Crisis as Opportunity: The Emergence of Reform

Interestingly, the Chinese and Japanese word for crisis is comprised of two Chinese characters that demonstrate two different elements. The upper character means great peril or danger, while the lower character means opportunity. Thus, within every crisis there is embedded opportunity. Influential Thai policy makers, technocrats, and intellectuals quickly realized that the crisis provided a chance to introduce critically needed reforms. Despite its many painful dimensions, the crisis was indeed a “wake-up call,” and Thailand began a major process of reform. Leading this reform movement were many Thais educated in the West under the country’s active program to send many of its best and brightest abroad for advanced graduate training. The current prime minister, Dr. Thaksin Shinawatra, has a doctorate from a US university and was previously an entrepreneur in information technology and telecommunications. Several influential intellectuals in the Thai reform movement, such as Dr. Prawes Wasi, a physician and persistent outspoken advocate for reform, Dr. Sippanondha Ketudat, the Harvard-educated former Minister of Education and Minister of Industry, and Dr. Wichit Srisa-an, a University of Minnesota-educated higher education innovator, emphasized that reform must be comprehensive to be effective. Inadequately integrated piecemeal reforms could have adverse unintended consequences.

Political Reform

Within months of the outbreak of the crisis, Thailand began a series of integrated political, administrative, financial, economic, and educational reforms. On October 11, 1997, Thailand promulgated its 15th constitution in 65 years. As James Klein, the Asia Foundation’s representative in Thailand, pointed out in a thorough analysis of the Constitution, this is the most democratic and progressive constitution in the country’s history. For example, it puts in place new structures such as the National Counter Corruption Commission (NCCC) and the Constitutional Court to promote accountability and transparency facilitates the impeachment of Thai officials. For the first time in Thai political history, senators are popularly elected rather than appointed. The Constitution also calls for decentralization and educational reform. Reflecting on the potential impact of the new Constitution, Klein comments that “the 1997 Constitution is far from business as usual,” establishing as it does “the ground rules for transforming Thailand from a bureaucratic polity prone to abuse of citizen rights and corruption, to a participatory democracy in which citizens will have greater opportunities to chart their destinies.” Klein concludes that “for the first time in Thai history, this charter establishes constitutional mechanism to secure accountability of politicians and bureaucrats to the public.”

The new Constitution mandates that politicians declare their assets and liabilities prior to and after leaving office to see if they have become “unusually wealthy.” If found guilty of financial wrongdoing, an individual can be expelled from politics for five years. Under this new provision, Shinawatra was accused of concealing assets—an alleged violation of Article 295 of the new Constitution. The prime minister was tried by the newly established Constitutional Court, which found him guilty, 8 to 7, even though he entered office in a landslide election in 2001. Shinawatra is a former business tycoon who became rich through his highly successful transnational telecommunications conglomerate. There was no allegation that the politician had gained unusual wealth through political office; in fact, he had lost money. He was instead accused of not accurately declaring his initial assets.

Decentralization and reform of the administrative structure are two other major reforms in the political arena. For decades, Thailand has been a bureaucratic polity with a highly centralized administrative system with over two million civil servants. With assistance from the World Bank and the involvement of the Thai Civil Service Commission, major administrative restructuring occurred with an emphasis on reducing the size of the bureaucracy. No draconian measures were adopted; instead an early retirement scheme was put in place, appropriate for a country with a significant aging population.

Economic and Financial Reforms

Reforms have also occurred in the financial sector, the origin of the economic crisis. These have been succinctly described by scholars at the Institute of Developing Economies in Tokyo. In October, 1997, two new institutions were created to take responsibility for restructuring and consolidating financial institutions: the Financial Restructuring Authority (FRA) and the Asset Management Corporation (AMC). Of 58 finance companies, 56 were closed and liquidated. In August 1998, the Bank of Thailand and the Ministry of Finance began restructuring the banking system. Some banks were taken over by international investors. Other banks were merged, and some sold major stakes to international investors in the Netherlands and Singapore, among other countries. The Bangkok Bank of Commerce was closed, and financially viable banks such as Bangkok Bank and the Siam Commercial Bank were more tightly and closely regulated. As a result of these reforms, the percentage of non-performing loans has decreased to a current level of 15.1 percent for Thailand’s financial sector.

Interestingly, some Thai skeptics and conspiracy theorists decried the government for “selling out” to the IMF and the World Bank, for allowing international investors to take advantage of the economic crisis to acquire many Thai assets at bargain prices. Others, particularly some non-governmental organizations and “rice roots” groups, were highly critical of the social costs of austerity measures imposed by IMF conditional ties.

On December 5, 1997, just several months after the outbreak of the economic crisis, King Bhumipol Adulyadej called for a new system of setakit popieng, or educational self-sufficiency, in his annual birthday address to the country. A rapid growth in materialism and luxury consumption were clearly symptoms of the economic crisis, as well as being contrary to Buddhist ideals of modesty and simplicity promoted by the state. The King thus asked the nation to rethink its approach to economic development. As Bhumipol is universally loved by the Thai people, his message for a new economic mindset was widely heard and influential.

Educational Reform

The new 1997 Constitution also mandated educational reform. Prior to the crisis of 1997, Thailand’s social development had lagged behind its economic development. Thailand fared poorly on various international indicators of competitiveness despite spending a remarkably high 25 percent of its government budget on education. The new Constitution required that a new Education Law be passed by August 1999, providing for 12 years of free education, nine years of compulsory education, and a decentralized system of educational administration. The new National Education Act became law on August 19, 1999, and was amended on December 19, 2002. Grants from the Asian Development Bank (ADB) provided funding for applied research and pilot projects in support of educational reform. Also, the Thai government and the ADB collaborated on an extensive student loan fund that helped students and private schools, both at the secondary and university levels, cope with the economic crisis. An Office of Education Reform (OER) was established with a three-year tenure to implement the new National Education Act. Another element of the reform was a shift away from traditional teacher-centered to more active student-centered learning to help develop problem-solving abilities and creativity.