When Thailand went bankrupt, there was a great deal of bad assets, in the US$ multi billions. IMF stepped in, and ordered the assets sold. Since then there have been a great deal of controversy. Even the pro-establishment TDRI, says the assest were sold at the wrong time and got too little return. Since then the “too little return” went to court for corruption. The court found those who were directly involved in the sales guilty, but of course, being part of the establishment, the court let them off with little punishment, even the damaged is in the US$ billions.
Then the DSI or Thai FBI stepped in, and found cause to levy charges on the Democrat Party leaders, like former Dems PM, Chuan for breaking rules, and then sent the case to the anti-corruption unit. The case sat there for years collecting dust. The Red Shirts recently, pressured the anti-corruption to proceed with the case, before expiration, as it is feared, the court will rule another case from the anti-corruption unit, on the Democrat Party, expired. Within days, of that pressure, the anti-corruption unit said Chuan is cleared from wrong doings.
(Up-Dated) The anti-corruption unit have thrown the entire disposal of de-funct asset out, with a no grounds ruling and the courts have also thrown out the case, for parts of it that have made it to the courts.
A local Thai neutral press, M-Thai, is calling for Thailand‘s anti-corruption body, to move forward with a corruption case involving the Democrat Party, caught in case that was frozened for years after the Thai DSI or FBI found the corruption.
The case, again found to have cause of corruption by the Thai FBI, will expire next year.
The amount of damage to Thailand in this Democrat Party case, is staggering, at around US$10 billion to US$20 billion.
M-Thai reports, that under the Democrat Party, after the financial melt-down of Thailand, saw assets from defunct firms being nationalized and auctioned off, with the final figure of the assets, fetching about quarter of its value.
Many Thai thus filed a complaint with the Thai FBI, that the process of selling off the assets, did not follow regulations, and offered the foreign buyer of the assets, a highly advantageous acquisition price.
The Thai FBI accepted the case.
It found that the disposal of the assets, broke about 10 regulations, and sent the case to the Thai Anti-Corruption Unit. The finding by the Thai FBI, is confirmed by the Attorney General Office for bankruptcy.
The Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.
The crisis started in Thailand with the financial collapse of the Thai baht after the Thai government was forced to float the baht (due to lack of foreign currency to support its fixed exchange rate), cutting its peg to the U.S. dollar, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.
Though there has been general agreement on the existence of a crisis and its consequences, what is less clear are the causes of the crisis, as well as its scope and resolution. Indonesia, South Korea and Thailand were the countries most affected by the crisis. Hong Kong, Malaysia, Laos and the Philippines were also hurt by the slump. The People’s Republic of China, Pakistan, India, Taiwan, Singapore, Brunei and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.
Foreign debt-to-GDP ratios rose from 100% to 167% in the four large Association of Southeast Asian Nations (ASEAN) economies in 1993–96, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13 to 21% and then as high as 40%, while the other northern newly industrialized countries fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.
Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia, however. After 30 years in power, President Suharto was forced to step down on 21 May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The effects of the crisis lingered through 1998. In 1998 the Philippines growth dropped to virtually zero. Only Singapore and Taiwan proved relatively insulated from the shock, but both suffered serious hits in passing, the former more so due to its size and geographical location between Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover.
The initial stages of Thailand’s financial system reform consisted of the suspension of 58 of 91 finance companies: 16 in June 1997 and another 42 in August that year. These suspensions and eventual closures were intended to clearly separate weak financial institutions from strong ones, in order to strengthen public confidence in the financial system. The Financial Sector Restructuring Authority (FRA) was set up to take care of the asset sale of these finance companies, while the FIDF has provided deposit guarantee. In December 1997, the FRA allowed two of the 58 suspended companies to resume their businesses and formally shut down the rest. In the case of banks, the Bank of Thailand had intervened in 5 commercial banks, cutting the number of banks in the system to 13. Three banks are now majority owned by foreign strategic partners and three others are to follow suit by the end of the year, with a combined 16% market share in loans, two will remain state-owned with 27 % market share, and only five in private hands with 57 % market share. Thai bankers are now wondering whether they should conduct business in English or in Thai at Thai Bankers’ Association luncheons and meetings!
The FRA and the Public Asset Management Corporation (PAMC) were charged with managing and disposing of the assets of the closed finance companies, totaling 860 billion baht (about USD 23 billion). As the previous speaker – Mr. Amaret Sila-On – mentioned, the FRA has played a crucial role in disposing off assets of these defunct finance companies. In addition to closing down weak financial institutions, the government has initiated several major consolidations among other banks and finance companies to strengthen their operations. Krung Thai Bank was merged with First Bangkok City Bank (FBCB) and Bangkok Bank of Commerce (BBC) in 1998. All the assets and liabilities of FBCB, and ‘good’ assets of BBC, were transferred to Krung Thai Bank, where the Financial Institutions Development Fund will compensate for the loss against impaired assets of FBCB using yield maintenance and gain/loss sharing scheme.
The FRA auctions yielded a disappointingly low recovery rate of only a quarter of the face value. The FRA defends itself by pointing to low or lower returns obtained on such asset sales from various asset disposal agencies in other countries. Be that as it may, the main problem with the FRA lay rather with the timing of these sales, rather than corruption or mismanagement. This arose from the Thai legal system, which was really not up to the task of enforcing loan contracts in a satisfactory manner. In the past, that had not mattered much, as growth would cover up the consequences of mis-investment and little recourse to the bankruptcy courts was needed. But it was becoming increasingly clear as time went on that this time around, the scale of the downturn would not be like anything seen before, and the duration will also be much longer.
Under the then current legal system, to enforce or foreclose on loan contracts would take a long time. Legal reform was therefore essential, and was soon put to the parliament, but a long battle would be fought over it (see below). Meanwhile, the FRA auctions were proceeding, with the bidders not yet clear whether there would be any reform and what form it would take. With such uncertainty heavy discounting was to be expected. Another feature of this solution to managing the bad financial assets was that the new creditors did not perform any banking functions. While some debtors were no doubt due to disappear from the scene in any case, many others could be nursed back to health, 24 given time and, above all working capital. It was clear that neither would be forthcoming from the bid winners. In reaction, government policies toward bad loans in the next few years would be obsessed with the idea of keeping the loans in the hands of the original lenders for as long as possible.
Damage from the financial crisis lingers today.
Bangkok Post: Bank of Thailand (BoT) governor Prasarn Trairatvorakul has opposed the cabinet’s decision to shift the responsibility for 1.14 trillion baht in debt stemming from the economic crisis in 1997 from the Finance Ministry to the central bank. Bank of Thailand governor Prasarn Trairatvorakul “Transferring the debt might affect the BoT’s work. “Moreover, this debt was not created by the BoT but stemmed from the government’s policy to use the central bank as a mechanism for addressing the problem,” Mr Prasarn said on Wednesday. He said the confidence of foreign investors would also be affected. “The BoT’s financial status is not as strong as the government understands it to be,” the governor said. The central bank currently has a negative equity of more than 400 billion baht and transferring the responsibility for the additional debt would add substantially to this, he added. The cabinet yesterday agreed to transfer responsibility to the BoT for 1.14 trillion baht in debt in a move to cut the government’s debt repayments by up to 70 billion baht per year and give the Finance Ministry greater leeway to undertake new borrowing to finance future investment programmes.
Apr. 8 2002 An important chapter in Thailand’s economic history closed last week after the last of the 56 defunct finance companies was ordered into liquidation by the courts. It marked the beginning of the end for the Financial Sector Restructuring Authority, the quasi-public agency set up in 1997 to oversee the defunct finance companies and handle creditor claims. What was achieved? Through asset auctions and debt restructuring, the FRA was able to recover 35.3 percent of the 748 billion baht in assets under care for creditors. Another 120.8 billion baht in assets remained tied up in the courts.
Inside the deal?
Goldman Sachs Group Inc., in conjunction with the GE Capital Corporation, has agreed to pay 23.6 billion baht, or $645 million, for about a third of the loans left over from Thailand’s unsuccessful auction last week of assets seized from defunct financial companies.
Goldman, Sachs (Asia) Finance will pay 21 percent of face value for several thousand loans, most backed by land and buildings, which it agreed to buy after private talks with Thailand’s Financial Sector Restructuring Authority, which is managing the liquidation.
Goldman was among the most active bidders at the auction on Tuesday of 13,000 loans, which have a total face value of 384 billion baht. But the restructuring authority rejected more than 90 percent of bids as being too low.
The unsuccessful auction last week came as Thailand struggles to recover from its deepest recession in three decades. Two-thirds of the country’s finance companies have been closed in the last year, most being those whose loans were put up for auction.
The liquidation is a condition of the $17 billion Thailand economic bailout program arranged in August 1997 by the International Monetary Fund.
Goldman, along with GE Capital, the financial services arm of the General Electric Company, agreed to drop any contracts made before the auction with original debtors seeking to buy back their loans at a steep discount, said Amaret Sila-On, the chairman of the restructuring authority. This avoids the appearance of collusion.
Goldman will also pay more if the recovery rate on the purchased loans reaches a certain level, which was not disclosed. Mr. Amaret said this profit-sharing arrangement was expected to increase the Government’s long-term return on the loans to 30 percent to 40 percent of face value.
Two closely held Thai companies also revised their offers and paid a combined 3.7 billion baht, or 26 percent of face value, for two other lots of loans.
Thailand is still stuck with three-fifths of the seized loans — with a face value of 223 billion baht — which it will repackage and auction again in February. A state agency, the Asset Management Corporation, will be ”the bidder of last resort” at that auction.
Thailand’s sales are being closely watched across the region as Malaysia, South Korea, China and Japan weigh similar programs. They also provide benchmarks for Thailand’s moribund real estate market.
The auction itself attracted 12 bidders, including Morgan Stanley Dean Witter, Starwood Financial Trust and Lehman Brothers Holdings Inc. But the authority and the Finance Minister, Tarrin Nimmanahaeminda, rejected almost all bids as not meeting the unofficial floor price of 25 percent of face value. Mr. Tarrin said the Government would create incentives, mainly for local businesses, to attract higher offers.
Bids could also be better next time around because of the asset corporation’s participation, the minister said. The asset corporation was excluded from the earlier auction.
The Government’s target price for the rest of the assets is 40 percent of face value, the Finance Minister said.
FRA members charged over sales:
At least five corporate entities and board members of the Financial Sector Restructuring Authority (FRA) are to be notified of charges against them over the post-crisis sale of the assets of 56 defunct finance companies, the Department of Special Investigation says.
The department concluded the FRA broke the law while selling off the assets seized from the 56 defunct finance companies.
It was investigating why the FRA did not separate good assets from bad assets. The selling of the assets in a pool was considered a major reason why Thailand received only Bt190 billion from the sale when the principal value was Bt851 billion.
It has also reviewed five more cases brought up by those affected by the asset sales. One of them involves Lehman Brothers Holding Inc, which bought assets with an outstanding value of Bt24.6 billion at a bid price of Bt11.5 billion.
Vit Jirapaet, director of the Bankruptcy Case Department, said the DSI had interrogated 106 individuals involved in the Lehman Brothers-related case, senior state officials and experts to find out if there were conflicts of interest and any intention to avoid taxes.
Billions of damage off lightly?
Former FRA bosses given suspended prison terms
The former chairman of the Financial Sector Restructuring Authority (FRA), Amaret Sila-On, and former FRA secretary-general Vicharat Vichitvadakan have received two-year jail sentences for malfeasance in the agency’s sale of assets from 56 defunct finance companies.
The jail terms, however, have been suspended for three years.
Amaret, the former commerce ministry in the Anand Panyarachun administration, said he would appeal against the verdict.
Public prosecutors indicted Amaret and Vicharat on September 2008. Vicharat is also the former president of the Stock Exchange of Thailand, Lehman Brothers Holding Inc, Lehman Brothers (Thailand), Global Thai Property Fund and property fund registrar One Asset Management Co.
Based on investigations by the Department of Special Investigation, Amaret and Vicharat were charged with assisting Lehman Brothers evade taxes on assets it purchased at the FRA auction in August 1998.
Lehman Brothers won auctions for 11.5 billion baht out of a total of 24.62 billion baht worth of corporate loans, putting up property as collateral on Aug 13, 1998.
Prosecutors said this could constitute a conflict of interest and lack of transparency as Lehman Brothers (Thailand) was appointed as an adviser to the FRA.
Lehman Brothers Holding Inc was required to seal the deal within seven days, or by Aug 20, 1998, together with an initial payment of 20% of the purchased assets value, or 2.3 billion baht. The company would also have been subject to tax if it had signed the deal.
However, the US investment banking firm failed to sign the deal, only placing a 10-million-baht pledge for the purchase.
Instead, the company set up the Global Thai Property Fund to enter into an agreement with the FRA on behalf of Lehman Brothers, thanks to a regulation issued earlier by the FRA, under the guidance of its adviser, Lehman Brothers (Thailand).
The court said this could be considered as an attempt to evade taxes via the property fund, which would be tax-exempt by law.
The prosecutors accused Amaret and Vicharat of negligence and malfeasance by allowing Lehman Brothers to set up the property fund to enter an agreement with the FRA.
The Criminal Court said Amaret and Vicharat were guilty of failing to collect the 2.3-billion-baht initial payment from Lehman Brothers Holding and allowing the US company to set up the property fund to enter the agreement on behalf of it, which the court views as an act that favoured the US firm and caused damage to the FRA.
The court sentenced the defendants to two years in prison and fined them 20,000 baht each. The jail sentence is suspended for three years, in consideration of the defendants’ ages. Amaret is 79 years old and Vicharat is 65.
Anti-corruption unit inner workings?
Thai Intelligence News
The Thai anti-corruption unit, long known with the “In-Crowd” in Thailand, as being part of the Elite establishment rule of Thailand, is going where no anti corruption units globally have gone before, and is now advertising its “Corrupt Nature” in plain sight.
Recently, the unit came out to say Yingluck‘s rice scheme and others have the potential to cause corruption and threat Yingluck of cases of corruption on them, even before real corruption took place. Then after that, as Yingluck appointment of Thailand’s top spy was ruled wrong by the administrative court, the unit came out to advise Tawil, to his legal recourse at the unit, even before anyone lodge the case with the unit, and as Yingluck may appeal the decision at higher courts. Then right after that, as a case against Abhisit Dems, related to the sales of defunct asset, have sat collecting dust at the unit for years, got pressured on the unit to proceed with the case, local press reports the unit just came out to say the Dems leader, Chuan, whose government handled the asset sales, that Chuan is cleared from wrong doings. The damage, is in the US$ billions. Then the latest, as police is still investigating the details of a luxury car import scam, potentially linked to a Yingluck minister son, now the press say the unit is on the case.
The Thai anti-corruption unit is a colorful comical bunch, most neutral analyst says, with a long line of linkages to the 2006 coup government, that saw Thaksin as the evil man to get rid of, and the coup set the mandate for the anti-corruption unit, to go after Thaksin corruption. Even Transparency International findings, that Thaksin is less corrupt than the 2006 coup government or the military installed Abhisit government, did not see the unit go after the 2006 coup government or Abhisit. In fact, for example, some former unit people, who left the unit, is making a career out of attacking the Yingluck government, like Kaewsan, and the 2006 Coup government Prime Minister, well known corruption, in massive encroachment of a mountain that is part of a national Forest reserve, to build a resort, escape the unit prosecution for accountability. Even several well known corruption case by Abhisit government, such the vocational school equipment scandal and the police station scandal, in the billions, have thus far see the unit making little statement on them.
How can such a unit with such a behavior exists in Thailand, in these day and age? How can anyone, who dislike corruption, accepts the units workings? Well, after every coup in Thailand by the Elite establishment, have saw subsequent moves by the in power, to accused the ousted government as being corrupt, as a rationale for the coup, as a way to legitimize the power grab, which is an action of ultimate corruption. So the Thai people, many of them, cannot face the real facts, but hide behind a mask of faulting others unjustly of corruption, so as to rationalize their philosophical position.
Until the Thais stop this childish political play, of “Politicizing Corruption” such as being exhibited by the anti corruption unit, corruption will never disappear, or lessen, from Thailand. And this can partially explain why, in poll after poll in Thailand, say the Thai people, can accept corruption, as there is clearly a “Double Standard” that everyone can see and have come to accept corruption “As A Game.”