The day the Thai economy crashed
By Jonathan Head
BBC News, Bangkok
On the morning of 2 July, 1997, the Bank of Thailand finally gave up its eight month-long battle against local and international speculators, and abandoned the peg that tied the value of the Thai baht to the US dollar.
Its desperate defence of the peg had all but exhausted the $40bn in foreign reserves; less than $3bn remained.
Thailand, a country that had enjoyed four decades of almost uninterrupted economic growth, and was admired all over the world as one of the Asian Tigers, was broke.
The country's decision set off panic throughout the rest of South East Asia, as investors started pulling out the billions they had bet on the miracle economies of the East.
It set off even more panic among local entrepreneurs.
Many had borrowed heavily in US dollars to cash in on the frantic property boom.
They did so to get around the high interest rates inside Thailand, raised by the central bank to support the currency and curb over-investment.
They had believed the government's promise that it would never abandon the currency peg.
Overnight their debt payments shot up, and they frantically bought dollars to try to cover their loans, putting even more pressure on the baht.
By the end of 1997 it had slid from 25 to the dollar, to 58.
Sirivat Voravetvuthikun was one of those swept up in the thrill of speculation.
He had played the stock market, and caught the property bug. He borrowed heavily to develop a luxury resort in a national park east of Bangkok.
"I was an honest businessman, but I was greedy," he told me. "I had 100 million baht, I wanted a billion, so I borrowed a lot - at that time I was paying 17% interest, which brought me down on my knees."
New attitude to life
Sirivat's response to his financial ruin made him one of the emblematic figures of the crisis.
He and his wife resorted to making sandwiches, and sold them on the streets of Bangkok.
Ten years on, he has built it up into a small catering business - but, unable to borrow, he has little chance of becoming the millionaire he once was.
He does not seem to mind, though.
"This is a real business, that deals with real people," he said. "It's not like a bubble business."
The crash nearly wiped out Vikrom Kromadit as well. He had built one of Thailand's most powerful companies, through developing huge industrial parks for the foreign manufacturers who had been pouring into Thailand during the late 1980s and early 1990s.
"My bankers would come to me after the devaluation and say: 'Vikrom, can you pay back just a little?', and I told them I did not even have enough to pay my staff salaries," he told me.
Vikrom's Amata Corporation has bounced back, but he has radically changed his philosophy.
"I no longer run the day-to-day business of the company. I am just the dreamer, the planner, the trouble-shooter. I work only one day every two weeks, and most of the time I stay outside Bangkok, reading and writing," he said.
The crisis left deep scars on the Thai psyche, after four decades in which its people had known only economic success.
There was the search for scapegoats, initially foreign speculators and the International Monetary Fund, whose rescue package required some painful medicine for the Thai business community.
Later the central bank governor, Rerngchai Marakanond, was prosecuted and fined $5bn for his negligence in depleting Thailand's foreign reserves.
There was an upsurge in nationalist sentiment, and demands for political reform.
That led to the political triumph of Thaksin Shinawatra, a charismatic telecoms tycoon who weathered the crisis and went on to form a new political party, Thai Rak Thai.
He won two record election victories in 2001 and 2005, largely on his promises to lead Thailand out of the economic gloom and make it a winner once more.
His high-handed, provocative style of government eventually drove the military to push him out in last year's coup.
So have lessons been learned? Could a repeat of the financial mayhem in 1997 occur?
"Thai people seem to forget things very easily," said Sirivat Voravetvuthikun. "Today if you ask people 'Do you remember the 1997 crisis?', they don't remember."
Certainly the banking and financial system is better regulated now, and crucially, the currency now floats, so the likelihood of such a dramatic devaluation is now remote.
If anything, Thailand is suffering the opposite problem today - too much foreign currency coming in to buy low-priced Thai assets, thus strengthening the baht and hurting exporters.
The economy has recovered, but not to the ebullient pre-1997 levels.
It now chugs along at around 4% a year.
It is true that there is plenty of construction underway again in Bangkok, and perhaps a little of the property fever of the 1990s: in the city centre most of the half-finished concrete shells, 'monuments to speculation', that were left after the crash, are now being completed.
But just outside the capital is the massive Muang Thong Thani development, a would-be satellite city of 26 tower blocks that is still only around 20-30% occupied.
The fact that no-one has yet been willing to put up the money to finish Muang Thong Thani is a telling indicator of the caution many investors now feel about betting on Thailand.
The year of 1997 also marked the time when the 'miracle economy' baton was passed on to China, India and Vietnam.
Thailand, like other South East Asian countries, is struggling to compete with these star performers of the global economy.
South East Asia now gets just a fraction of the foreign investment that goes into China.
"We don't invest enough in our human resources," said veteran economist Amar Siamwalla, from the Thailand Development Research Institute.
"We don't put out enough engineers, technicians, and we rely too heavily on investment by foreign multinationals for our industrial development," he said. "Thai investors prefer to put their money in property."
All the betting now is that any future financial crisis on the scale of 1997 will not start here, but in China, India, or even the United States.
South East Asia's moment in the sun has probably passed.
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The day the Thai economy crashed