senator William Roth (R-DE) has offered a congressional resolution
of support for Thailand.
Continue military exercises with
Thailand. These exercises will become more valuable as the
economic crisis forces cutbacks in Thailand's military
Ask Thailand to reconsider allowing
U.S. supply ships to use Thai ports. A previous request was
denied in 1994. The United States should request that Thailand
reconsider its decision; these supplies need to be close to U.S.
servicemen in Korea and the Persian Gulf in the event hostilities
flare up in either region.
Offer modest assistance to help
Thailand fight drugs. Budget cuts are reducing Thailand's
ability to destroy drug crops; the United States should offer a
one-time assistance package to help destroy drugs that might end up
on the streets of the United States.
Thailand now needs help from the United
States to recover from its devastating economic crisis and to
prevent future crises. The crisis began in early 1997 when the
value of Thailand's currency, the baht, fell in international
markets. The fall of the baht exposed serious flaws in Thailand's
financial sector, its corporate laws, and in its statistical
reporting. After seeing economic growth rates over 8 percent most
of this decade, Thailand's economy may contract by 3 percent in
1998. The crisis has seen a 50-percent fall in the value of the
baht and a collapse of Thailand's financial sector. Thailand has
turned to the International Monetary Fund, which in August 1997
extended $17.2 billion in credits. Thais are angry that the United
States did not contribute special credits to this package. But the
United States can offer something more valuable: sound advice to
prevent future crises.
first step is to restore confidence in Thailand's financial sector.
Banks need to resume normal business before the economy can begin
to recover. To strengthen Thailand's financial sector, the Clinton
Administration can urge Thailand to:
Create an international creditors
committee to restructure bank debts. Such a committee can help
to extend the terms of repayment or can help to excuse some
Sell bad assets from failed and
troubled banks. Thailand created a government agency, the Asset
Management Corporation, to acquire and liquidate bad assets (those
not generating revenue). The United States could offer this agency
much practical advice from its experience with Resolution Trust
Corporation, which helped failed U.S. savings and loan institutions
sell their assets.
Create a currency board regime. A
currency board regime would fix the value of the baht to the U.S.
dollar and allow the interaction of U.S. Federal Reserve policy and
market forces to determine the domestic money supply, and therefore
the inflation rate, in Thailand.
currency board, however, can succeed only in conjunction with other
economic reforms that build greater transparency and accountability
in Thailand's economy. The Clinton Administration can help Thailand
to do so by urging that it:
Strengthen the prudential supervision
of financial services firms. This would include rules to
prevent reckless investments by managers that put their companies
Adopt international standard accounting
rules. Financial disclosure requirements similar to those
followed in the United States are needed to provide investors with
Increase corporate accountability.
Thailand should adopt rules to allow outsiders to change the
leadership of poorly run corporations. Such rules will make
directors and managers more accountable to shareholders.
Since World War II, the United States and
Thailand have developed a strong strategic and economic
partnership, building on a friendship that dates back to 1833. The
United States benefited from access to bases in Thailand during the
Vietnam conflict and during the Persian Gulf War. With Thailand
facing significant military cutbacks, this alliance currently is
more valuable to Thailand. The United States can help Thailand by
finding an alternate buyer for expensive fighter aircraft that
Thailand recently purchased but now cannot afford. The United
States also should ask Thailand to allow it to preposition military
supply ships in Thai ports. These supplies can help deter conflict
in Korea and the Persian Gulf--which also benefits Thai security
an ally, the United States has the obligation to help Thailand
recover from this crisis. The best assistance the United States can
offer is advice on how to strengthen confidence in Thailand's
financial sector and how to prevent similar crises in the future.
Thailand deserves serious attention from U.S. policymakers, and
Prime Minister Chuan Leekpai's visit to Washington, D.C., offers
the opportunity to affirm support for this long-time ally of the
Richard D. Fisher, Jr.,
former is Senior Policy Analyst in the Asian Studies Center at The
Robert P. O'Quinn is a former Policy Analyst in
the Asian Studies Center at The Heritage Foundation.