Learning lessons from Thailand

Learning lessons from Thailand

By Aleksius Jemadu and Duncan McCargo

BANDUNG (JP): It makes sense to compare Thailand and Indonesia
regarding their respective strategies in dealing with the
economic crisis. The point is that there might be some important
lessons Indonesia could learn from its neighbor.

Many international analysts argue that compared to other Asian
countries, Indonesia has been left far behind in managing its
economic turmoil. Not only has its currency depreciated more
than other countries', but its economic reform has also been
hindered by political complexities, be it student protests,
social unrest or other issues. Moreover, even after the new
cabinet was established, the Indonesian economy remained as
precarious as ever.

If we look at the origins of the economic crisis in Southeast
Asia, we can find some similarities between Thailand's and
Indonesia's experiences. Crony capitalism, a nepotistic political
system, weak financial systems, and excessive borrowing without
regard to exchange-rate risks have been widely mentioned as the
main factors leading to the economic crisis. It is not hard to
find evidence of these political and economic pathologies in both
societies.

However, while there is growing concern over the uncertainty
of the economic recovery in Indonesia, Thailand has regained
international confidence over its economic prospects. When Prime
Minister Chuan Leekpai visited Washington recently he managed to
convince President Bill Clinton and U.S. businesspeople that
under his leadership Thailand's economic recovery would soon take
place.

Real political changes are indeed visible in Thailand. The
inept government of Gen. Chavalit Yongchaiyudh is long gone,
replaced in November by the more respectable leadership of Chuan.
Although he is not an economist and does not claim to know
everything, Chuan has delegated control of economic affairs to a
pair of extremely able technocrats, Finance Minister Tarrin
Nimmanahaeminda and deputy premier Supachai Panitchpakdi.

Dissatisfied with some aspects of the original IMF agreement
signed by the Chavalit government in August 1997, the Chuan
technocrats have been able to renegotiate some problematic parts
of the deal. This renegotiation has been expertly handled by
professionals, who are well-respected by their international
counterparts, without recourse to counterproductive and
fatuous nationalist rhetoric.

Painful decisions have been taken to overhaul the financial
sector, overruling the special interests of influential
bureaucrats and well-connected bankers.

November 1997 also saw a new Thai constitution come into
effect, the culmination of longstanding demands for reform of
Thailand's pluralistic but sometimes unstable political order.
Despite numerous shortcomings, the new constitution is a
significant improvement on what it replaced.

Thailand's political and economic problems are far from over,
yet the Thai case demonstrates that relatively rapid progress may
be made given sufficient political will. This which primarily
entails putting the right people into key economic portfolios and
letting them get down to work without hindrance. Thus, Chuan has
managed to combine political and economic reforms so that
international confidence has been restored.

There are some important lessons that Indonesia could learn
from Thailand. First, political change is a necessary condition
for successful economic reform. The replacement of Chavalit was
said to facilitate the workability of economic reform agreed upon
with the International Monetary Fund (IMF).

Second, a top leader needs to give full autonomy to his
economic team to implement economic reform without structural and
psychological hindrances.

Third, in order to restore international and domestic
confidence, economic reform must not be piecemeal. It should be
comprehensive and impartial in its implementation. All these
lessons can be taken as inputs for the Indonesian government in
implementing its new agreement with the IMF.

Aleksius Jemadu is the head of the school of international
relations at Parahyangan University, Bandung and Duncan McCargo
is a lecturer in the politics department at Leeds University, UK.