THE FAD for emerging markets took a tumble in the past week when the economy of Thailand, a world growth leader, did. Some of it sounds like the Maryland savings and loan scandal of the 1980s, some of it like the banking embarrassments following and some of it like Mexico's peso collapse of 1994.
Thailand's economy vied with China as the world's growth leader but growth slipped under 7 percent last year and the current account deficit was 8 percent. The financial services industry just grew and grew. Much of it was shoving money into construction of more buildings to house more companies. The supply went way ahead of demand and developers couldn't pay back their loans.
A major bank failed and was taken over by the government a year ago. Three of its executives cannot be prosecuted for corruption because of a one-year statute of limitations. The government fired three officials of the central bank for insufficient regulation of that case. The governor of the central bank was rumored to be quitting, but denied it.
On Monday, the Bangkok stock market suspended trading for a day in bank and finance company shares, a third of its capitalization. The national rating agency threatened to downgrade banks. The finance ministry is buying shares of 10 bank and finance companies and forcing shotgun marriages. The stock market dipped. So did the currency, called the baht. Bank depositors started a run. Analysts said half the amount of property loans on banks' books are non-performing, about one-tenth of the gross domestic product.
This is a growing pain. While foreign companies try to figure out what industries will feel the repercussions, it's clear that Bangkok was overbuilt while infrastructure to hook the rest of the country onto prosperity lags behind. The Thais will overcome this in time.
But it is a useful warning to the rest of the world that rapid growth is an untidy business and the herd instinct can make small problems huge. The International Monetary Fund says Thailand is taking the steps to prevent a currency collapse on the Mexican model. But Thailand is not the only tiger that can hiccup.
Pub Date: 3/09/97