Asians are beginning to react like I said they would.
(The following article was culled from The Far Eastern Economic Review at feer.com).
Fund Under Fire
The IMF has never flown higher--nor drawn so much flak. The debate is
about more than fiscal policy--it's about national sovereignty in a
borderless world economy.
By Michael Vatikiotis in Bangkok with Salil Tripathi in Jakarta and Kuala Lumpur
May 14, 1998
Suave, well-dressed and articulate, Krikchai Charoen Rajapark is the
epitome of the modern Thai businessman. With 10 years of higher
education in the United States behind him, he now runs a Bangkok college
that teaches business and technology management. So his view on the
International Monetary Fund's role in restructuring Thailand's economy
comes as something of a surprise.
"The IMF is managed by the U.S. government," he insists. "They have a
plan to make the country bankrupt so that American companies can come
and buy everything very cheaply."
Krikchai is not alone in harbouring deep suspicions of the IMF's motives.
In Jakarta, the owner of a successful food company, an
Indonesian-Chinese with a degree from a top American university,
wonders if the Fund is part of a Western "conspiracy to prevent the rise of
Chinese capital."
Such views may be extreme, but they capture a growing mood in Southeast
Asia. As the economic crisis forces more companies to close and strips
people of their wealth, many of the victims are focusing their anger on the
IMF. Businessmen complain that IMF-prescribed tight-money policies are
strangling their economies. Government officials mutter that the Fund
infringes on national sovereignty by conditioning aid on changes in
domestic policy.
In Indonesia, for example, the Fund's demand for the abolition of
monopolies such as Bulog, the rice-distribution agency, is seen as
interference in the way the state feeds its poor. Indonesian indignation at
IMF-mandated reforms prompted Industry and Trade Minister Bob Hasan
to declare in April: "This is the Republic of Indonesia, not the IMF
Republic." Even Indonesians who are not cronies of President Suharto
chafe at the January 15 photo of Suharto meekly signing the bailout
agreement under the stern gaze of IMF Managing Director Michel
Camdessus. "When I saw Camdessus folding his arms over the president,
that was it," grumbles a businessman in Jakarta. "No matter how much I
resent the monopolies, I am an Indonesian first."
Senior Thai officials express similar frustration with the IMF's bitter
prescriptions--but only in private, fearing that the markets will punish any
sign of resistance to reform. The Thai press, however, has no such qualms
about questioning the market forces widely blamed for causing the crisis.
"Perhaps the market can be a great wealth-creating machine but not so
great when it comes to building a humane and just society," said a May 4
editorial in The Nation. "Perhaps while we speak out against authoritarian
regimes we should also be concerned about the dictatorship of the
market."
Whether such sentiments translate into action remains to be seen. For the
moment, it's mainly talk. Asian efforts to come up with alternative rescue
plans have yet to bear fruit, leaving crisis-hit countries with little choice
but to play by the IMF's rules.
However, some analysts warn that Asian resentment could have
longer-term consequences: A backlash against the United States, which is
seen as the main force driving the IMF's interventionist style, and
resistance to the economic globalization that has exposed countries to
harsh outside pressures. "Everyone needs America now. But once the dust
settles down, pan-Asian nationalism will arise," predicts Eric Teo, a
Singaporean former diplomat who is now business-development director
for France's Suez Lyonnaise des Eaux group.
If he's right, a crisis regarded by many Western economists as an
opportunity to speed up globalization may be breeding the opposite
reaction. Certainly, the flight of foreign capital has reminded Asians that
openness can be a two-edged sword. It was even less pleasant to hear the
IMF prescribe invasive surgery to heal the wounds.
A nationalist backlash was visible early on in South Korea, but it was
mitigated by President Kim Dae Jung's insistence that the country's future
relied on an open economy. Now, surprisingly, the clearest signs of
nationalist resentment can be found in Thailand, which is considered the
IMF's best student.
Thailand's influential King Bhumibol Adulyadej provided the first hints.
"We have to go backwards, have to be careful and have to return to
unsophisticated business," the king said in December. Many Thais
interpreted his words as a call to preserve Thai sovereignty, perhaps even
to abandon efforts to compete in the global economy.
The Thai business community was already fuming over the high interest
rates prescribed by the IMF. (Powerful companies such as the Charoen
Pokphand group and Bangkok Bank are warning that if interest rates don't
come down, they will withdraw financial backing for political parties in the
government.) Coming on top of that, the new nationalist spirit has fuelled
opposition to foreign ownership of state enterprises that the IMF wants
privatized. Civic action groups are gearing up to fight privatization.
The timing of foreign pressure on Thailand to open its economy--coming
when the economy is at its weakest--reinforces the belief that the IMF is a
cover for Western capitalists plotting to buy Thai assets on the cheap.
"We have to tell Thai people that it is not our express purpose to sell
everything to foreigners," says Deputy Prime Minister Supachai
Panichpakdi.
Much of this alarm stems from the importance of proprietorship in a
business community dominated by people of Chinese descent for whom
family security and corporate assets are indivisible. "It's our culture not to
risk what our great-grandfather built," says Vuttichai Wanglee, the
fourth-generation heir to the troubled Nakornthong Bank, which is casting
around for foreign buyers.
Faced with little option but to sell, many struggling businessmen have
resorted to nationalist breast-beating. Krikchai, the businessman who
accuses the U.S. of steering the IMF, is only one of them. In addition to
running a college, he owns a five-star hotel, where, in late April, hundreds
of middle-class executives turned up to hear a panel of academics talk
about "economic war" with the West and the erosion of Thailand's
independence.
In intellectual circles, this sentiment has resulted in some strident rhetoric.
Take a recent edition of the serious socio-political journal Vithaithat
(Vision), titled "Thais in the Age of Slave Culture." By blindly following
foreign models of development, the preface argues, Thai society is
changing to a "slave society, modern-style."
Disaffection with market forces is even prompting an ideological rethink.
Students at Bangkok's conservative Chulalongkorn University have
formed a Marxist discussion group. And even some businessmen are
entertaining doubts. "Perhaps we should take a closer look at China's
concept of a social market economy," suggests Sophon Supaphon,
president of state-owned Bangchak Petroleum.
This may sound far-fetched in a country which still bans communism and
whose reliance on Western markets far outstrips its trade with China. But
Southeast Asia's traditional response to dominance from one direction is to
restore balance by moving in another. If the economic crisis in Asia is
reaffirming the power of the U.S and the influence of market forces, some
analysts see China, with its gradualist approach to market opening, as the
main counterweight.
Beijing has been quick to score points by offering aid and trade and
boosting diplomatic and security ties. Two high-level Chinese trade
delegations visited Asean countries at the end of April. Meanwhile,
Malaysian Defence Minister Syed Hamid Albar has said that his country is
considering holding bilateral security talks with Beijing.
The problem is that Beijing lacks the economic and military clout to play an
effective role in the region. China's contributions to the IMF bailouts for
Thailand, Indonesia and South Korea--which together totalled more than
$100 billion--amounts to only $1.6 billion. Trade and investment are
slowing because of the corporate debt burden in Asia and China's own
economic problems.
Besides, talk of ideological rethinks and new alignments is rather remote
from the reality of companies heavily in debt and banks badly in need of
fresh capital--from sources foreign or local. Moreover, attempts by Asian
governments to fashion an Asian response to the crisis have met with
disapproval from the markets and lukewarm regional support.
So for now the realistic, if grudging, assessment is that there's no
alternative to the IMF; indeed, the only alternative is isolation. "You'd
have to be like Burma or North Korea," says Mohammed Ariff, executive
director of the Malaysian Institute of Economic Research. "If you want the
fruits of liberalization and globalization, you have to pay the cost. You
can't blame the IMF for problems you have created." |
