| Some Never Learn |
30 June 2003
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Thailand Sets Up New Economic Disaster
Thailand, where the currency crisis of the late 1990s began, has embarked on a plan that could make the country a two-time loser in global financial markets. The cabinet just approved a Bt100 billion ($2.4 billion) fund to bail out trouble Thai firms. The beneficiaries will be the shareholders of these companies of "national interest" while the losers will be the man and woman in Bangkok who pay taxes.
The 10-year, close-end fund will be able to invest in any company or project that the government thinks will benefit the country, according to Thai finance minister Suchart Jaovisihda. The Financial Times ran a story last Wednesday in which he also said, "There will be no risk and the fund will have good returns in the long run."
Could it be? No risk, good returns and backed by the Thai government? The entire Thai cabinet should resign in shame. This is the same mentality that has given Japan a stagnant economic for a decade, and Thailand is not rich enough to tolerate even a year of it.
It is likely that letting some companies go under will be embarrassing -- it is to the credit of Thai culture that such a feeling is still possible in business. Letting risk-takers off the hook with taxpayer money, though, should not be a source of pride nor a national policy.
Government does have a role to play in any economy. It must establish and enforce property rights, it must provide a reasonably stable currency, it must provide public goods like defense and education. It must not provide a safety net for the corporate officers who have mismanaged their shareholder's funds, nor can it pardon lax shareholder supervision of corporate officers.
Having done severe damage to the world economy less than a decade ago with ill-considered policies, Thailand's government appears willing to do the same again.