Paths to recovery in Thailand and Indonesia
| Date | 01 February 1999 |
| Pages | 183-197 |
| DOI | https://doi.org/10.1108/eb025007 |
| Published date | 01 February 1999 |
| Author | Andy Mullineux,Juda Agung,Adisorn Pinijkulviwat |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 7 Number 2
Paths to recovery in Thailand and Indonesia
Andy Mullineux,* Juda Agung and Adisorn Pinijkulviwat
Received: 1st March, 1999
*Department of Economics, Edgbaston, Birmingham B15 2TT; tel: 0121 414 6642; fax: 0121 414 7377;
e-mail: A.W.Mullineux@bham.ac.uk
Andy (A.W.) Mullineux is Professor of
Money and Banking in the Department of
Economics and Head of School of Social
Sciences at the University of Birmingham,
UK. He has published extensively on finan-
cial sector restructuring and regulatory
and supervisory reform in various coun-
tries and regions, including Central and
East Europe and, most recently, East and
South-East Asia.
Juda Agung is an economist in Bank Indo-
nesia, the central bank of Indonesia, and is
currently completing his PhD in the Depart-
ment of Economics, University of Birming-
ham. He has served as a visiting research
associate in the Netherlands Central
Planning Bureau. The views expressed in
this paper are his personal views and not
attributable to Bank Indonesia.
Adisorn Pinijkulviwat earned his BA in
economics at Thammasat University
(Bangkok) and an MBA, majoring in
inter-
national banking and finance, from the
University of Birmingham. He began his
career as an assistant analyst in the
department of bank examination and
analysis, Bank of Thailand in 1975. At pre-
sent, he is a chief officer in the depart-
ment of examination and supervision.
ABSTRACT
This paper briefly reviews the build up to and
onset of
the
1987 financial
crises
in S. E. Asia,
focusing on the experiences of Thailand and
Indonesia. After emphasising the importance of
banking sector restructuring and regulatory
reform,
progress
with
economic
stabilisation and
financial and enterprise sector restructuring in
the three countries is
assessed.
Future prospects
are then
considered.
FIRST IN FIRST OUT?
The crisis which broke in Thailand in 1997
was no real surprise. Problems had long
been anticipated by the International Mone-
tary Fund (IMF) and others and Thailand
had already had to withstand a minor spec-
ulative attack on the baht in November-
December, 1996. The property market
bubble had already collapsed in 1995 lead-
ing to a build up of bad debts in the bank-
ing system, major problems at the Bangkok
Bank of Commerce. The current account
balance was deteriorating and the govern-
ment budget had moved from surplus into
deficit. The IMF was advising devaluation a
year or so before the dollar peg was aban-
doned on 2nd July, 1997. Further, political
uncertainty entered the equation in 1996—
1997 as it became evident that the govern-
ment was unable to take the necessary
action to restore economic stability and was
unlikely to survive. Thai nationals had been
persistently exporting their capital for 12
months or so before the crisis broke, but the
impact of this 'capital flight' and the current
account deficit on foreign exchange reserves
was being more than offset by short-term
inflows of capital through Bangkok Inter-
national Banking Facilities. The interna-
Journal of Financial Regulation
and Compliance, Vol. 7, No. 2,
1999,
pp. 183-197
© Henry Stewart Publications,
1358-1988
Page 183
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