ECONOMICS: IMF in Asia
Far Eastern Economic Review
May 14, 1998
Fund Under Fire:
The IMF has never flown higher-nor drawn so much flak; the debate is
about more than fiscal policy -- it's about national sovereignty in
borderless world economy
By Michael Vatikiotis in Bangkok
* With Salil Tripathi in Jakarta and Kuala Lumpur
The International Monetary Fund, in the words of Newt Gingrich,
speaker of the U.S. House of Representatives, is a "self-selected
oligarchy" with no accountability. With that ringing phrase, he pulled
the plug in early May on legislation requesting an $18 billion capital
increase for the IMF, putting paid to White House hopes of getting quick
Gingrich may agree to let the request back onto the House floor
few months' time -- but not before a series of congressional hearings
that will focus not on Asia's financial fires but on the fire-fighter
Politicians in the United States, the IMF's biggest contributor,
aren't the only ones questioning the Fund's role these days. Overseeing
the restructuring of the Thai, Indonesian and South Korean economies has
given the IMF a high profile, but has also amplified pressure from both
backers and critics -- some of whom want it to do more, others less.
In the following articles, IMF Deputy Managing Director Stanley
Fischer responds to the main criticisms levelled at the Fund, while
* correspondent Salil Tripathi reports on the IMF's own emerging
its future role -- as less of a fire-fighter and more of a global
But we start with a different perspective -- the one seen from
As Michael Vatikiotis and Tripathi report, many people in the countries
the IMF heed feel their national sovereignty was violated in the
process by the Fund's policy dictates. This resentment is kindling a
nationalist backlash against the IMF and the United States -- even in
Thailand, which has been held up as a model student.
For now, the backlash runs to little more than foot-dragging
foreign buyouts. But longer term, it could affect regional politics and
Asian capitals' relations with Washington.
Suave, well-dressed and articulate, Krikchai Charoen Rajapark
epitome of the modern Thai businessman. With 10 years of higher
education in the United States behind him, he now runs a Bangkok college
that teaches business and technology management. So his view on the
International Monetary Fund's role in restructuring Thailand's economy
comes as something of a surprise.
"The IMF is managed by the U.S. government," he insists. "They
plan to make the country bankrupt so that American companies can come
and buy everything very cheaply."
Krikchai is not alone in harbouring deep suspicions of the IMF's
motives. In Jakarta, the owner of a successful food company, an
Indonesian-Chinese with a degree from a top American university, wonders
if the Fund is part of a Western "conspiracy to prevent the rise of
Such views may be extreme, but they capture a growing mood in
Southeast Asia. As the economic crisis forces more companies to close
and strips people of their wealth, many of the victims are focusing
their anger on the IMF. Businessmen complain that IMF-prescribed
tight-money policies are strangling their economies. Government
officials mutter that the Fund infringes on national sovereignty by
conditioning aid on changes in domestic policy.
In Indonesia, for example, the Fund's demand for the abolition
monopolies such as Bulog, the rice-distribution agency, is seen as
interference in the way the state feeds its poor. Indonesian indignation
at IMF-mandated reforms prompted Industry and Trade Minister Bob Hasan
to declare in April: "This is the Republic of Indonesia, not the IMF
Republic." Even Indonesians who are not cronies of President Suharto
chafe at the January 15 photo of Suharto meekly signing the bailout
agreement under the stern gaze of IMF Managing Director Michel
Camdessus. "When I saw Camdessus folding his arms over the president,
that was it," grumbles a businessman in Jakarta. "No matter how much I
resent the monopolies, I am an Indonesian first."
Senior Thai officials express similar frustration with the IMF's
bitter prescriptions -- but only in private, fearing that the markets
will punish any sign of resistance to reform. The Thai press, however,
has no such qualms about questioning the market forces widely blamed for
causing the crisis. "Perhaps the market can be a great wealth-creating
machine but not so great when it comes to building a humane and just
society," said a May 4 editorial in The Nation. "Perhaps while we speak
out against authoritarian regimes we should also be concerned about the
dictatorship of the market."
Whether such sentiments translate into action remains to be
the moment, it's mainly talk. Asian efforts to come up with alternative
rescue plans have yet to bear fruit, leaving crisis-hit countries with
little choice but to play by the IMF's rules.
However, some analysts warn that Asian resentment could have
longer-term consequences: A backlash against the United States, which is
seen as the main force driving the IMF's interventionist style, and
resistance to the economic globalization that has exposed countries to
harsh outside pressures. "Everyone needs America now. But once the dust
settles down, pan-Asian nationalism will arise," predicts Eric Teo, a
Singaporean former diplomat who is now business-development director for
France's Suez Lyonnaise des Eaux group.
If he's right, a crisis regarded by many Western economists
opportunity to speed up globalization may be breeding the opposite
reaction. Certainly, the flight of foreign capital has reminded Asians
that openness can be a two-edged sword. It was even less pleasant to
hear the IMF prescribe invasive surgery to heal the wounds.
A nationalist backlash was visible early on in South Korea,
was mitigated by President Kim Dae Jung's insistence that the country's
future relied on an open economy. Now, surprisingly, the clearest signs
of nationalist resentment can be found in Thailand, which is considered
the IMF's best student.
Thailand's influential King Bhumibol Adulyadej provided the
hints. "We have to go backwards, have to be careful and have to return
to unsophisticated business," the king said in December. Many Thais
interpreted his words as a call to preserve Thai sovereignty, perhaps
even to abandon efforts to compete in the global economy.
The Thai business community was already fuming over the high
rates prescribed by the IMF. (Powerful companies such as the Charoen
Pokphand group and Bangkok Bank are warning that if interest rates don't
come down, they will withdraw financial backing for political parties in
the government.) Coming on top of that, the new nationalist spirit has
fuelled opposition to foreign ownership of state enterprises that the
IMF wants privatized. Civic action groups are gearing up to fight
The timing of foreign pressure on Thailand to open its economy
coming when the economy is at its weakest -- reinforces the belief that
the IMF is a cover for Western capitalists plotting to buy Thai assets
on the cheap. "We have to tell Thai people that it is not our express
purpose to sell everything to foreigners," says Deputy Prime Minister
Much of this alarm stems from the importance of proprietorship
business community dominated by people of Chinese descent for whom
family security and corporate assets are indivisible. "It's our culture
not to risk what our great-grandfather built," says Vuttichai Wanglee,
the fourth-generation heir to the troubled Nakornthong Bank, which is
casting around for foreign buyers.
Faced with little option but to sell, many struggling businessmen
have resorted to nationalist breast-beating. Krikchai, the businessman
who accuses the U.S. of steering the IMF, is only one of them. In
addition to running a college, he owns a five-star hotel, where, in late
April, hundreds of middle-class executives turned up to hear a panel of
academics talk about "economic war" with the West and the erosion of
In intellectual circles, this sentiment has resulted in some
rhetoric. Take a recent edition of the serious socio-political journal
Vithaithat (Vision), titled "Thais in the Age of Slave Culture." By
blindly following foreign models of development, the preface argues,
Thai society is changing to a "slave society, modern-style."
Disaffection with market forces is even prompting an ideological
rethink. Students at Bangkok's conservative Chulalongkorn University
have formed a Marxist discussion group. And even some businessmen are
entertaining doubts. "Perhaps we should take a closer look at China's
concept of a social market economy," suggests Sophon Supaphon, president
of state-owned Bangchak Petroleum.
This may sound far-fetched in a country which still bans communism
and whose reliance on Western markets far outstrips its trade with
China. But Southeast Asia's traditional response to dominance from one
direction is to restore balance by moving in another. If the economic
crisis in Asia is reaffirming the power of the U.S and the influence of
market forces, some analysts see China, with its gradualist approach to
market opening, as the main counterweight.
Beijing has been quick to score points by offering aid and trade
boosting diplomatic and security ties. Two high-level Chinese trade
delegations visited Asean countries at the end of April. Meanwhile,
Malaysian Defence Minister Syed Hamid Albar has said that his country is
considering holding bilateral security talks with Beijing.
The problem is that Beijing lacks the economic and military
play an effective role in the region. China's contributions to the IMF
bailouts for Thailand, Indonesia and South Korea -- which together
totalled more than $100 billion -- amounts to only $1.6 billion. Trade
and investment are slowing because of the corporate debt burden in Asia
and China's own economic problems.
Besides, talk of ideological rethinks and new alignments is
remote from the reality of companies heavily in debt and banks badly in
need of fresh capital -- from sources foreign or local. Moreover,
attempts by Asian governments to fashion an Asian response to the crisis
have met with disapproval from the markets and lukewarm regional
So for now the realistic, if grudging, assessment is that there's
alternative to the IMF; indeed, the only alternative is isolation.
"You'd have to be like Burma or North Korea," says Mohammed Ariff,
executive director of the Malaysian Institute of Economic Research. "If
you want the fruits of liberalization and globalization, you have to pay
the cost. You can't blame the IMF for problems you have created."