Good Start

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For a taste of how Thailand is coping during these recessionary times, step inside the IMF Kitchen. Dechatorn Henchaichone, an idle construction contractor (no work for him these days) opened the simple, 10-table restaurant in July in a vacant shop that once sold $2,500 car stereos (no market for those anymore). Dechatorn's electrical engineer mops the floors. His foreman waits tables. The bookkeeper handles the cash box. It's quite a step down for a firm that had million-baht contracts to install electrical wiring and air-conditioning in high-rises. "Thai people need to be reminded that the good times were not for free, that they came with a price," says the electrical engineer, Thanakorn Punyaratyuenyong. He is paying dearly himself for the profligate years. He stopped driving his car and now rides the bus, he lost his house when the bank foreclosed, and he has postponed his marriage.

The recipe at the IMF Kitchen is much like the one the IMF imposed on the country. One, reduce spending (the employees took 40% pay cuts). Two, stop borrowing (Dechatorn and his wife invested less than $1,000, bringing the dishes, cutlery, pots and even the cooks from their home). Three, reform the financial institutions (the staff is drawing up a new plan for the contracting business). Is it working? The eatery, popular with workers down-scaling their lunch habits, is breaking even. "It's not the IMF's fault that Thailand seems to be standing still," says Dechatorn. "To me, IMF means I Am Fine."

Is the country itself in fine shape? Not quite. The results in Thailand, a model student of the IMF regimen, are much like those at the IMF Kitchen. The reviews are first-rate; the returns, so-so. The currency has been stable for several months, the stock market has flickered with new life in recent weeks and the country has avoided the unrest that has erupted elsewhere in the region. Foreign reserves are growing, though that's largely because imports have declined. Exports have not picked up significantly, and the jobless ranks have swelled to more than 2 million, or 8.5% of the workforce. Although interest rates have started to fall, banks are reluctant to lend. Domestic consumption is so low that even with a weakened baht, inflation remains in check. Economists are cautious about when recovery will take place, expecting a GDP contraction of 8% this year and 2% in 1999. "It's like the chicken and the egg," says Thaksin Shinawatra, a telecom tycoon who has organized a political party around the idea that Thais, not the IMF, should fix the economy. "The government thinks if it revives the banks, they can lend to the real sector and productivity will bounce back. I think we need to revive the real sector first."

Indeed, the IMF's normal approach doesn't involve economic stimulation. "There was very little choice in terms of having reserves replenished," says Abhisit Vejjajiva, a top adviser to Prime Minister Chuan Leekpai. "Plus, the government had lost credibility, both with people here and the international community. Any economic package needed assistance from someone else [like the IMF] to gain credibility." Chuan and his team, which came to power in November, took its IMF medicine--low interest rates, budget cuts, tax hikes and bank reform--while blaming the country's ills on the previous government, on whose watch the treasury was nearly depleted in an effort to prop up the baht. The prescription has left the economy numb. To rev things up again, the government is liberalizing foreign-investment laws. Plans to privatize state companies, including Thai Airways and the utility monopolies, have stirred nationalistic impulses. Amarin Khoman, chairman of conglomerate Thai Star, wrote in the Bangkok Post that the IMF Letters of Intent should be called "Letters of Surrender."

But as a recipient of the IMF's billions, Chuan & Co. aren't making even the mildest of criticisms. "The hardship is intensifying, I know," says Finance Minister Tarrin Nimmanahaeminda. "But we had to stabilize the exchange rate and reform first." Such acquiescence has served its purposes, for Thailand has been able to play the responsible and repentant student even as it chips away at fundamental planks of the IMF plan. For example, Bangkok persuaded the fund to scrap its fiscal-surplus requirement and allow a budget deficit. It also won endorsement of a plan to issue bonds to recapitalize failing banks in exchange for having the government take over their management. "The IMF underestimated the severity," says an economic adviser to Chuan. "So naturally they made mistakes. Now we try to correct them."

In the meantime, thousands of Thais have lost their jobs. To the destitute, measures to pump up the economy now seem tardy. "By waiting, they have caused real damage to the economy that will be difficult to patch up quickly," says Kamal Malhotra, co-director of Focus on the Global South, a Bangkok policy research group. Still, many Thais, like engineer Thanakorn at the IMF Kitchen, are displaying extraordinary patience. "We just have to make the best of today and believe that tomorrow will be better," he says. Chuan's IMF-friendly government is hoping it doesn't run out of tomorrows before such patience wears thin and the lines at the IMF Kitchen grow longer.