We entered Thailand on Friday 19th December, heading for some Christmas cheer on the islands off the southern coast. Not only does it sound like a good spot – many travellers congregate in this area for Christmas, and it's never nice to be alone in the festive season – but the Thai currency crisis means my dollars can buy a lot more festive spirit. Listen to this for a story of mismanagement and corruption with a distinctly Southeast Asian flavour.
Thailand's economy is pretty screwed, along with most of the rest of Southeast Asia, but where Indonesia, Malaysia and the Philippines suffered from a domino effect, Thailand started the whole thing in the first place. It's a classic case of government corruption, bad planning, a desire for instant westernisation, and a bursting economic bubble.
In the mid-1970s, the Thailand economy started to grow from its post-war Third World status, mainly thanks to Japanese aid and investment, and by the late 1980s the country had made remarkable progress, and Thailand had become one of the world's leading rice exporters and Southeast Asia's biggest producer of cars (from Japanese-owned factories). The dream of financial affluence was becoming a reality. In the last few years of the 1980s foreign investment skyrocketed, in the early 1990s the world discovered the Asian stock markets, and in 1993 the Thai government set up the Bangkok International Banking Facility through which companies could borrow money from abroad. This latter facility really took off, with foreign bankers more than willing to lend money to a country whose currency was tied to the US dollar (as were most Southeast Asian currencies then). As a result, between 1993 and 1996 about US$50 billion poured into the country in loans.
This money was supposed to be spent on improved roads, more modern industrial facilities, better education, AIDS awareness and so on, but none of this materialised. Instead it was spent, among other things, on building more cars and trucks (which were never bought), expensive condominiums (which were never sold), heavy industry (which failed to interest overseas investors), and private hospital beds (which were never filled). Private citizens built up huge debts on credit cards, and the Bangkok Bank of Commerce spent a fortune on propping up the currency, rather than face devaluation – money it could ill afford seeing as the government had had to bail out the bank itself to cover bad loans.
Then there's Thailand's amazingly corrupt governmental system; current MPs include 'oil smugglers, alleged traffickers in drugs, investors in casino businesses, suspected traders in contraband and others involved in illegal logging and cross-border trade', according to one economics professor. The method of getting votes is to buy them (in 1996, US$1 billion was spent on buying votes) so it's hardly surprising that the government's policies had less to do with improving the country than improving its individuals' portfolios. Consider that Thailand has had 21 coups since 1932, and seven prime ministers in the last nine years, and you begin to see the instability built into the system.
All it took to bring down this house of cards was a slide in exports in 1996; soon currency traders around the world were speculating that the currency would have to loosen the tie between the Thai baht and the US dollar. The government didn't want this to happen, so it spent a fortune on propping up the baht, but eventually the foreign debts were called in, the bubble burst and the currency was suspended.
The effect of all this on the traveller is that if you have your money in something like US dollars, then you'll get upwards of 50 per cent more bang for your buck than before the crisis, across most of Southeast Asia. A concurrent devaluation occurred in Indonesia, Malaysia and the Philippines, because foreign investors saw similar economic set-ups in these countries and therefore similar potential risks, so they pulled their money out and the rupiah, ringgit and peso tumbled too. Only Singapore survived the crisis, because it has a much more stable government and financial system, and indeed, Singapore has been pouring aid into its neighbours, because it knows how important the local financial system is to its own economy (and how important political goodwill is).
It's too early to see a real effect on the man in the street, but the strict economic plan imposed by the International Monetary Fund1 (IMF) as part of its US$17 billion aid package has affected everyone; the price of fuel and food has shot up because the governments have increased taxation in an attempt to cut budget deficits. As for Thailand, the large numbers of go-go girls, poverty in the countryside and shocking traffic and health infrastructures aren't anything new, it's just a travesty that these issues weren't addressed when Thailand had the money to do so.
So I might be getting lots more baht, rupiah and ringgits for my dollar, but it does make me feel slightly guilty; by simply by being paid in a different currency from the man on the street here, my money goes further. However you look at it, it feels unfair, even more so because nobody I'm likely to meet can do anything about it...
1 The International Monetary Fund (IMF) is the sister agency to the World Bank; the former helps out developing countries whose economies have gone disastrously wrong, while the latter funds development projects in the Third World. Here are a few figures to put things in perspective: Thailand is getting US$17 billion from the IMF; Indonesia about US$23 billion; South Korea maybe as much as US$60 to US$100 billion; by comparison, Mexico's bailout three years ago cost US$48 billion. The hope is that stalling the ASEAN crisis and that in South Korea (the world's 11th largest economy) will stop the crisis moving to Japan, which is having economic problems of its own. A Japanese crisis would hit the USA, which could trigger a global collapse, and that's the last thing we all need. It's all quite ironic when you consider that in 1963/64 the USA borrowed US$600 million from the IMF to bolster its own diving currency and restore investor confidence; the USA is now the largest contributor to the IMF's funds, having donated 18 per cent of the US$200 billion reserve the IMF has to throw around. History is circular, after all.