Comment on “Thailand after 1997”

• DOI: http://doi.org/10.1111/j.1748-3131.2011.01182.x
• Author: Takatoshi ITO
• Published date: 01 June 2011
• Date: 01 June 2011

Comment on “Thailand after 1997”

Takatoshi ITO†

The University of Tokyo

JEL code: O53

Ammar (2011) is an excellent overview of the Thai economy after 1997, the pivotal

financial crisis. The rise and fall of Prime Minister Thaksin and the ensuing conflicts

between the yellow shirts and the red shirts are all mysteries to most foreigners.Even more

mysterious is the resilience of the Thai economy, despite the seeming instability, and

sometimes utter chaos, of Thai politics.aepr_118286..87

There are two notable assertions in Ammar’s paper. First, Ammar identifies the

Chuan–Tarrinpolicy as a cause for the r ise of Mr Thaksin. Fiscal policy was not aggressive

enough (more spending was required). Investment and growth rates were low compared

to their precrisis levels. Banks’ bad loans were left to be resolved by the market. These

mistakes led to voter dissatisfaction and Mr Thaksin won a landslide victory in 2001.

Second, Ammar positively views Thaksin as a man with national vision, who proposed a

set of popular economic policies, and had enough assets to attract followers. A natural

question is whether those populist policies were fiscally too costly.

First, let us examine the Chuan–Tarrin policy.Was the economic policy adopted by the

Chuan government, 1997–2001, not popular because it was too austere and/or too

market-oriented? Was the unpopularity of this economic policy a main driving force of

the mass shift of voters to Thai Rak Thai, led by Mr Thaksin? Ammar seems tobelie vethat

the economic policy by then Finance Minister Tarrin was too austere: the approach to

dealing with bad loans was “too conservative,” and the fiscal deficits were too small to

stimulate the economy.The gross domestic product did not recover its precrisis level until

the first quarter of 2002.

Toblame Prime Minister Chuan and Finance Minister Tarrin for not adopting a more

stimulating policy is half misleading. The initial set of policies was constrained by the

International Monetary Fund (IMF) program, in which any policy change had to be

debated and approved by the IMF. If the policies were too tight, half of the blame should

go to the IMF.1The low postcrisis growth and investment rates were observed not just in

Thailand, but were a common phenomenon for all the crisis-hit countries. The Thailand

Asset Management Company (TAMC)was created by Thaksin, but the Asset Management

Companies set up by banks were available under the Chuan–Tarrin regime. Whether the

national approach (TAMC), or the banks’ own efforts, or a market-based approach is

better is debatable. Ammar thinks that the national approach is better.

†Correspondence: Takatoshi Ito, University of Tokyo, Graduate Schoolof Economics, The Univer-

sity of Tokyo, 7-3-1 Hongo, Bunkyo-ku,Tokyo 113-0033, Japan. Email: itointokyo@aol.com; tito@

e.u-tokyo.ac.jp

doi: 10.1111/j.1748-3131.2011.01182.x Asian Economic Policy Review (2011) 6, 86–87

© 2011 The Author

Asian Economic Policy Review © 2011 Japan Center for Economic Research

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