Speech Archives in English (Part 4: Sections 10 - 11) - นายอานันท์ ปันยารชุน

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Asian Economic and Business Outlook for the New Millennium

Keynote Address to
The Eight Pacific Basin Finance Economics and
Accounting and the Second ADSGM
International Conference
by Mr. Anand Panyarachun
June 1, 2000

Dean of the Southeast Asian Graduate Schools of Management, Honoured Guests,

I must confess to feeling somewhat intimidated at the prospect of speaking to so many deans and PhDs. When I saw Dr. Chirayu’s invitation to talk about the economic and business outlook for the new millennium, I felt even worse. With the volatility in today’s economies and markets it is hard enough to predict what will happen next week, much less in the next millennium. You have set me a very tough examination. I hope I don’t flunk. The only saving grace I can see in making predictions for a thousand years is that despite the best efforts of my doctors, I am not likely to be around long enough to see how wrong I was. So, let me tell you not what the future will be, but what I realistically hope it will be.

As we look forward to the new millennium, the first obvious thing to note is that it is starting off with a huge increase in the amount of information available and with fantastic new technologies to deliver it all over the world in seconds. This is very exciting and it is, potentially, of great benefit, but we must not forget that people, not information or technology, remain the key to the future. People will decide how to use the technology. People must learn to receive, organise, understand and act on all that information.

I heard a joke about this, the other day. It seems there was a senior citizen - meaning someone much older than I am - driving for the first time on the new expressway north of Bangkok when he got a call from his daughter on his mobile phone. “Father - please be careful. I just heard on Jor Sor 100 (that’s the traffic radio station) that some idiot is driving the wrong way on the express way.”

“It’s even worse than that,” the senior citizen replied. “Its not just one car; its hundreds of them - all going the wrong way and blowing their horns at me.”

The situation in Asia in 1996 and 97 demonstrates this lag in understanding warning information. We should have seen lagging stock markets, sagging property prices, declining export figures, current account deficits and pressure on our currency as warnings we were going the wrong way. I am afraid we were so sure we were going the right way and so proud of our high-speed economy that we were not ready to listen to warnings. In this analogy, I suppose, that mobile phone call would have come from George Soros.

Now we are left to clear up the wreckage from the financial crisis, make sure we get headed in the right direction, re-train the drivers, slow down a bit and set up systems to ensure that the information we need to correct course gets to us more quickly and effectively.

This work is largely the responsibility of the people in Asia and, of course, you, as the leaders of Asian institutions of management, have a major role to play. There are many local institutions, rules, attitudes and management practices that need to be changed.

I’ll get back to our responsibilities in a minute, but first I want to note that world leaders and global institutions also have a responsibility to adjust. Part of the problem we faced in Asia was with an international financial system that did not develop in sync with systems of regulation to moderate volatility. The new millennium will bring changes in the international financial system, including the major institutions, the IMF and the World Bank, that are part of that system. These institutions need to get better information. They need to interpret it more accurately and act on it more quickly. Most importantly, they need to involve local people, so they better understand local situations, rather than applying the solutions that worked in other places, in other circumstances.

So, I think and hope that the first years of the new millennium will begin with these changes needed to prevent even more serious crashes further down the road.

Existing multi-lateral institutions, for instance, need to be more open and more responsive. At a time when the pace of change is frightening many people, the IMF, ADB, and WTO seem like isolated bureaucracies unresponsive to human concerns. That is why we see protests and demonstrations, however irrational some of them may be. I believe we will see these multi-lateral institutions become more open, more accessible and more responsive in the years to come, even though they will not change their main objectives. Other institutions should simply be discarded. The G-8, for instance, is now outdated, ineffective and perceived to be elitist. More nations and more institutions need to be included in global strategizing. A members-only club of a few developed countries, however wealthy, cannot provide effective global leadership in the new millennium.

Tinkering with international systems and developing new information hardware, however, will not be sufficient. In the recent past, we may have been diverted by great technical achievements from the importance of the human side of development. We in Asia need to find ways to help our people change and develop so that those directing the new technology will remain focused on the needs of people. That is a great responsibility that you have as educators. I am afraid we will never be able to eliminate human greed, but, as educators of business and management, we can find ways to steer the power of greed in directions that help rather than harm people.

In environmental management, for instance, there is a simple and powerful principle, that “polluters pay” for the real costs of the damage they inflict on society and the natural ecology. We introduced this principle in Thailand nearly a decade ago, but it is still not being implemented. The main reason for this slowness is a shortage of the political courage to explain to the people that they too are polluters and will have to pay. I believe that people are willing to pay, but only if those in authority involve communities and businesses in the decision-making. Our leaders need to engage the people in two-way communication on the benefits as well as the costs of pollution prevention and reduction. Sometimes, our leaders underestimate the good sense of our people and fear they will be punished at the polls if they propose any sacrifice, even if it is in everyone’s best interest.

Once the “polluters pay” concept and its application are accepted, business managers focused on the bottom line will rush to find the management tools needed to prevent pollution, to reduce waste, and to account for full environmental costs. Management schools must be ready to provide the managers of the future with the skill-sets needed.

This just one example. I believe there are other ways that markets in the new millennium will be re-structured to serve human needs rather than changing people to serve imperfect markets. Business schools and business school professors have an absolutely crucial role to play in this process. We need to undertake research that helps us understand the complex and rapid changes underway in the global economy that have brought different societies, different institutions and different world views into much closer contact. Business schools have the duty to train a new generation of business leaders who see the necessity of ethical, effective, environmentally-conscious business, that ultimately serves the greater, long-term ends of human society.

These tasks do not belong exclusively to business schools, of course. Systemic change is part of the task, and that is the joint responsibility of government, business, academia, civil society, labour and mass media. Let me quote Joseph Stiglitz, the recently retired chief economist of the World Bank.

“Development entails not only creating market institutions, but also political institutions, and the two are intimately inter-twined.”

In the millennium ahead, I predict, or at least I hope, there will be major changes in political institutions and in the connections between business and government. I am proud to say that Thailand has been a leader in beginning such change, but perhaps that is because we were the leaders in suffering the penalties of having outdated and inadequate institutions.

We have experienced the costs of corruption, inadequate government regulation and poor corporate governance. Our new constitution is an important starting point, but just a starting point, and a strong signal of the desire for change. The constitution, which came out of a broadly consultative process, includes strong provisions for honesty in government and elections. I am pleased to see that some initial steps have been taken to enforce those provisions. A lot more work still needs to be done because the constitution is but words on paper. To work, it requires institutions with the ability to enforce its counter-corruption provisions and people willing to act, both inside and outside government, to make sure that those institutions perform.

Unfortunately, passive obedience to the new rules is not enough. We need people willing to work together to ensure that the rules are followed and that those breaking the rules are exposed. There have to be some whistle-blowers and some troublemakers for the benefit of society. Recently, we had the example of one Thai mother, concerned about unfair school entrance examinations, start a process that has led to major improvements in access and fairness all over the country.

The defence of human rights requires the same willingness to speak up. Some people fear that globalisation will result in impersonal multi-national corporations, above government control, abuse human rights for their corporate gains. That is a possible danger, but I envisage a different outcome in the new millennium: new technologies, global markets, international standards, and faster flows of information, that give concerned people the weapons to ensure that corporations and governments protect the rights of their workers and their local communities. Much more needs to be done, but we see a clear direction: global markets and global brands are leading to global standards of conduct.

That means change, not only for the big brand names, but also for their thousands of suppliers all over the world. The new logistics technologies and “Just-in-Time” management techniques mean that buyer and supplier must be tied closely together by constant information flows. This extends from inventory, designs and shipments to health and environmental standards. It forces knowledge down through the organisation and out to the suppliers. This will mean that employees at all levels in the supply chain must handle sensitive information. That, in turn, will mean that corporations and their suppliers must develop co-operative, rather than confrontational relationships with their workers. It is already clear that JIT does not work in a confrontational system and this trend will only continue to expand in the future.

I believe the same is true of the hot new e-commerce technologies. In some ways these technologies do the same thing as a client and a customer sitting down together to talk. There is an exchange about needs, products, costs, capabilities, and delivery information. Then there is an agreement on a sale and a payment. E-commerce does the same things, but on such a scale and with such ease, speed and geographical reach that it is rapidly changing important aspects of business. This technology has provided such exciting new opportunities that there has been talk, particularly with respect to stock markets, of a distinction between an “old economy” of physical goods that grows slowly and a “new economy” of digital services that grows so quickly that price/earnings ratios are irrelevant. I do not believe that this distinction will last very long. Within a few years, the new technologies will be incorporated in some way into almost every business, so the real distinction will be between those companies that use electronic capabilities well and those that don’t.

What we need to do in Asia is to ensure we climb the e-commerce learning curve quickly enough, so that our businesses are not left behind and destroyed by global competitors who learn how to use e-commerce ahead of us.

Fears that globalisation will destroy not only local companies, but also local communities, environments and customs, have recently been the cause of much protest and controversy. It has been argued that globalised; multi-national corporations are out of control because they are too powerful and too geographically spread for individual governments to handle. It is said that unelected corporate managers who affect what happens to people around the world are accountable to no one.

I believe that is not actually the case now, and it will be even less so in the years ahead. Managers are increasingly accountable to shareholders, employees and customers. Information flows and human concerns are at the heart of this accountability. New mechanisms are coming to ensure that all shareholders get the information and analysis that is available to corporate-insiders and institutional shareholders. Networks of NGOs and the power of the Internet ensure that corporate misconduct in even remote parts of the world is soon known to the corporation’s customers around the globe. Enforceable standards will make it much more difficult to lock the fire doors of a toy factory, as was the case in Bangkok several years ago, to improperly store hazardous waste or to use child labour.

It has been said that business managers are like sub-atomic particles. Observation changes their behaviour. In the new millennium, I see increased observation of management, whether in government or the private sector, leading to improved standards, greater acceptance of standards and more effectively enforced standards. This will lead to better lives for workers, better returns for shareholders and better protection of local communities. Your students will be managing in a fish bowl much of the time and you have to teach them how to do it.

Observation will not only come from outside the company. The new millennium will not work in a top-down fashion. Business will have to involve employees and, indeed, all stakeholders through much freer and fuller flows of information in good governance processes. Recent research has shown that greater worker participation and better information flows within a company, lead to higher motivation of employees, better management decision-making and increased productivity

These flows of information in the new millennium will not be limited to workers’ issues. As population growth and industrialisation increase, the pressure on the natural environment, corporate treatment of the environment will become an ever more important issue for management. Research at the Kenan-Flagler Business School has shown that the companies that take the best care of the environment are also the most profitable. Why should this be so?

First of all, pollution consists of materials that the corporation paid for that it is now dumped into the environment without anyone to pay for it. Better design, better production processes and better accounting for costs can reduce wastage and make the company more profitable.

Second, production of waste entails disposal-costs or penalties. Avoidance of these costs not only reduces expenses and legal fees but also reduces a serious demand on management time and attention.

Third, environmental management systems cannot work effectively top down. They must involve workers at every level. Workers tend to value working for a company that places a high value on the environment. Involvement in environmental management motivates employees.

Fourth, the damage to corporate reputation among customers, may be greater than any penalties paid to regulators, because it is damage that can persist for a long time. Even decades after the Exxon Valdez, the corporate name is damaged by the memories of the Alaskan oil spill.

In the new millennium, corporations will be known to workers, regulators, and communities by their actions to protect the environment. Business schools need to give managers the skills and attitudes to manage more open systems, that protect both the environment and their workers.

Open-ness to stakeholders - workers, shareholders and communities - will also provide corporations with mechanisms to avoid undue risk, cut costs and attract financing.

Much has been said about corporate governance and some progress has been made, at least in the rules, with requirements for greater disclosure, audit committees, and better accounting practices. It is still up to people to take actions. Workers can passively follow management orders or they can speak up. Had workers understood how the risks being piled up in Asian banks and corporations would lead to their own loss of jobs, they would have spoken out, and those risks might have been better managed? In the new millennium, I believe there will be systems that provide timely risk information to employees.

Company executives, must learn ethical behaviour and new ways of management. Particularly here in Asia, there needs to be a change in the old pattern of patriarchal, top-down management. I am afraid this will be difficult for many of the dinosaurs of Asian business to accept, but there will be little choice. To satisfy international markets, international suppliers of capital, local communities and local government, the managers of the new millennium will have to be more professional, more democratic and less secretive. This is not just a nice thing to do; it is essential for survival in the global economy of the new millennium. Ethical behaviour will be a source of competitive advantage for nations as well as corporations.

The Thai government learned to its dismay that simply keeping its own state debt under control is not enough, if the private sector undertakes high debt and high risk. The suffering that accompanied the economic crisis, spread well beyond the managers, regulators and entrepreneurs who made the mistakes. Employees were laid off; salaries were cut and benefits reduced. We learned that we had few safety nets for the victims of the downturn. We also learned that no safety net can replace a strong economy.

Unfortunately, market signals are not perfect, and attention to markets alone will not achieve the kind of transparency, good governance and ethical conduct that I envision for the new millennium. We have learned to our cost in Asia that markets require strong and effective regulation. Who is to regulate the new global economy? Some have suggested that this need require a super world government that will be more powerful than the corporations, and able to deal with rogue governments. I do not see this happening. We are still hoping that the United States will pay its financial obligations to the United Nations. We are still trying to get a long list of countries to respond to the UN’s human rights committee. We are still trying to free the World Bank, the IMF and the WTO from undue political interference by national governments. So a world government is unlikely and, I think, unneeded.

What I see developing is not global government, but global governance. Not a super bureaucracy, but a set of internationally accepted rules of conduct that protect global interests. This global governance will be provided, not only through governments and multi-lateral organisations, but also through activist NGOs, educated consumers, civil society organisations, labour unions and corporations working together for mutual self-interest. It will require the willingness on the part of some, to give up special privileges, to protect the interests of future generations, and to fore-go immediate advantages for long term, sustainable growth. In short, it will require ethics and a sense of justice.

This sense of ethical behaviour needs to be instilled as early as possible - through the family and through the education system. Since you are educators, let me expand on the role of academia and education in the new millennium. First of all, we need to teach our young people to understand how their actions can affect people all over the world, whether it is making a decision that pollutes the atmosphere, or taking on a risky loan. There has to be an emphasis on the social, ethical and environmental bonds that connect us all. New communications technology will help communities form around mutual interests rather than geography. Translation-software will reduce language barriers.

Second, it is more important than ever before to teach our students how to think and how to learn. Knowledge is changing so quickly, that in many disciplines about half of the knowledge base for an advanced degree becomes obsolete every five years. So we need to teach our students how to learn, because they will not conclude their learning with the acquisition of a graduate degree, they just begin another phase of it -continuous, self-directed, life-long learning.

Learning how to learn is not simple. It requires the tools of research, including the new Internet tools, but more importantly, it requires the ability to think logically and independently.

Asia has immense talent, but we must nurture it with quality education that is not directed only at a test or a degree, but at real learning and ethical action. If we can do that, this region will have an immense comparative advantage for the future. It is sometimes noted that 60% of the world’s population is Asian and the percentage is growing, therefore Asia will dominate the world economy of the 2lst century. While the power of demographics is considerable, it is not numbers alone that will provide leadership. It is the education of those people to think creatively and act responsibly that will make the numbers important. We certainly have the bright young minds to be successful; it is up to us, the not yet senior citizens, to make sure the education we give them is good enough.

Fortunately, Internet technologies provide not only the challenge of improving learning, but also give us new ways of doing it. We will not be far into the new millennium when a large portion of education will be computer-aided and internet-based. Learning will be less confined to the traditional years and more spread throughout a lifetime. Education, like information and entertainment, will be digitised and delivered electronically almost anywhere the consumer wants it. This is not to say that all education will be electronic; we still have live theatre and concerts despite television and hi-fl equipment. We will, and must continue to have, live inter-action between student and teacher. Undoubtedly, however, education will be increasingly electronic, inter-active and customised. The greatest change is likely to come in those parts of universities that offer advanced professional education. Universities will cease to be places of learning and increasingly become the guarantors of the quality of education, that can be delivered anywhere and any time.

The past few years have been full of change. The pace has been dizzying. Sometimes we just wish that things would slow down long enough for us to catch our breath. That will not happen. More than 2,500 years ago, the Lord Buddha taught that the only thing that does not change is the existence of change it. So I feel safe in predicting that Asia will see even faster and more incredible changes in the years ahead. It is your responsibility as scholars and educators, to ensure that our students are equipped with the intellectual skills and moral strength, to ensure that this inexorable change is for the betterment of all.

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Asian Business Leadership: Planning for the Future

Dusit Thani Hotel
March 3, 1996

I am honoured to be here tonight to address some of the top CEOs and presidents from around the region. This is the first forum that I can think of that has drawn senior Asian company executives together to share views and insights. I believe that Asians have a great deal to learn from one another and I welcome other Dialogue programmes that focus on the dynamic companies and leaders of Asia. The importance of this event is underlined by the re-scheduling of a previous engagement to attend ABL. Tonight I would like to speak on the roadmap for Asian business leadership and planning for its future.

Asia is a complex environment in which to do business. Each country has its own unique history and culture. In addition to these characteristics, the politics and economic development in each country has greatly influenced the business structures, which have developed. Successful companies such as the Birla Group, Sime Darby and SGV, however, were early pioneers that focused on the similarities in this diverse region to develop their regional businesses. Managing and operating as a regional business rather than a national company is an important factor in their success. I believe Asian companies will increasingly look to similar Asian companies as a model to develop or enhance their regional businesses. These successful Asian companies will also change how Asian companies are organised, managed and will plan for the future.

As international trade barriers are eliminated, Multi-National Corporations (MNC) and regional players will increasingly try to identify markets where they have a competitive advantage. Asian companies have the ability to develop as competitive businesses as any MNC. The key to success is to ensure the management and organisational structures are developed to respond to the unique opportunities and challenges in Asia. San Miguel is an excellent example of a company rising to this challenge. As San Miguel has discovered, an Asian company can become a major player in the global beer market. A large regional consumer market has made it possible for Asian companies to develop comparable market volumes to truly global companies, by staying focused solely on Asia. Imagine what could happen when that focus shifts to global arena.

Asia is often viewed as a region where companies need to court political favours to be successful, but multi-lateral trade organisations are changing how business is conducted in Asia as well as other parts of the World. Asian companies must begin to explore key management issues as the means to get ahead. Companies must rely more on their ability to manage resources and people rather than count on political favour for their competitive advantage today. Our goal should be to develop world class market leaders that are as common in Asia as they are in the US or Europe. The forum over the next few days offers an excellent opportunity to learn from some of the best strategists and management-thinkers in the world and bring this vision to reality.

Asian companies have three distinct competitive advantages. One of the greatest advantages Asian companies have over other large companies such us MNCs are flexibility. This trait has allowed many companies to grow and flourish, and has even enabled many smaller players to compete successfully with larger MNCs. Many companies that develop into large market-leading companies become too complacent and even risk-adverse, focusing on asset maintenance rather than growth. Asian companies should learn from this and strive to maintain flexibility as they prosper.

Another advantage of many Asian companies is the family-owned business structure. The ability of these companies to focus on the long term without outside investor pressure is a key competitive advantage. As family-owned businesses grow and expand regionally, a transition from family-owned and family-managed to family-owned but professionally managed is occurring. The challenge to family-owned and managed businesses is the retention of qualified management; professional managers will not stay long in family companies where decision- making is based on family status. The balance between family-owned but professionally managed companies exists to a high degree in Korea. This can be used as a model on which to propel family-owned businesses into the global arena.

Asian companies are less likely to be weighted with outdated technology. The ability to leapfrog generations of older technology without the burden of replacing older units, is also a competitive advantage. In addition, as technology becomes less of a factor in companies maintaining market leadership and as the lead times to develop new products is reduced, the availability of technology becomes more like a commodity.

These three competitive advantages are just a few of the factors transforming business organisations in Asia. So where does this leave us in terms of looking at some of the challenges ahead for the leading companies in Asia?

There are some key challenges facing Asia’s business leaders, which require us to continue to change and adapt our organisations and practices in order to respond effectively or face being left behind. In making these changes in our organisations, in order to compete in the future, it is my hope that we do not discard some practices, which have served us well and are common across the region.

In Asia, the biggest challenge facing business today is that of human resources. The lack of qualified and well-trained executives has the potential to de-rail our progress, more than any other single factor. While infrastructure projects are basically a one-time expenditure, education requires a continual investment. It is clearly an issue that needs attention. A shortage of skilled middle and upper management already exists. To develop a long-term solution, we must turn our attention to academic institutions.

The Malaysian Minister of Education expressed it best when he said, “We have been recipients of knowledge from the West. The time is ripe for us to be originators of it.” The global thought leaders who have one to Bangkok to share some of their insights, come mostly from business schools in the West. They have useful insights, and through extensive study and research have contributed to the field of management. How many executives could name the Minister of Education for any country including their own? Business leaders must take leadership to improve education and to develop regional talent. The business leaders need to be part of a solution. Companies profiting in Asia should give back to society in the region.

There is a need, for leadership within the business community for work across the region. The scope of business research conducted is focused on local issues, however, not at cross-border issues, which Asian companies face. Business leaders should unite and promote the development of funds to develop projects that focus on relevant cross-border issues.

If our business schools are unable to adequately undertake such research, the fund could be used to undertake joint co-operative research with researchers from Western institutions, thus helping to upgrade university students' research skills. A commitment of US$25,000 from one hundred companies will go a long way to attract talented academics back to Asia and also help us to understand what business practices work best in Asia for the long term. As business leaders, you not only help yourself but also take one small step towards addressing this major problem faced throughout Asia. The challenge of business leaders is to show vision and commitment to develop our own role models and management gurus.

While there are other challenges faced by companies in Asia, I think one of the most formidable is the shortage of middle management and human resources in the region. While we have our national business leaders, we also need regional business leaders to step forward. I hope this has perhaps made a few people think about one small thing they can easily do. If it has made one person begin to think about their role and responsibility to the region in addition to their country or company, I think this will be a healthy development in our corporate development. Avoiding the natural nationalistic tendencies for companies that dominate one market is important.

The only other challenge I would like to discuss is the building of lasting organisations. This requires developing and instilling core values within every member of the organisation. This value system will help organisations get beyond owner-dependent personalities. It should be our goal to fill Asian companies’ corporate annual reports with quotes from Asian leaders and legends, rather than the quotes by Western figures as currently seen in so many corporate annual reports.

Thank you for your attention. I hope I have left you with enthusiasm and the knowledge that you have the opportunity to influence and lead the direction of your organisation and contribute to the future of the region. It is easier to shape the future than to react to it!

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Quest for Investment Liberalization

Luncheon Address
by Mr. Anand Panyarachun
Chairman, Saha Union Public Co., Ltd.
Former Prime Minister of Thailand
at APEC Investment Symposium
Shangri-la Hotel, Bangkok
October 2, 1995

Distinguished Guests, Ladies and Gentlemen,

It is a great pleasure for me to be here today at this event and to address such a distinguished gathering. This is a unique occasion where we have government officials, business representatives, and academia from APEC member economies as well as representatives from international organizations, all gathered here in Bangkok to discuss how APEC should move forward to achieve freer investment flows.

I believe there is no need to stress the importance of the topic that you, distinguished guests, are focusing on at this symposium. We are all aware that investment is an area without concrete frontiers. A broad spectrum of issues is related to investments. It is undeniably a complex, difficult issue with far-reaching implications for every economy. Nevertheless, this challenge is worth exploring, particularly for APEC, which has a goal to achieve free and open trade and investment by the year 2010 for developed members and 2020 for developing members.

Investment liberalization is a prevalent policy theme around the globe in recent years. The Agreement on Trade-Related Investment Measures (TRIMs) has been created under the Uruguay Round trade talks to discipline the use of performance requirements imposed on investors, and stresses non-discriminatory practices. APEC has produced its own set of non-binding investment principles. Thailand supports the notion of the WTO as the best forum for negotiating actual regulations because of its inclusive, multi-lateral nature. OECD is currently in the process of negotiating its Multi-lateral Agreement on Investment. Bi-lateral negotiations on investment issues are conducted on a continual basis. These are just a few examples that indicate how active development of international investment is right now.

The question is not so much on whether or not governments should liberalize their investment regimes. Long-term benefits arising from liberal investment environments are well recognized. In an area with strong intra-regional investment like APEC, increasing investment flow is certainly desirable as long as it does not isolate the region or polarize global markets.

I believe that questions of investment liberalization concern “how” and “when” rather than “whether or not”. The Bogor Declaration has set a general goal for APEC to achieve free and open trade and investment by the target dates. The details of “how” and “when” are left to most of you here to figure out. This is not an easy task, and should be thought about in the larger context of the WTO as well as APEC.

As a former diplomat and presently a businessman, I would like to take this opportunity to share my views with you. When I assumed the responsibilities of Prime Minister of Thailand, I had a chance to be involved in various investment facilitation and liberalization schemes. As Prime Minister, I also chaired the Board of Investment. My experience tells me that the agenda in front of you is extremely complicated. A broad range of factors has to be taken into consideration, and theoretical expectations may diverge widely from realities.

We often hear of two motives underlying investment liberalization. One is to enhance an economy’s attractiveness as a foreign investment location. Creation of a level playing field is often cited as one of the most effective means to attract foreign investment. The other motive is to benefit consumers. Perfect competition, as the basic economic theory goes, creates a win-win situation: The industries of an open market and the global market as a whole are stimulated to work more cost-effectively and efficiently as a result. Consumers then enjoy the largest range of products at the best prices.

In effect, I believe that most policy makers have no quarrel with the benign objectives of investment liberalization. Most governments recognize that competitiveness is a key to thriving in today’s global economy where distinct borderlines between international economic transactions do not exist. However, whether these desired objectives can truly and effectively be materialized remains a moot point.

As one of the creators of the ASEAN Free Trade Area, I certainly have all the reasons to believe in removal of major barriers to investment. One crucial motive behind the establishment of AFTA is to induce more foreign investment into this region. It was not to form a trade bloc. Our idea is that it is easier to begin removing barriers in a smaller region - and then to keep expanding the barrier-free environment with the long-term goal of creating a truly free global market.

Common international rules governing the treatment of foreign investment by host governments are believed to be a means to promote its flow. More freedom and less unpredictability will occur in an environment where everyone observes the same rules and practices. You will probably hear about the development of the creation of the Multi-lateral Agreement on Investment Agreement being pursued by OECD at this symposium. This so-called “MAI” is expected to provide foreign investors from every part of the world with the same rules of the game. So, ostensibly, the level playing field can become a reality.

Many policy makers may argue against the necessity of international rules, claiming investment policies lie within the sovereign rights of host governments. Moreover, the exact same set of rules cannot be equally appropriate for both developing and post-industrial economies. This principle is recognized by GATT, which allows countries trying to attract investment to poor rural areas to use incentives to lure industries.

It should be noted that barriers to investment do not come from public policies alone; natural resources, history, geography and other factors all come into play. However, one school of thought holds that by creating a set of common rules, economies will ensure the requisite environment for foreign investment.

However, it is not my intention today to debate for or against the formation of the MAl but to use this as one example of the numerous on-going attempts to establish universal rules for investment which are believed to promote greater flows. In the long run, the larger the arena of players, the more efficiently the market should function. In the shorter term, though, we need to look carefully at the motives of those pushing regulations on smaller economies. Sometimes, those demanding common standards are really seeking advantage for themselves, not a cleaner planet or better treatment of workers.

It is notable that even without a set of common universal rules, liberalization is the current theme for policy makers in most economies. If we look around the globe, we witness actions taken by many governments attempting to deregulate and liberalize their investment regimes with an intention to improve their competitiveness. Rivalry for foreign investment is growing increasingly severe. This situation naturally prompts contemplation of positive changes. These actions may have nothing to do with obligations of governments under international agreements or legal obligations. Some economies experience success whereas others are still struggling with adjustment.

Thailand is also one of the countries that has chosen a pro-active, yet gradual approach towards liberalization. We realize that benefits cannot be possible without appropriate adjustments to cope with the new environment. Gradual steps have been taken to minimize negative effects. This leads to the whole question of approaches.

When facing external pressure to open up investment regimes, many policy-makers, like some of you here, may query whether governments should design their own liberalization regimes rather than having legal “boiler-plate” forced upon them. To create change is a challenge, because you face resistance arising from inertia and other reasons. Many people argue that if there is no channel to force things to happen, change will never take place. It is often said that governments will only take liberalization steps when they have no alternatives, because they cannot take the short-term political “heat.” This may hold true in many circumstances, but we have seen a great number of governments taking bold steps in liberalizing their investment regimes for economic reasons.

The key point here is the readiness of economies to embark on a liberalization journey. Benefits such as “increased competitiveness” or “greater efficiency” remains theoretical and abstract until a country has advanced to a certain level of industrial development. Until that point, when its economy can begin to cope with a globally oriented environment, such terms lack the meaning and substance attached to them in developed countries.

Given the great diversity in socio-economic development among APEC economies, there is not one ready-made formula for successful liberalization. The needs and priorities of one economy greatly differ from those of others. Ways and means to open up an economy have to be designed specifically to accommodate relevant settings.

With the same goal and objective, we may take varying routes leading to a common target. Some governments may prefer gradualism, while others choose to take more radical steps. Thailand is among the economies that opt for a gradual route.

Sustainability of economic development is probably the single most important factor that determines ultimate success. Liberalization that leaves an economy in a poorer and more vulnerable situation than it was should not be APEC‘s goal, or WTO’s. Economic sustainability is particularly crucial in developing countries, when designing liberalization packages. I know that many of you here are facing this challenge at this very moment, and feeling some pressure from countries with larger, stronger economies.

Investment liberalization creates positive effects to economic systems in the long run, but tends to lead to negative impacts in the shorter run. Can short-term problems be avoided? Not completely. However, disturbance can be minimized when the right mechanisms are in place. Gradualism is one way to avoid sudden shocks to domestic entrepreneurs. Steady, measured change that gradually reaches the goal, is often the best path for developing economies.

Short-term agitation has to be carefully dealt with; otherwise, backlash can occur and the expected long-term benefits of liberalization will never be realized. “Equal footing” competition is often quoted as an objective for which we should strive Today’s world does not consist of economies or companies with the same features, operating in similar competitive environments.

In concluding, no one doubt the merits of investment liberalization, but how to go about it still pose several questions. No success formula that applies equally to every economy exists. We have to create our own individual concoctions that address particular features of our economy. I truly believe that we do have many options to choose from, in achieving the goal of free and open investment.

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AIDS and Social and Economic Progress

in the Asian and Pacific Countries
by Mr. Anand Panyarachun
Third International Conference on AIDS in Asia and the Pacific
Fifth National AIDS Seminar in Thailand
Chiang Mai
September 21, 1995

Excellencies, Distinguished Guests and Participants, Ladies and Gentlemen,

Over the past few days of deliberations on the myriad issues and topics relating to AIDS in the region, it seems that there is a wealth of knowledge and experience on addressing the issue of AIDS. It seems that we have a good idea of what we must do. Then, why must we continually call for action to prevent the further spread of AIDS?

As I reflected on the topic for discussion today, I felt the most useful contribution I could make to this forum was to share the perspective of a group that seems to have been otherwise excluded from the deliberations here - the heads of government and national leaders. My humble opinion is that without the commitment of leadership at the highest level to preventing further spread of AIDS; we will never see the scale of action necessary to address this issue and its social and economic consequences.

AIDS must be viewed as a national development issue. If we present AIDS as a health problem, it will be treated as such. AIDS is not a health problem, it is a behavioral and a societal problem - and an urgent national development priority. Today, AIDS remains the most critical threat to the social and economic progress of the region - along with environmental degradation.

The leaders of our countries are not taking AIDS seriously enough. I am here today to tell you about my view as the former Prime Minister of a country facing one of the fastest spreading AIDS epidemics on the planet, in the hope that we can get more leaders to take AIDS more seriously. We need more action!

II. The Case of Thailand

You and many others around the world have heard much about AIDS in Thailand. You will continue to hear about AIDS in Thailand because many people are infected and they are only beginning to become sick. We are only beginning to feel the impact on our society. It will become severe, as it has already in some communities, and it will become more and more painful.

Even with the hard-earned successes to-date, Thailand must still learn to care for the 800,000 infected people and their families - many of them live not too far from where we sit at this moment. Many resources from the pockets of these families, from government budgets, and from our society as a whole, will be consumed by these infections and associated illnesses.

Thanks to many people here in this room, you have heard many reports on some of the successes here in Thailand so far. There is much more to do, on many fronts. We must be honest and accept that there is still too much discrimination against people with AIDS in this country. Action must start at home, with our own attitudes. Many companies in Thailand have adopted progressive AIDS education programmes in the workplace, but still many companies - including some foreign firms - continue to discriminate against people with AIDS.

There are some important lessons in Thailand’s experience. We must focus on action, time is running out. We must enlist the commitment of the highest levels of authority and begin implementing the necessary prevention programmes on a meaningful scale.

In early 1991, I assumed the Office of the Prime Minister, here in Thailand. This was a time when Thailand was moving from several years of denial, to a gradual acceptance that AIDS would pose a significant threat to social and economic progress. Already in place was an immigration regulation, prohibiting HIV-positive people from entering the country.

Awaiting my government’s consideration from the previous year, was proposed legislation, whereby, HIV-positive people would be subject to close scrutiny by health officials and could be detained if their behaviour was determined a threat to public safety. This legislation would also require the head of every household to report to the authorities any HIV-positive member of their household.

In addition to this legislation was a proposal to establish “therapeutic communities” where HIV-positive people were to be sent, under quarantine. This gives you a sense of the prevailing attitude at the time - those were dark days.

So, when I entered office these proposals awaited us. Had we not paid close attention to these issues, we could have followed quite a different path. With close assistance and cooperation from the NGO sector, we were able to prevent these proposed draconian measures.

Upon assuming office, we faced a whole host of pressing issues regarding trade and investment, land reform, education, and many more. The economy had been growing at over eight percent for ten years, and some important actions were required to set the stage for another decade of growth. As we looked at national development, we could not ignore the AIDS controversy.

There was no consensus on the extent of the problem, so the previous governments had difficulty agreeing on a solution - let alone implementing it. We made a concerted effort to analyze the actual situation. We were open and honest about the size of the problem because this was the only way to mobilize the required response of a corresponding magnitude.

This is a critical point. Without an open assessment of the current extent of the problem, we are unable to plan the necessary response. Today, there is far too much deception and denial about the extent of AIDS in the countries of this region. When we made public our projections, we became highly unpopular among the tourism industry. I am happy to say that because of our actions back in 1991, we still have a tourism industry today. In fact, there are more tourists this year than in 1991, and you can be sure there are more people with AIDS. If we do not address the problem early, we are ensuring the early demise of tourism. So, effective action on AIDS begins with a realistic assessment of the problem and a planned response of corresponding magnitude.

To achieve the goals of our plan, we needed a comprehensive multi-sectoral effort. To mobilize these sectors and maintain a focus on this urgent issue, I accepted the Chairmanship of the National AIDS Committee. I am told that I was the only head of government at the time to lead a national AIDS effort, but - for me - there was no other way. For effective action against AIDS, you need both: the highest level of authority and the broadest base of support.

I put the National Economic and Social Development Planning Board, our national planning authority, in charge of formulating our National AIDS Action Plan. They included AIDS in the National Development Plan and ensured smooth cooperation between the ministries and government agencies in formulating a comprehensive action plan for the long-term.

Our AIDS prevention efforts included all sectors; it was the only way to mobilize a meaningful response. We made a point to enlist companies, schools, all government ministries - including the Army and Police, the NGOs, and the communities themselves. I invited all relevant groups to join the National AIDS Committee - the Tourism Authority, the Hotel Association, and the Federation of Thai Industries, the Chamber of Commerce, and the Thai Bankers’ Association. They all had to play a part, so we gave them a constructive role. By including them in the process, we could depend upon their cooperation and assistance.

As the Prime Minister, I demanded that all government ministries play an active role in AIDS prevention and we granted necessary budget allocations for these activities. AIDS is much bigger than the Ministry of Health; it is much bigger than government as a whole. In fact, many other ministries play the most important roles in communicating to the public and educating people about AIDS.

Government budgets are critical. We could not expect all of the ministries and provinces to play the active role we were demanding, without giving them the necessary resources. So, we approved supplemental budgets for AIDS activities.

We mobilized foreign donor funding and maximized in-kind contributions, like radio and television airtime from the stations and creative media talent from the advertising companies. Companies even paid for the printing of most of our public information materials at the time.

We did not see HIV as a health problem; we approached it as a national development issue. We were facing a potential economic impact equivalent to 20% of our GDP by the year 2000, not to mention the social devastation an epidemic of such a scale would cause. Without such a comprehensive effort, our response would have amounted to “throwing a bucket of water at our burning house”.

‘Without our own financial commitment, others would not have taken us so seriously. AIDS is our national development issue, and it requires our own investment. We must demonstrate our political and financial commitment, before we can expect anyone else to contribute.

My government was not popular for promoting AIDS prevention so openly at the time, but research now shows that these efforts were effective in changing behaviour and reducing the rate of increase in all sexually-transmitted disease infections, including HIV. It was recently reported in the Lancet that during the years 1991 to 1993, the incidence of sexually-transmitted diseases decreased by 77 percent. So, action works!

In some ways, Thailand is lucky. However, it is tragic that it took us over three years to mobilize enough of an education and prevention effort to begin changing people’s behavior - and many people were infected during this time of denial and cover-up. However, because we did make a concerted effort to educate people and equip them to prevent becoming infected, I would like to think we were able to avoid many more infections.

Even now, we must remain vigilant. AIDS has slipped from the consciences of our own leaders of late. If left unchecked, AIDS could still proliferate and impede Thailand’s social and economic progress far into the future. The US Bureau of the Census has estimated that if Thailand is unable to slow the rate of AIDS infections: the Average Life Expectancy at Birth in the year 2010 will be only 44 years - a dramatic drop of 30 years from the 74 years we would achieve without AIDS. This would return our life expectancy back to the same level as in the 1930s.

The same study shows that in that year Thailand will experience a negative annual population growth rate of minus 0.8 percent, compared to a positive 0.9 percent growth rate without AIDS. Ten years later, in the year 2020, our population would be about 62 million rather than the projected 78 million without AIDS - a full 16 million people less, due to AIDS-related deaths and associated demographic changes. This is the equivalent number of population growth for the next 20 years!

Today in Thailand, we need continued action to educate young people about sexuality and its consequences. We must demonstrate compassion for those already infected, and seek to provide them with as much decent care as we can afford. We must constantly remind ourselves, that action can prevent further tragedy.

Ill. Implications for the Region

As we consider the implications for other countries in the region, I think we must accept several hard truths.

Despite some action and awareness, the progress made to date is still small.

AIDS is prevalent throughout the region, now more than ever. AIDS will affect

ALL countries in the region - rich and poor.

Countries enjoying rapid economic growth could face serious obstacles to further economic progress, if AIDS is not addressed as a national development issue now. For those Asian countries experiencing high economic growth - like Thailand, AIDS will affect some critical economic sectors such as tourism, labour exports, and foreign direct investment.

Tourists are reluctant to visit countries where they know that AIDS is not under control. This will be exacerbated when we consider that the more people there are with AIDS, the more hosts there are for communicative tuberculosis. This will surely keep tourists away.

Similarly, there will be a greater reluctance from certain countries to accept guest workers from places known to have a high prevalence of AIDS. After all, AIDS is most prevalent among the most economically active segment of the population.

As more and more people become sick from the illnesses associated with AIDS, labour costs will be forced to increase. More health costs will have to be covered and more people will be removed from the labour supply. With higher labour costs, foreign companies will be deterred from investing and will seek other places to locate their business. This will affect us as a region because all Southeast Asian countries will eventually face a similar fate.

In poorer countries, AIDS threatens to condemn the majority to another generation of grinding poverty. Such countries will face significant difficulties in stimulating economic growth if effective AIDS prevention is avoided or postponed until it becomes too serious. National leadership must address AIDS as an urgent national development priority and reflect this in government policies, plans and budgets - not to make donor governments or international investors happy - but, for only one purpose, to initiate effective action.

AIDS will have the most severe impact in countries where men frequent commercial sex and where the government is most apathetic about effective prevention. Conversely, those countries that take early and effective action, can minimize the scale of the epidemic, and lessen its impact on social and economic progress far into the future.

I would hazard to guess that on average no less than 20% of GDP is at stake for each and every country in the region, if we do not achieve more results in the next twelve months. Of course, we stand to lose much more, when we consider the pain and suffering, social tension, and other unquantifiable implications. AIDS represents such a significant threat to social and economic progress in the region, that the Asian Development Bank should be offering substantial grants to countries that successfully initiate effective AIDS action plans. I hope they are represented here today to hear this. They should reward the countries that take AIDS seriously and achieve significant reductions in the potential impact of the epidemic. This should serve as an incentive to the governments in the region, and send a strong message to the heads of government, finance ministers and business leaders. It could be the best investment the ADB will ever make.

Any other economic or trade issue with the potential to affect 20% of GDP -such as AFTA or the rise of the Yen - would have its own summit. Why should AIDS be different? Only because the leaders do not understand that AIDS is an economic issue.

IV. Conclusion and Call to Action

We have learned many important lessons over the years. I do not think we need to spend much more time searching for answers. I think we must focus on action - time is running out for many in the region. Our opportunity for early action has passed us by. We face a momentous and growing task. We must re-think our approach.

AIDS policy-making in the region is still medically oriented. Leaders still do not realize how seriously their societies will be affected if AIDS is not addressed properly. We must get the leaders more involved.

Many resources have been devoted to the preparation of this conference. It behooves us to brief the leaders of this region about the important lessons that were discussed in these halls over the past week. We need not do any further research for this purpose; we should summarize our current findings and propose a prescription for success. We must sell solutions. We should get the heads of government from around the region into the same room to gain their unqualified commitment and endorsement of national AIDS action plans by the middle of next year. We must focus on results.

The next AIDS conference should be for parliamentarians and business leaders. These are the people that initiate and sustain action. Most of the answers to the problems of AIDS are already known. We must communicate these to the people who control the wheels of power and the purse.

Time has run out on millions in the region. We have the answers. We need solutions. Let us focus on action. Let us return to our countries and enlist the meaningful involvement of our leaders, it is the only way.

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The Future of Asia’s Past –
Bringing Conservation Philosophy into Practice

by Mr. Anand Panyarachun
Chairman of the Council of Trustees, Thailand Environment Institute
Chairman, Thailand Business Council for Sustainable Development
Chiang Mai Orchid Hotel, Chiang Mai, Thailand
January 11, 1995

Mr. Nicholas Platt, President of the Asia Society

Dr. Vishakha Desai, Vice President of the Asia Society

Mr. Athueck Asvanund, President of the Siam Society

Distinguished guests

Ladies and Gentlemen

It is a great pleasure for me personally to be among so distinguished a gathering, at such an important conference. My sincere thanks go to the Siam Society, the Asia Society and the Getty Conservation Institute for organising this momentous gathering.

The theme of this conference evokes excitement and vision. Some of you here may recall a piece of conversation in “Alice in Wonderland”, by Lewis Carroll.

“Would you tell me, please, which way I ought to go from here?”
asked Alice.
“That depends a good deal on where you want to go,” said the Cat.
“I don’t much care where,” said Alice.
“Then it doesn’t matter which way you go”, said the Cat.

I have the distinct impression that the organisers of the present conference not only do know which way they want to go but also exactly where they want to lead us to!

The timing of this conference is indeed opportune. Last month’s World Heritage Conference in Phuket has re-focussed attention on Asia’s rich cultural heritage and natural splendour, and in doing so has highlighted the very real threats; posed by environmental degradation, uncontrolled development and, in particular, tourism.

The preservation of Asia’s heritage, as called for by the international community, can no longer be neglected and must be given due priority commensurate with it’s significance.

At the same time, Asia has reached the point where responsibility for the conservation of cultural heritage now lies squarely with national governments. In most countries of Asia, the science of conservation has now advanced to the stage where national institutions and experts can increasingly take on the task of architectural conservation themselves.

Heritage conservation is therefore, moving out of what may be termed the “colonial phase” – where academics and concerned institutions, mostly in developed countries, took the lead in preserving historic monuments and artifacts in developing countries – and into a new “nationalist phase” – where national experts are now in the vanguard of protecting their own cultural heritage.

It is thus significant that we are meeting in Chiang Mai, the seat of Lanna culture, for here the challenges and pitfalls facing heritage conservation in Asia are only too apparent.

Chiang Mai is the most important city in Northern Thailand. It was founded almost seven hundred years ago, during the reign of King Mengrai, the ruler of the Lanna Kingdom. According to old Northern scripts, King Mengrai chose the location and designed the square-shaped walled city himself.

From its inception until the Burmese conquest in the sixteenth century, Chiang Mai flourished as the capital of the Lanna Kingdom and the political, commercial and cultural centre of the North.

Following liberation and revival in the eighteenth century, the city resumed its role as the principal city of the North and continues to prosper today.

Chiang Mai will celebrate it’s seventh centennial next year. More than any other town in Thailand, the city has been fighting to preserve the past and it’s architectural heritage. And nowhere is this glorious past more evident than in the city’s many temples; built-in the typical Lanna style with multiple-tiered roofs, gracefully-curved eaves and a portico.

But Chiang Mai has also lost much of its appeal in recent years. The present-day city thrives on the site of its origin. Thus giving rise to the universal problem of conservation versus development.

The pace of commercialisation in Chiang Mai has outstripped the best efforts of town planners, resulting in unsightly high-rise condominiums and office buildings. The traffic situation is following the same vicious path as that of Bangkok, with consequent noise, air and visual pollution; and in addition, rubbish disposal remains a perennial problem for City Hall.

It is obvious too that Chiang Mai’s precious cultural heritage is suffering under the strain of modern progress.

Hundreds of historic sites still languish in neglect, encroached upon by squatters or hemmed in and hidden by new buildings. Of those sites which are registered with the Fine Arts Department, many receive only marginal maintenance, there being too few personnel and funds allocated to undertake necessary repairs and restorations.

The remains of the ancient city walls, once a proud symbol of Chiang Mai’s strength and purpose, have suffered long periods of neglect alternating with periods of hasty reinforcement.

And yet Chiang Mai is dependent upon the very development that is threatening it’s heritage, if it is to develop as a modern regional centre – part of the “economic quadrangle” being enthusiastically promoted by Thailand, Myanmar, Lao PDR, and Southern China.

What then can be done to preserve the city’s cultural legacy, while at the same time allowing the benefits of development to flow freely?

Simply put, the aim should be to integrate development with preservation. The term sustainable development, which has come to define modern environmental thought, can be used in this context to describe the integration of cultural with commercial demands.

Such development is already appearing; all construction within the city walls is now required to uphold the local architectural identity, and the building of condominiums within the old city, or construction of tall buildings in the vicinity of temples, is strictly under control.

Furthermore, the people of Chiang Mai have added their voice to the conservation crusade. Public campaigns have been instrumental in preserving the rich cultural heritage of Northern Thailand. Strong opposition to the construction of a cable car up Doi Suthep resulted in the project being dropped, and public support for the control of high-rise buildings within the old city led to the drafting of the regulations I have already mentioned. These campaigns demonstrate the depth of community feeling which exists here, and the importance of public participation in the development process.

Chiang Mai is, in effect, a living ancient city, and has to live with all the problems associated with balancing the past and future. However, the solutions to the city’s dilemmas demonstrate that conservation must be recognised as an essential part of development. It is important that the elements of cultural heritage, such as historic buildings and sites, should be counted as assets, not as burdens or obstacles to development.

Historical and cultural traditions are an important, enriching dimension of community identity. Active community participation is therefore essential to the process of sustainable development.

It is important, however, that the community contributes fully to the process of conservation, by which I mean there must be free access to any relevant conservation and development plans, Dissemination of this information at all public levels is essential to success.

Furthermore, education, both inside and outside the classroom, must play a strong role in creating understanding and pride in our cultural heritage. It is time that conservation, for both natural and cultural environments, was taught on equal terms with other professional skills.

It is undeniable, however, that the preservation of our cultural heritage is expensive, and will become more so in the future as the pressures of development and tourism mount on historic sites.

Yet despite the costs of cultural conservation, it is no longer realistic to expect international agencies or foreign bilateral donors to continue to pay for this effort in the booming economies of Asia. Now is the time for the governments of Asia to take this responsibility upon their own shoulders.

Ways and means of providing for the expense of conservation in the national budgets must be identified. There is a need to rectify the current imbalance which exists between the promotion of tourism and the conservation of historic sites, for example. Too often, a tourism-orientated policy prevails, and sites are preserved only as tourist attractions.

Ideally, such a situation should be reversed so that historic monuments are preserved first and foremost for their cultural values, and not merely as showpieces to attract more tourists. It would be dangerous to establish too close a link between tourist revenues and conservation, which might lead to a risk of losing cultural and artistic independence.

Perhaps we should look to our common heritage to provide us with the answers we are seeking. Asia is a region of immense antiquity, with a correspondingly rich and turbulent history. Many countries in the region have inter-acted in the past, and benefited from cross-fertilisation in arts, religion and commerce.

Today, however, we are unable to appreciate the collective effort needed to preserve what is left of our past. This is due in part to the concern of each country with its internal affairs – economic growth and development particularly. It is also due to the current emphasis placed on the natural environment, rather than the cultural environment.

As an issue, conservation of the natural environment has taken centre stage in the last decade, culminating in the 1992 Earth Summit in Rio de Janeiro. Global attention is now being given to issues such as biological diversity, climate change and protection of the Earth’s ozone layer. The level of funding, the number of qualified professionals and the degree of public awareness are higher for the protection of tropical forests, or endangered species, than they are for restoring temples and ancient cities.

This imbalance stems in part from an imperfect understanding of our environment, and what it encompasses. Humans are intimately associated with not only their natural environment, but also their cultural environment. Together these two elements form the millieu within which our societies evolved and exist today.

Because of this disunion between culture and nature, development and conservation plans for our natural and cultural environments have progressed in different directions; they are no longer mutually sustaining or even inter-related.

But in fact they should be. To protect the environment, man must be able to live in harmony with nature – which means being able to cultivate its bounty without destroying its sources. Yet, aside from physical well being, man also yearns for spiritual enrichment, which is where culture plays such an important role. Our cultural heritage provides us with spiritual fulfilment, which alone distinguishes man from other species on Earth.

The time has come for us to recognise the relationship between man, nature and culture, and to formulate appropriate strategies to conserve our environmental legacy. We must be serious about protecting our heritage at all costs.

I would like to call for concerted action on three main fronts;

Firstly, the governments of Asia should start working together to restore cultural heritage with both national and regional significance.

The restoration of ancient cities such as Luang Prabang and Ayutthaya will have a significance far beyond national boundaries. Similarly, the preservation of Angkor Wat will ensure that the Khmer heritage is saved not only for the people of Southeast Asia but also for the rest of the world. Surely there is now enough wealth and expertise in the region for us to take a leading role in preserving our regional heritage.

Governments also have an important role to play as guardians of our cultural heritage. Throughout history, one of the most insidious threats faced by sites and monuments has been looting, dismantling and illegal destruction. National governments should now ensure that regulations prohibiting the encroachment on, or destruction and looting of, cultural property are in place and properly enforced.

It is now incumbent upon governments to take strong action in protecting the national heritage. However, protection must go hand-in-hand with development programs designed to benefit those communities living on or near historic sites. Local populations will have to play their part in safeguarding our national heritage, but they will only be able to do this if they have a fair share of the national resources.

Secondly, regional collaboration should not only be limited to government to government efforts. Aside from such initiatives, I would like to call for business to contribute to the preservation of our cultural heritage.

The private sector in Asia has been the prime mover in the economic development of the region, and now is the time for business to put its considerable experience and financial resources behind efforts to save our cultural legacy. Here in Thailand for example, the Thailand Business Council for Sustainable Development and the Thailand Environment institute are currently discussing ways of supporting efforts to restore our ancient capital city of Ayutthaya. I believe the time is now opportune for more of such private-public partnerships in Asian heritage protection, and would urge businesses to explore options for taking action on heritage conservation.

Finally, the time has come for non-governmental organisations to take up a more prominent and effective role in the preservation of our cultural heritage.

As an example of an NGO playing a constructive and commendable role in protecting the nation’s cultural legacy, I would like to cite the Siam Society, co-organiser of this conference. The Siam Society has an almost century-long tradition of fostering scholars and scholarship, both Thai and foreign. The Society has played an important role in not only the study and conservation of our region’s cultural heritage, but also in the promotion of this heritage to the wider public.

Indeed, next month the Society will initiate it’s Historic House series, at the Bangkhunphrom Palace Seventh-Cycle Celebration. This series hopes to channel corporate sponsorship into the restoration of historic buildings in the Kingdom.

It is obvious however, that worthy organisations such as the Siam Society can only do so much with the limited funds and personnel they have at their disposal. It is for this reason that countries may wish to explore the establishment of an independent national “heritage trust”, along the lines of the British National Trust. This Trust manages public properties all over Britain, with over two million members supporting its work. The establishment of such an organisation would give both financial and political independence to the conservation effort, as well as raise the profile of heritage conservation amongst the wider public.

Asia has now emerged as an International economic centre. As Asians, we are known for our hard-working ethic, and our striving to improve the standard of living for the billions of people living within our boundaries.

Let us therefore be unsparing in our efforts to ensure that our cultural legacy remains secure and undiminished, both for this and future generations. For if we can accomplish the union of conservation with development, and truly attain sustainable development, then we may look forward to the glories of our future, whilst benefiting from the richness of our past.

Let me end my address by quoting from Mr. Abba Eban, former Foreign Minister of Israel. He said, “history teaches us that men and nations behave wisely once they have exhausted all other alternatives.” Perhaps now is the time to behave wisely together.

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Asian Prospects toward the 21st Century

By Anand Panyarachun
Former Prime Minister of Thailand
Chairman of Saha-Union Public Co. Ltd.
at the International Conference
sponsored by the Association for Promotion of International Cooperation and the Yomiuri Shimbun, Tokyo
November 8, 1994

Excellencies, Ladies and Gentlemen,

Introduction

The year 2000 will mark a rare historical occasion. It will usher in not only a new century but also a new millennium. Some, who take ancient prophecies, literally predict that this period will be accompanied by cataclysmic upheavals.

I can see some empirical basis for the millenarians’ fear. While the Cold War may be over, a wide variety of international challenges still loom large before us: nuclear proliferation; ethnic cleanings; competing claims of territorial sovereignty; East-West differences over democracy and human rights, trade, environment and population. The world is not in danger of going up with a bang, but we must ensure that neither will it end with a whimper.

Meanwhile, the drama on the world stage is changing. If the end of the Cold War taught us anything, it was that fundamental change could be swift and unexpected. While the United States has emerged as the world’s sole super-power and Japan continues to play an influential role, attention is increasingly focused on China as a new pole of power and engine for growth in the world’s most economically dynamic region. Further afield is a host of other medium-range regional countries in Southeast and South Asia--particularly India - which are assuming an increasingly significant role in regional and global affairs. These emergent players are actively forging cooperation at the bilateral and multilateral levels with the various regional players.

The Asia Pacific region’s booming economy has prompted widespread optimism about its future. Everywhere, the East Asian “model” of development is being studied and admired. Intra-regional trade has far outstripped that of other regions. Economic inter-dependence and cooperation are at unprecedented levels.

So, what does the future hold for the Asia Pacific region?

Regional Economic Institution-Building

The key trend is a renewed interest in regional cooperation through institution building. This is an apt response to the Cold War’s end, particularly for a region that has for too long lacked a sense of common identity. Throughout most of its history, the Asia Pacific has been an odd cluster of different economic and political systems. For many countries in the region, colonialism has contributed to the various malefactors, which have fed on historical distrust between regional players. The fact that regional countries now show willingness to work together in forging new modes of cooperation is by far the most promising development for continued peace and prosperity in the Asia Pacific region.

The areas for such cooperation are many. So far, the spotlight has been on economic cooperation. ASEAN is finally making good on its economic promise. This dynamic market, with 340 million people and a combined GNP of 430 billion US dollars, is taking steps that will ensure its vibrancy well into the next century. The members have recently agreed to move forward the timetable for trade liberalization under the ASEAN Free Trade Area by five years, to the year 2003. Furthermore, the members of ASEAN have agreed to eventually include agricultural products, which have initially been excluded from the tariff reduction scheme. These advantages of these major steps are two-fold: it will boost intra-ASEAN trade and also make investment in the region even more attractive. With the passage of the Uruguay Round, this move should help ASEAN to maintain its competitive edge and stay ahead of the game.

This trend is likely, to find echoes throughout the greater Asia Pacific area. The Asia Pacific Economic Cooperation (APEC) is quickly gathering momentum, shedding its modest origins to become a potent force for free trade and open regionalism. Next week, the eighteen member countries of APEC will assemble in Indonesia to define the goals of more liberalized trade and investments with proposed timeframes ranging from 2010 to 2020. This will be a further complementary step in the direction towards freer and fairer trade in the wake of the conclusion of Uruguay Round of GATT and the pending establishment of the World Trade Organization (WTO). The APEC leaders will also have occasion to discuss other areas of strengthening the APEC cooperation process including education, human resources development, technology transfer and private enterprises participation in regional cooperation.

Nevertheless, some countries are concerned about being rushed into trade liberalization. These concerns are not entirely unjustified. The reallocation of labour into more economically productive areas, the urbanization that accompanies industrialization - these pose socio-cultural challenges that certainly need to be taken into account by each country. But they should not overlook the powerful argument for economic liberalization. As the risk of being left behind become apparent, governments will have little choice but to open up their economies. Therefore, the sooner each APEC member shifts away from protecting inefficient sectors and concentrates on developing its areas of comparative advantage, the better.

This is, of course, more easily said than done. Inefficient producers often wield considerable political clout. Governments are concerned about social dislocations and environmental deterioration resulting from rapid shifts in economic activity. Since conditions in each country differ, each sub-region in the expansive Asia Pacific area should be encouraged to work out for itself the most appropriate pace and timeframe to adjust for, the side-effects of economic liberalization by taking into account their varying stages of preparedness and development.

Regional Security Cooperation

Sustained economic development requires a stable security climate, and this is another area that will benefit from regional institution building. During the Cold War, the United States security umbrella allowed the East Asian NIEs to prosper. At present, however, Washington’s foreign policy priorities, including its security role in the region, are in flux. Domestic pre-occupations and unresolved debates over America’s vital interests will tend to constrain U.S. involvement abroad. While Washington is likely to “remain engaged” in Asia, the relative scope and nature of that engagement will probably be more limited than before out of their own agenda. It, thus, falls to the Asia Pacific countries to assume greater responsibility for regional security.

In response to this trend, the ASEAN Regional Forum (ARF) was inaugurated earlier this year in Bangkok. For the first time, all ten countries of Southeast Asia were gathered under one roof. For the first time, ASEAN and its dialogue partners from the West and in the region resolved to engage in regular dialogue as part of a process called preventive diplomacy. To build trust and confidence over the longer term, such ideas as the establishment of a regional peacekeeping centre and the exchange of military information may be tabled in the future.

The “proof of the pudding”, of course, will be whether the ARF can contribute directly to reducing regional tensions. The three biggest potential threats to regional security today are North Korea, Cambodia and the South China Sea. Some may wish to portray them, as bilateral or domestic disputes, but their impact on the region, should conflict break out, will not be confined to the disputing parties. Should the Korean peninsula be de-stabilized, Japan and China will be the first to be affected. Should the terrorist and brutal tactics of the Khmer Rouge escalate into large-scale violence, neighbouring. Thailand will once again bear the brunt, a massive influx of refugees. Should force be used over the Spratlys, vital sea-lanes will be disrupted, and regional economies will suffer. At this early stage of its existence, it is understandable if the ARF seeks to avoid controversy. If it can play a constructive role in these disputes, the initiation by fire will quickly establish its credibility.

Other Opportunities for Cooperation

Other areas can also benefit from similar cooperative efforts in the region. As I suggested earlier, rapid economic growth can produce adverse social and environmental side effects, and these often transcend national borders. In the early enthusiasm for free-wheeling capitalism, these side effects tend to be ignored or overlooked. But growth cannot be sustained over the long term if they are left un-addressed. The fact that the side effects have trans-national consequences, make them an appropriate subject for regional cooperation.

Another reason for taking a regional approach to these developmental side effects is their multidimensionality. For one, as industrialization in the region quickens, environmental problems are likely to exacerbate. Inadequate infrastructure and rampant pollution are already lowering the quality of life in many major Asian cities. Rural areas are no less prone to environmental damage. The conversion of farmland to industrial use, overfishing, soil erosion, flooding and erratic rainfall patterns caused by de-forestation may turn some previously self-sufficient countries into net food importers. Indeed, unbridled population growth would further compound the problem of the already under-nourished populace. Add to this global warming, which will raise sea levels and flood rich delta areas, and the environment becomes an issue we can no longer afford to keep on the back-burner. The Climate Institute, in a report commissioned by the Asian Development Bank, estimates conservatively that climatic changes in the next 80 years may create over 20 million “environmental refugees” in South and Southeast Asia, as well as social and economic disruptions on an unparalleled scale. Taking steps to protect the environment now is more sensible and feasible, than attempting to undo the damage later.

Still, it is not immediately clear how best to balance the region’s developmental and environmental needs. Since global warming affects everyone, East and West alike have an interest in preserving the last remaining strands of tropical rainforest in the world. But the argument that developing countries should show their development in order to preserve the environment is not convincing. The comparative advantage of many Asian countries lies in non or semi-renewable natural resources such as timber, and to restrain them from exploiting these resources would be patently unfair. Any attempt to link trade, and environmental protection, particularly if it is seen as an attempt to set up non-tariff barrier, is likely to be staunchly resisted by the developing countries.

The growth-versus-environment dilemma might be usefully taken up within an institutional setting such as APEC, for here is an issue directly related to economic development. Furthermore, it involves allocative choices between more and less developed countries in the region. The answer may lie in some form of compensation of “debt-for-nature swap” in which a developing country’s debt is effectively reduced in exchange for its commitment to protect its rainforests. Such swaps have already been negotiated in several countries, including Costa Rica, Ecuador and the Philippines. While this sort of arrangement may provide only a partial solution, its main advantage is that it creates no losers, only winners. A region-wide dialogue would help identify the key issues and suggest solutions satisfactory to all.

Culture: Clash or Convergence?

A challenge that lends itself less easily to institutional solutions is the simmering debate over Western versus Eastern values. I am pleased that the organizers of this event have included, besides the usual politics and economics, the issue of culture. Already, disagreements between East and West over democracy, human rights, labour rights, reproductive rights and -- dare I say it? -- even caning rights, appear to validate Professor Huntington’s prediction of an impending “clash of civilizations.”

I believe the clash will eventually be avoided. The reason that its possibility looms so large now, is a function of our continuing search for a post-Cold War order. With communism all but dead, the United States, the only super-power left, is returning to “core American values” to guide its foreign policy. This may be no more than an effort to establish some measure of predictability in an increasingly chaotic world. Despite its good intentions, however, Washington is still groping for ways to win friends and influence governments, without alienating them. I believe the learning curve will be overcome before too long. Washington may appear aggressive and abrasive in promoting its democracy and human rights agenda, but the limits of a heavy-handed approach are already becoming apparent.

Even as the United States begins to appreciate the advantages of friendly persuasion, Asia will come around on its own. As we have seen in South Korea, Taiwan, and Thailand, prosperity creates a demand for democracy, and at a certain juncture in the national development process, citizens will long for greater political freedom and civil liberties. Moreover, the free flow of information, so necessary to a vibrant economy, is also the harbinger of new ideas. Satellite dishes and other technologies are already helping spread the gospel of Western-style consumerism. There is no reason to suppose that the idea of free choice in politics will not make similar in-roads in Asian societies, the efforts of governments notwithstanding.

The final point that I wish to add regarding the so-called “clash of civilization” or the clash between Western and Eastern values is that, in fact, throughout history we have witnessed the conflicts of ideas and values arising out of conflicts between forces of extremism on both ends. Coming from a country like Thailand, that adheres to the precepts of Buddhism, which espouses moderation and the middle way, I earnestly hope that the forces of moderation will succeed in overcoming those who profess extremism of all kinds. It may be that both Western and Eastern civilizations are flexible enough to accommodate one another. I like to think that, rather than a clash of civilizations, what will eventually come about is a convergence of cultures instead.

Role of the Regional Powers

For all these region-wide trends, the future of the Asia Pacific will still be tied to the fortunes of key regional powers. The greatest uncertainty surrounds the future of China. Even a change in the Chinese leadership is unlikely to affect the direction of economic policy. However, China’s double-digit growth has been accompanied by corruption, inflation, loss of job security and a widening income gap between urban and rural areas. A large “floating population” of unemployed peasants, drugs, prostitution and crime are also some of the social side effects of rapid economic reform. As in any other country, how the leadership deals with these issues, will determine the extent to which growth translates into development.

The problem that is particular to China, meanwhile, will be the eventual passing of the torch to a new generation of leaders. When the last of the so-called “immortals” - such as the octogenarian Deng Xiaoping - are gone, the new Communist Party leadership will find it difficult to command the same deference as the Long March veterans. The Party’s tight political control will be increasingly challenged by the children of Tiananmen and a rising middle class. Dissent will become increasingly hard to suppress. China is not the closed society it was during the Cultural Revolution or the Great Leap Forward. Its economy is intimately linked to the outside world, and any significant political or social unrest will damage that link. Maintaining social order, instituting market reforms while making an orderly political transition will, therefore, pose a tremendous challenge to the country’s leadership.

Japan, meanwhile, is free from the prospect of any such major upheaval. Continuing present trends, it should become an increasingly important player in world politics. A permanent seat on the United Nations Security Council is within sight. Its repeated expressions of remorse for its World War II role, as well as its categorical rejection of deploying combat forces, provide assurances that Japan poses a threat neither to Asia nor the world. These are all passive actions. Japan needs to demonstrate its readiness to engage itself more actively and objectively in the deliberations and decision-making process of the world organization.

The only question will be how Japan can best fulfill its new responsibilities - for this will be a Japan, no longer dependent on the United States, but a regional and world power in its own right. As such, it will be expected to play a leading role in ensuring that the region’s economic development stays on the right track. Japan has to come to a hard political decision, and by opening up its market, it will have a vital role in the promotion of free trade and economic development in the region. The yen is likely to continue rising and motivate Japanese industries to relocate to Southeast Asia - and elsewhere - in ever greater numbers, facilitating transfers of technology and managerial skills. In terms of government policy, while official development assistance will continue to play a major role in the region’s development, liberalization of trade and investment rules are no less important and should be given greater emphasis.

Apart from the United States and Japan, the traditional Asia Pacific key players, as well as emergent China, the second-tier NIEs in ASEAN will join the first-tier, and a new second-tier will follow in turn. Among them will probably be Vietnam, which will face a dilemma similar to China’s. Despite trying to balance political control and economic freedom, it should still manage to grow rapidly, thanks to its bountiful natural resources and industrious workforce. In addition, Australia and New Zealand will inevitably identify themselves more closely with the East Asian scene.

Some countries from outside the region are also likely to play a bigger role. India, for example, has of late demonstrated interest in forging closer ties with the Asia Pacific. Given its sheer size and the success of its ongoing economic reforms, India may well become a formidable economic power in the first decade of the 21st century.

Conclusion
I have tried to outline the major trends that I think will affect the future of our region: economic and political institution-building, environmental changes, cultural convergence, and developments in key regional countries. Assuming that all things go well, and there are no major interruptions in the economic and political developments in East Asia, what scenario can we then anticipate in the first decades of the 21^st century?

East Asia, including Japan, China, Korea, Taiwan, Hong Kong and the ASEAN countries, will have together an economy larger than that of either NAFTA or the European Union.

East Asia is set to occupy the central role in the world economy. According to the survey of the global economy in the recent issue of the Economist, by the year 2020, there will be seven Asian, namely, China, Japan, India, Indonesia, South Korea, Thailand and Taiwan in the ten largest economies.

By 2030, China will account for half of East Asia’s GDP or roughly equal to the GDP of North America.

The centre of gravity of the world economy will then have shifted to East Asia, but America will continue to retain its lead in basic scientific research, advanced technologies, software and sophisticated financial services.

East Asian countries will be more inter-dependent as their economies forge stronger linkages in trade and investments among themselves and become closely integrated with global economy, thus providing incentives for the maintenance of peace and prosperity.

China, the United States of America and Japan will continue to have dominant roles in the organization of peace and stability in East Asia, including the North Korean issue. Pragmatic diplomacy must replace self-righteousness; dialogue and negotiation must prevail over confrontation. A strategic partnership of these three powers working in tandem with the rest of East Asia would bode well for the long-term future.

Given the pace of change in today’s world, I would not vouch for the accuracy of my assessment with the confidence of a Nostradamus devotee. As we slip into an uncertain future, though, we carry with us a faith no less strongly held than that of the millenarians. It is a different kind of faith. This faith, which allows us hope rather than despair, is faith in humanity. While other parts of the world are torn by strife, we in the Asia Pacific region have begun to build faith in one another. With a little luck, the coming millennium may yet prove to be everything we hope and strive for.

Thank you.

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Liberalisation of the Thai Economy

by Mr. Anand Panyarachun
for the 4th Asian Management Awards
Bangkok, September 22, 1994

Good evening. Your Excellencies of the diplomatic corps, distinguished members

the Thai government, business leaders and industrialists, observers and friends from the media, faculty and students, ladies and gentlemen:

On behalf of our gracious host, Viroj Phutrakul, and the Asian Institute of Management, thank you for joining us this evening as we honor the recipients of the 4th Annual Asian Management Awards in Thailand.

As I watched the presentation this evening, I must say that I was just as moved as some of the recipients - and I felt as proud. In fact I think that all of us can be proud of what Thailand and its private sector-government partnership has achieved.

You, tonight’s recipients, are outstanding symbols of what has happened in Thailand of how significant economic growth can be achieved in an environment where democratic institutions and practices prevail.

Our double-digit GDP growth in the late 80’s and our projected 8% - plus growth this year and next is enviable. Inflation in controlled at well under 5% (I hope), we have attracted over ten billion dollars of foreign investment over the last few years, our foreign exchange reserves at $25 billion have never been higher, our per capital income of $2300 is very respectable and is rising and unemployment is at a low 3.3%.

Today, however, we face a very different challenge. (The prevailing political and socio-economic forces of the 1980’s have all changed. The disintegration of the former-Soviet block has opened up previously controlled-economies. New countries and republics are being formed and admitted to the United Nations at an ever-increasing rate. It is in this light of change, that we must forge our new vision and policies to lead us into the 1990’s and beyond.

I know that many experts will speak of how we need to prepare for changes in technology that will affect the way we live and the way we compete. Others say we must be ready for how the newly-emerging economies - China, India, and Indochina - will at the same time be our competitors for foreign investment and markets for our products.

Within this regional context, other pundits are convinced that Thailand’s real priorities should be to resolve infrastructure bottlenecks, alleviate rural poverty and create a more equitable distribution of wealth.

All of these pressing concerns are important, but today we address an issue of equal importance, one if not handled appropriately may relinquish Thailand’s competitive edge in the newly-forming global economy.

From being a lackluster resource-based under-developed economy in the 1970’s, we became one of Asia’s emerging dragons in the last 10 years or so. How? Economists, businessmen and politicians-the pundits, I spoke of - are generally agreed that our growth and success were due to both sound macro-economic policies coupled with prudent economic liberisation.

In the 1980’s, we started to liberalise our economy with the enactment of an export-promotion policy. At the same time, the Board of Investment, aggressively encouraged and fostered increased foreign direct investment, triggering a boom in foreign investment in manufactured products. As a result, exports surged in the late 80’s.

Since the late 1980’s, more liberal policies on capital flows, privatisation and rules on foreign investment have led to an additional influx in direct foreign investment. This has led to further industrialisation, growth and technology transfer for Thailand.

To drive growth into the 90’s however, Thailand must not only continue our current

efforts at liberalisation but also move swiftly to become one of the most open trading nations in Asia. Even as we continue to reduce tariffs, gradually liberalise our financial services sector via BIBF, and relax rules on foreign ownership, we must do more.

Competition amongst companies and multi-national corporations is fierce. A recent issue of the Harvard Business Review says, I quote: “Competition is now a ‘war of movement’ in which success depends on anticipation of market trends and quick response to changing customer needs. Successful competitors move quickly in and out of products, markets, and sometimes even entire businesses - a process more akin to an interactive video game than to chess. In such an environment, the essence of strategy is not the structure of a company’s products and markets, but the dynamics of its behavior.”

Likewise, competition amongst nations will be equally fierce. Nobel Laureate Milton Freedman, recently stated that: “It is today possible, to an extent greater than any time in the world’s history, for a company to locate anywhere, to use resources from anywhere and to produce a product that can be sold anywhere.”

What does all of this mean for Thailand? We can only compete effectively in the global economy if our private sector is linked to the international community.

Our success came at a time when we were a relatively liberal economy compared to those around us: China, India, Vietnam, Indonesia, the Philippines, and the Soviet Union were more protected than we were. The success stones are clear: the open ports of Singapore and Hong Kong thrived while the controlled-economies of Burma and Vietnam stalled.

But today we are in danger of becoming more protected than our neighbours. If this happens the situation will be reversed: we will be hurt by our protectionism, and they will benefit from their liberalism. And Thailand cannot afford to let this happen.

The AFTA Monitor has made a very succinct case for free trade. It says, and again I quote:

“History has shown that protectionism hurts economic growth and condemns consumers to higher prices and lower quality. It also created unemployment, lower wages and lower productivity. Protectionism leads to economic stagnation - so much so that the world economy all but collapsed during the depression of the 1930’s, a markedly protectionist period. It was thought that world leaders had learned their lessons from that experience, lessons like:

Cutting or eliminating tariffs exposes domestic industries to foreign competition. This competition forces both domestic and foreign industries to become more efficient, either by themselves, or by forming alliances. The result: consumers, have a wider range of goods and services to choose from and better-quality goods at low prices. Those industries no longer able to compete invariably shift their resources to areas in which they can compete, i.e., where the resources are used more efficiently. This leads to higher productivity of a country’s factors of production and therefore to better living standards.

As an added benefit, more jobs and higher incomes result from the entry of foreign competition and technology. Workers are trained quickly and become more productive. Domestic industry also flourishes as new technology is acquired and new markets are opened. Every economy that has tried freer trade has obtained these results”. End of quote.

The ones who will be hurt the most by protectionist policies will be the protected industries themselves. Granting indefinite protection assures that our local business or industry will become uncompetitive in the long-run in the quickly converging world economy. We must instead insure that as we liberalise and move to a true “free trade” area, that our local industries be equipped to complete globally.

Consider what protectionism alone will do to Thailand and its workers.

First, we penalise our country because being protected, we are making inefficient use of our resources, and Thailand must strive to use its resources wisely.

Second, we must realise that for every industry that is protected, another industry is penalised. If cement is protected, that construction industry will suffer from high prices and lower quality. If we protect textiles or leather, then we penalise clothes and leather goods manufacturers.

Third, we penalise consumers - our fellow Thai’s - who have to pay higher prices for lower-quality goods. Because if goods were priced lower and were of better quality, the industry would not need protection from foreign competition.

Just as there are well-dressed fools, there are well-dressed foolish ideas, and protectionism is one of them. Protectionism only benefits a very small group - and only for a short period. Meanwhile millions suffer.

Government alone cannot move to liberalise the economy. Businessmen who propose protectionist measures must recognise the implications of indefinite protection. In the long-term, they will be uncompetitive. They must now take the first step to prepare for a more open economy. As the government moves to liberalise our economy and welcome not only foreign direct investment geared towards export but foreign competition in the local markets as well, our local industries must be ready to compete with tough foreign challenges. This is the first and most crucial thing for us to do as we drop our protectionist shell.

I wish to call on the rest of us in the private sector and government to be on the lookout for and expose those who would propose and those who would implement protectionist measures.

They say that a person who sees the advantage but not the disadvantage is like a fish who sees the bait but not the hook. I hasten to assure you that I am no such fish. Instead of looking only at trade-offs and sacrifices, we must seek out mutually beneficial endeavors, those in which both parties can share in a “win-win” scenario. Let me give you a few examples. Those in manufacturing have discovered with economics of scale we can achieve higher quality at lower prices. So also we now know that the ideals of democracy can be well served even with a strong central government. Well, it’s time we believed that economic liberalisation can help us achieve a much better standard of living for our people without sacrificing nation interest or national pride.

Just like the trophies you have received today with their Pillars of Hercules and the saying ‘Plus Ultra’, or ‘everything lies beyond’, Thailand must go forth into the next century standing on the twin pillars of sound macro-economic management and economic liberalisation. The time for discussion is past. It is now time to act. And if we do, everything lies beyond for Thailand and we can move forward with confidence.

I congratulate all of the recipients of tonight’s Management Awards. You are amongst not only Thailand’s best, but Asia’s best. I ask that all of us here this evening, help our nation to remain one of Asia’s best as we move to liberalise our economy.

Thank you.

(CJ note: Quotes from current sources e.g. AFTA Monitor may not be appropriate given Khun Anand’s standing.)

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ASIA: Back to Basics?

Remarks by Mr. Anand Panyarachun
Chairman of Conference
Shangri-La Hotel, Bangkok
July 29-30, 1999

Prime Minister Chuan, Ladies and Gentlemen,

Over the next two days, the conference will provide us with an important opportunity to look at the economic crisis affecting Asia. It will give us the chance to think through some of the difficult issues facing us as a consequence of the crisis, and, just as important, how we can avoid a recurrence of such a crisis.

The premise of the conference is that we need to look for answers by reconsidering the basics of economic development: the effective use of land, human resources and capital. With challenging speakers and discussants from government, academia and the private sector, this conference gives us an opportunity to reason together without defensiveness about the past.

In a crisis of this magnitude, everyone has made his share of mistakes: governments, banks, companies, and multi-lateral institutions. The challenge is to draw the right lessons from those mistakes, so the terrible pain of this crisis can be the starting point for needed change.

Although this crisis has given us an opportunity for change, it is not a simple matter to determine exactly what change is needed and how it is to be accomplished. Defensiveness, self-interest, pet theories, disputed or incomplete data and maneuvering for future economic advantage, all add to the smoke of intellectual battle that can obscure the best way forward. What we need to do over the next two days is to listen carefully to all views and focus on the essentials of what needs to be done to put our economies in this region back on the road to sustainable development.

In the past decade of rapid development, these basics have sometimes been overlooked and occasionally ignored. The productive use of land through agriculture was our first and perhaps most fundamentals source of wealth, but in the past two decades of rapid growth, agriculture trailed far behind the growth of industry and services. Since the majority of the people of Asia still make their living from agriculture, it meant that the majority was left behind in the boom. This sharpened income disparities and accelerated urbanization.

Over-emphasis on industrial, rather than agricultural development contributed to social and environmental problems. Asians became more dependent on imported fuel and food, and therefore more dependent on the international trading system including international exchange rates. Clearly, changes in the way that land is allocated and used are needed to lead to more sustainable, more balanced and more evenly distributed development.

Similarly, the economic boom generally outpaced the development of human resources. Perhaps exceptions are Japan, Singapore, and Taiwan. It is, of course, a cliche to say that economic development depends on an well-educated population. During our boom years, not enough was done to build the systems needed to provide young people with the kind of education that would allow them to reach their full potential. There was not enough investment, despite the availability of funds. There was too little connection between the manpower needs of the private sector and the education provided by largely state-run educational systems. There was not enough pressure for changes in the way that our people are educated.

The problem is widely recognized, but the solutions are much less clear. Should governments be investing more in education? Should there be more reliance on private sector education? Can useful links be created between government and industry in joint efforts to teach immediately useful skills? How do we stop the brain-drain out of education? Should technical education be the main priority?

Some would argue that as great as the shortage in technical training has been, there has also been an important shortage in ethical training that is just as damaging to progress as the lack of scientific and managerial expertise.

In contrast to these first two basic factors, the use of capital has received great attention. Even before the crisis, there was rapid change in the financial systems of all our countries. We opened our economies up to world capital markets, liberalized banking, welcomed foreign investment and initially benefited from the rapid inflows of external resources. New economic empires were created around the ability to mobilize capital. Scarce managerial expertise was pulled into finance with high salaries and rapid promotions.

This focus on capital was incomplete. Too much attention was paid to the attraction of capital and too little to its effective and productive employment. Instead of spending the time and money to build systems that support the allocation of capital towards its most effective use, we simply assumed that reliance on market forces was sufficient. Our banks became pawnshops; our stock markets became casinos. Insider trading, conflicts of interest and simple criminal misuse of funds undermined our financial systems and many of them go unpunished.

Neither foreign investors nor multi-lateral lending institutions insisted on reform. On the contrary, foreign financiers were at our doors every day, insisting on lending cheap money. While some noted the shortages of the ethical training, supervision, regulation and enforcement needed to make those systems effective, the problems were not taken seriously enough to slow investment. The high growth rates and the profits available overwhelmed such objections.

So, while there are important changes needed in the various national financial systems, there are also important issues for the international community to address. The ignorance, irresponsibility, and heard mentality of those charged with moving huge amounts of international capital around the world contributed to the crisis. Advances in computers and telecommunications have dramatically increased the speed at which capital can be moved. This has reduced the time allowed to investors and fund managers to give careful consideration to their capital investment decisions. It has led to irrational decisions to invest and to dis-invest in Asia.

Has our ability to move capital quickly now outstripped our ability to move capital intelligently? Is there anything that can be done to protect economies from the effects of these rapid movements?

Finally, as we look at changes in these three basics - land, labour and capital - we must also look at the balance among them and the way we go about making changes which would lessen the conflict between economic growth and social justice. Balance is needed to avoid the capital intensive bubble growth of the recent past, but how do we achieve it? The problems in our finance and business sectors that now appear obvious, were not simply an accumulation of individual mistakes. Some mis-allocation of capital cannot be avoided in a free enterprise system, but the extent of misallocation we have seen in the recent past indicates a systemic problem of governance that needs to be addressed.

We need to think about the processes through which our key economic decisions are made. Those processes, whether in government or in private business, must be reviewed to ensure that they are not distorted by special interests. The best way to do this may not be to simply toughen laws and strengthen enforcement because it is so difficult, well-nigh impossible, to invent regulations that address all possible situations.

Greater transparency, so that accurate, timely information is available to all of those concerned - whether citizens or shareholders - is probably the greatest single mechanism that can lead to improved governance and better performance. Even transparency must have some limits. Where do we draw the lines? How do we build a new culture of transparency and public responsibility that will be the real guarantee of good governance? How do we incorporate the best of Asian traditions and practices into this new culture of transparency?

These are difficult challenges. We cannot expect to meet all these challenges in a two-day conference, but we can at least contribute to the process that will involve us over the next several years. We can contribute with appropriate data, with new ideas, and with careful analysis. Perhaps most importantly, I would like to see a contribution in terms of the public spirit of the discussion that is aimed at practical action and achievable goals. You have my best wishes for success in this endeavor.

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The Leadership Forum

Speech by Mr. Anand Panyarachun
Chairman of Saha-Union Public Company Limited
Former Prime Minister of Thailand
Bangkok
February 25, 1999

Khun Arsa Sarasin, Chairman of the Foundation for International Human

Resources Development,

Excellencies,

Distinguished Participants of the Leadership Forum,

Ladies and Gentlemen,

I would, first of all, like to thank Khun Arsa for that warm and generous introduction. I would also like to take this opportunity to congratulate him on being appointed Chairman of the Foundation, which is just one of the many important positions that he has been asked to assume. I am sure this latest assignment will involve many challenging tasks ahead and will require the kind of determination, commitment and experience that Khun Arsa has always brought to bear in every endeavour he has undertaken.

When I was asked to give this talk, I was not sure what would be the appropriate subject for me to address in my remarks this evening. But I was informed that the aim of this forum was to discuss and search for possible solutions to issues of economic development in the light of the current economic crisis, and particularly the implications for human resource development.

I think that with the brainpower in this room, you may have already made much progress towards finding such solutions. So let me offer by way of a disclaimer that I may have little of substance to add to the discussion. Indeed, my remarks should be taken as the musings of one man, and if what I say here makes us think - and care - more deeply about human resource development, I shall consider that to be ample reward.

It seems that since the Asian crisis broke out, with Thailand as the epicentre, we have all gone through considerable soul-searching, particularly with regard to our development strategy. What went wrong? What are the lessons to be learned? What do we need to change to be able to thrive in the globalised economy? These are hard questions that we have to keep asking ourselves if we are not to repeat the mistakes of the past.

Certainly, there is no shortage of theories on the origin of the crisis. Some blame it on rampant capitalism, while others see a conspiracy led by “rogue” financial speculators. Some point to the fallacies of so-called Asian values and the Asian model of development, while others see globalisation as the main source of all our problems.

There may be elements of truth in all these analyses. But I believe that at the heart of it all is the plain and simple fact that we became victims of our own success, success which we defined much too narrowly and which lulled us into complacency.

What happened was that we came to see economic development purely in terms of material wealth and astronomical GDP growth?

We equated economic success with the outward trappings of modernity such as high-rises and luxurious lifestyles, whether or not they were cost-effective and appropriate. Even as we enriched our pockets, we failed to enrich our minds and spirits.

Success bred excess. Traditional Thai values of thrift and spirituality gave way to consumerism and materialism. The Asian values we trumpeted only served to justify a system of patronage and favouritism that led to the misallocation and mismanagement of our resources.

We touted the abundance of our natural and human resources but it turned out to be an open invitation for the exploitation of cheap labour and the destruction of our environment.

Certainly, we can blame outside forces for the devastation wrought upon us, but complaining would not get us very far. It would be a much better use of time and energy if we were to realistically assess our strengths and weaknesses, determine what needs to be done, and do it.

When we talk about the causes that contributed to the crisis, one weakness we tend to overlook is in the area of human resource development. We have to admit that Thai society has not traditionally devoted as much attention to developing its human potential, as it should have. The paternalistic nature of our society has meant that ideas and change mainly came from the top down.

Authority spoke, and the people listened and complied. While this social structure made for great political stability, it meant that society was ill equipped to deal with change, particularly rapid, sweeping change.

And change is what Thailand’s integration into the international system brought. Father-knows-best leadership works well enough in closed systems, but when father himself is overwhelmed by outside forces, the children have to fend for themselves. To do so successfully, they have to be empowered to think for themselves.

But human resource development is a long-term proposition. For many years, the crucible of the Cold War made the idea of people empowerment and independent thinking politically unpalatable. Grassroots movements that aimed to build on society’s traditional strengths, such as by fostering rural self-reliance, were regarded by the authorities as controversial. Thus even with the advent of national development planning, the workforce was generally taken to mean the labour force, with labour another ingredient in the industrial development recipe - a raw ingredient, rather than one that needed to be refined and developed.

Without the economic crisis, we would have probably continued on that unsustainable path, and a bigger crisis would have been waiting for us further down the line. But now we have had our wake-up call. The Cold War is no longer, and rapid change is buffeting us from all sides. The trend towards democracy and good governance is irreversible. If ever there was a time to reconsider our approach towards human resource development, it is now.

What is most important is that we must return the process of economic development to where it belongs, to the people. We have seen that a top-down or trickle-down approach does not work. The State has shown that, for all the resources at its disposal, it does not know enough to outguess the market, much less to achieve any degree of efficiency in managing economic development. The business elite has also demonstrated that it is not above making costly mistakes that can run the economy into the ground.

To be sure, there is a place for the State and a place for the private business sector, but it is high time we brought out the latent energies of our greatest asset, our people. After all, you can invest as much as you like in all the skyscrapers, expressways and other physical infrastructure, but it is the human infrastructure that matters the most and potentially offers the highest return on your investment. A nation can pour as much money as it likes in acquiring military might but no nation can feel truly secure if its people languish in deprivation and social injustice.

If we are to become competitive as a nation, if we are to have social equity, if we are to foster sustainable development, we have to put the people at centre stage.

The development of the human potential must be the most important investment that any nation could make for the long term. And it can only be achieved when people are free to learn, to think, to express their views and to decide on their own choice of government and to engage in the economic enterprise of their choosing.

There are some encouraging signs. An education reform bill has been passed. Human resource development has become something of a mantra in policy circles. And in the midst of this crisis, the word “human” has been given the kind of prominence that it never received just a few years ago. In the press and in seminars, we read and hear about the human impact of the economic turmoil, the imperatives of promoting human security and human development. If there is a silver lining in the dark cloud of the crisis, it is that it has put the human agenda at the top of our development priorities where it rightly belongs.

Perhaps, despite all our efforts, we will never be able to rid our societies of inequality and injustice. But at the very least we can offer our peoples more equal opportunities for bettering their lives and livelihood. And there can be no better means of providing such equal opportunities than education and human resources development.

When we speak of education, it should not be confined to the formal schooling every child receives. Our attitude towards education and its role in economic development must reflect the changes in today’s world. Education should not be seen as a process that is completed upon receipt of a diploma or degree. Education must be a life-long process both in and out of school. Our higher education has to be geared towards producing independent, critical thinkers, not just workers and bureaucrats as required by national development objectives as determined by the State. Students have to be encouraged to question authority and not to settle for rote-learning and accepting the wisdom of their teachers. Education needs to become more than a ritual, a license to a good job and a good life. Learning must become second nature, a habit that we instill in all our people from childhood onwards.

I regret to say that here in Thailand, in spite of all that has been said about its importance, education has been given short shrift. It is a well-known fact that the rate of functional literacy in Thailand is lower than in some of our less-developed neighbours. Unfortunately, education has now become too much commercialised and politicised. Teachers and lecturers nowadays care more about making money than passing on knowledge and thinking skills. Universities and colleges now care more about increasing enrolment than about producing quality graduates. Despite claims about the decentralisation of education, the setting of school curricula is still very much in the hands of the central government, making them rigid, often times outdated, and unresponsive to real-world needs. I do not mean to be harshly critical but I am simply stating some of my concerns about the present state of education in Thailand.

But the main point that I should like to emphasise with regard to education as it relates to the current economic crisis is the question of ethics and values. Human resources development is not simply about instilling marketable skills and knowledge.

We need not remind ourselves that the problems besetting our economy were not due just to the failure of our financial institutions. At the heart of it was the erosion of moral standards, the excessive value placed on a culture of profligacy and consumerism, the cosy relationship between businessmen and politicians, the abuses of public trust and the lack of transparency and accountability in both the corporate sector and government. Human resource development means that we must restore personal responsibility and moral integrity to the economic development equation.

This is, of course, more easily said than done. But the crisis has shown us that not doing it carries an extremely high price. The renewed interest in Buddhist social values as a result of the crisis appears to be a step in the right direction. By drawing upon the traditional strengths inherent in our culture, we can restore our moral compass and use it as a guide in managing change, rather than let change overwhelm us and cast us morally adrift.

Perhaps more important than the various economic reform measures being undertaken is the need to build into our political, economic and social systems a standard of ethics based on the concept of good governance. Good governance, as far as the public sector is concerned, means a government that is transparent, responsive and accountable to the people. It must put the public interest before the interest of certain individuals or of certain specialised groups within society.

Good governance does not stop at governments. Accountability and transparency must also be demanded of companies and all others that exert a disproportionate influence in public affairs.

I have no doubt that if good governance is going to become a permanent fixture in our society, it must come through effective leadership. Those in positions of leadership must set an example and show responsibility, vision and vigour - qualities which I believe are the very essence of good governance. It is also necessary to bear in mind that leadership means more than convincing and inspiring others to follow you. Leadership is also about inspiring others to be the best that they can be, so that if you inadvertently lead them down a blind alley, they can find their own way back and set out in the right direction. And that is what human resource development is really about.

The way forward from the current crisis is to critically rethink our policies and priorities. We need to strike a balance between competing priorities. We need to focus on the fundamentals of economic development. We need to reconcile our traditional strengths with the power of the global economy. The way forward requires our nations, individually and in partnership, to work towards the promotion of sustainable development - through good governance in both the government and corporate sectors, through effective leadership and through protecting the diversity and abundance of nature.

Most of all, we need to remind ourselves that modernization is not development. The objective of development is not to have bigger buildings and more expensive cars. Development is about uplifting the material and spiritual well being of each individual in society. And that is best accomplished not by a top-down approach, but by empowering each person to make the best of his circumstances and determine his own destiny. Only then can we truly realise our potential as individual human beings and fulfil our common aspirations as members of the human race.

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Keynote Address
Integrity in Governance in Asia

by Mr. Anand Panyarachun
Delivered at Workshop on integrity in Government in Asia
United Nations Development Programme
Transparency International - Thailand
June 29, 1998

Ladies and Gentlemen,

First of all, allow me to congratulate the organizers for gathering such a distinguished group of people from the Asian region to deliberate on an important topic. To counter corruption is not only critical to good governance but it is also central to an equitable, balanced and sustainable development. Simply stated, corruption needs to be challenged, curtailed and in the long run, hopefully eradicated. For corruption not only depletes our already limited budget and resources, but it also demoralizes the spirit of a nation and its people. Corruption, if allowed to persist unchecked, would inhibit and dwarf the moral integrity of a society.

The current economic crisis in Asia has inadvertently brought much attention to economic problems and their solutions. This rather single-minded focus on the economy may have overshadowed other urgent issues that need to be addressed in the region. Typical of conventional approach and thinking, the trend to divide problems and issue into segmented categories would propel us to deal with them in a disjointed manner, as if realities can be neatly divided into compartments where one could systematically prioritize them and deal with them one at a time.

At least in the Thai situation, our economic woes are closely intertwined with failures in our political and social-cultural institutions. Many Thais have wondered aloud that if the first signs of financial mismanagement were taken seriously and immediately and properly dealt with, perhaps our economic woes might have been lessened. Other might hasten to add that the fact that the economic ills were allowed to escalate and worsen indicated suspected acts of “cover-up” and “favoritism” in return for special “favor” by powers that be. I would add that at the core of our “dark experience” lies the ugly truth that there was an absence of transparency, accountability, public interest and public responsibility.

Socio-cultural values, which propagated consumerism, conspicuous consumption fortified by the practices of cronyism and patronage in politics and administration has invariable combined to doom the Thai economy. Because socio-economic and political factors are so inextricably intertwined, a holistic approach, which focuses on their inter-relationship, will serve us well.

The combat against corruption is not an individual quest nor even solely a government’s duty. In fact, it should be a joint effort of different players. Government should be an active partner in this effort. But a strong civil society where average citizens cohere to volunteer their time, energy and effort to monitor situations and persons, which engender corrupt activities and behaviors will prove to be the most enduring deterrence against corruption. Likewise, civil society organizations such as NGOs, people’s group and informal associations of like-minded people will undoubtedly and unmistakably be good partners for individual volunteers and government. In reality, we will need to create an environment where cooperation and participation from the public to tackle with corruption goes beyond verbal endorsement and commitment.

Such an “enabling” environment where integrity in governance is high would need to meet certain requirements such as:

Leadership with good moral characters and high integrity. Role models aside, leadership with true commitment to foster transparency and accountability in governance and a willingness to welcome public engagement and involvement in solving social issues.

Constitution or basic law that provide the legal framework and assurances that people’s voices, needs, participation and involvement in exercising their civil rights are not only guaranteed but nurtured.

A set of values that are congruent with activism, engagement and participation in public life by private individuals. Too often, in the context of many Asian countries, historical conditions were such that an average citizen is made to feel not only his/her insignificance and vulnerability vis-a-vis government and other powerful forces in society, but he/she is also conditioned to submit to authorities with silence and to endure all conditions, however onerous, with patience and tolerance.

I would like to draw you attention especially to the last point - value system and value change for social activism. Traditional Asian values speak of loyalty to family and kins, commitment to honor and obligations, adherence to a system of integrity, and a code of business ethics built on personal trust and relationship. These values may be construed as antithetical to the values of modern society where disengagement from familiar and kinship ties and reliance on legal contracts are stressed.

However, I contend that traditional Asian values could be extrapolated to strengthen our present call for value change, for integrity in good governance. Allow me to elaborate.

Imbued in some of the traditional Asian values already stated are the virtues of a moral and integrity system which bind an individual to his social relations. Loyalty to family and kinfolks submits an individual to an immediate social group for the good of the group instead of for one’s own personal ends. The requirement to honor and repay obligations serves to strengthen an individual’s commitment and responsibility to social acts. It also serves to remind one that the social world is a web of interrelated exchanges and reciprocities where one could not act independently, disregarding social consequences and implications. As for the code of honor and integrity in business, the virtue of honesty and basic trust in the goodness and integrity of other human beings are hereby extolled.

These virtues could be and should be captured for our task at hand to interpret and incorporate them into a set of values system that will counter the forces of corruption.

We could translate commitment to family and kins into commitment for an even larger social group, which is society. That an individual’s obligation to society requires participation and involvement and even vigilance to fend off the corrosive effects on society which corruption inevitably incurs. The moral and integrity code of business practice easily translates into an integrity system where corruption could have no place and would not be tolerated.

In essence, through the cooperation of the media as a partner in the effort to stamp out corruption and install transparency and accountability in all spheres, the public will not be motivated to actively participate as alert monitors of wrong doings only, but they will cultivate a strong distaste and contempt for both wrong doings and wrong doers. They will also be concerned enough to act and not just to sit back and complain.

What should ordinary citizens do and how could they be effective in battling corruption? I do not presume to know all the answers, especially in the face of divergent socio-cultural economic-political contexts. I trust that you will be addressing these questions among others in the next few days. I wish you my best in your deliberations.

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Facing the Future

Keynote Address
by Mr. Anand Panyarachun
Chairman of Saha-Union Public Company Limited
Former Prime Minister of Thailand
at Chulalongkorn University
Bangkok, Thailand
March 23, 1998

Distinguished Guests, Ladies and Gentlemen,

It is a great honour to be invited to deliver this Keynote Address to all of you attending this Conference on the “Social and Political Dimensions of The Asian Economic Crisis” organised by Chulalongkorn University Social Research Institute, the Asian forum for Human Rights and Development and Focus on the Global South on March 23 and 24,1998 in Bangkok.

Whither the “Economic Miracle”?

In a short period of a few months only the “economic miracle” of Southeast Asian countries, built over decades, has shuddered to a halt. Since July last year this country and many others in this region have been several affected by an unprecedented economic and financial crisis. In a short period of a few months, thousands have been left jobless, drastic budget cuts have been made in government’s public spending and prices for essential consumer goods have skyrocketed in some areas. On the other hand, the financial system has been subjected to a thorough overhaul under the direction of the International Monetary Fund (IMF). Many of our countries in this region had to be “bailed out” from this crisis through a comprehensive but stringent “rescue package” put together by the IMF. The suffering for the people that began with this crisis last year continues today, and is showing signs of becoming more serious in the coming period.

I believe that the “economic fundamentals” of the countries in this region remain sound. The crisis was an indication of the vulnerability of our countries to the fluctuations of the international capital markets and unguided “open economic” policies that had little roots in one’s own country, but were totally dependent on foreign investment.

Our “miracle economic model” of development has been challenged to its fundamentals by the current economic crisis in Asia. This was a model that was based on rapid growth and liberalisation which catered more to the interests of foreigners (“external”) than to local people (“internal”). This was a model that was biased towards the “rich”, and largely neglected the poor and the vulnerable sections of our society. Under the influence of this model, we all became its agents and preferred “extravagance” to “efficiency”, “high growth” to “equitable income distribution” and “quick profits” over “sustainability”

I believe that the main cause of the economic crisis was our “social deficiency”. Let me explain this concept:

We did not have an effective monitoring system to oversee the financial and commercial sector, as well as overall direction of our economic paradigm,

Our government seemed to be less transparent and accountable and more “rapid growth” driven,

Our civil society, while reaping some benefits of the economic miracle, generally remained aloof to the economic direction of our country,

Finally, there was little to no participation of the ordinary people in decision-making on important economic and commercial policy making that affected the country as a whole.

Development Is More than Just Growth

We know that development is not just growth. The experience of our countries shows that rapid and high growth can indeed take place, but many other crucial aspects of development remain stagnant or neglected - viz., social justice and human rights, sustainable environmental management, equitable sharing of the country’s resources and promotion of self-reliance and local enterprises.

The general discourse on development revolves around two polarised positions, both of which I believe are seriously questionable:

Those that believe that mainstream development based on rapid modernization (“globalization”) is the only way forward for development of the country, and hence reject traditional and “local wisdom,”

Those who believe only in traditional and “local wisdom” and reject all forms of modernization.

I believe there is a mid-way between these two juxtapositions. I am a firm believer in the “middle-road” that blends and integrates the best elements in both positions - the traditional and the modern; the local and the mainstream; the local economy and the global village. It is only with this merging of historical paradigms of development that we can achieve genuine self-help, self-reliance, sustainability and overall human development for all.

The Way Forward

The way forward from the current crisis is to restore the value and spirit of the fundamental principles of human life and good governance - viz. transparency, accountability and participation. Good governance does not stop at governments. At the present time, we should be talking more about “corporate governance” and “financial governance” we need to make companies and corporations more transparent and sensitive to our people. We need to make them more accountable to the environmental and social costs of their policies and actions.

The way forward from the crisis is to critically re-think our policies and priorities. It was not our integration with the global economy that is to blame for the crisis - it is our inability to balance various development priorities and build a foundation of self-reliance based on our sound indigenous “economic” and “human” fundamentals.

We now need to go back to these fundamentals - both the economic and the human - to restore confidence in our people, to rebuild our country from the bottom-up, to draw inspiration from our local wisdom and our local practices that emphasis sufficiency, mutual respect, equality, justice and fair sharing of resources. In short, we need to reconcile our traditional strengths and the power of the global economy. This is the task of “bridging” that we are all called upon to play at this juncture in our history.

The Significance of This Conference

This Asia-Europe People’s Forum with its main aim of facilitating the involvement of civil society groups in the ASEM process in order to ensure that the interests and needs of different groups, especially children, women, the poor and the marginalised in society, can be articulated; is an important step in the right direction. We need to build dialogue and understanding between the government, business and private sector, civil society groups and donors in our common endeavour to respond to the plight of the poor and the vulnerable sections in our societies.

We need to recognise that people have struggled hard to build local level alternatives that safeguard self-reliance, social justice and equality. We need to facilitate their voice to be heard in national and international fora in order to influence policy makers and our political leaders. Democracy and Development begins at the grassroots levels first - it is a challenge to all of us to ensure that this experience transcends the frontiers of nation states and becomes a global reality.

I am pleased to be part of this important Conference and wish the organisers and all the participants from so many Asian countries and abroad, the very best in your deliberations in these two days.

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Keynote Address

by H.E. Mr. Anand Panyarachun
Former Prime Minister of Thailand
Socio-Economic Summit Nepal 1998
"Strategy for the New Millennium"
Kathmandu, Nepal, 20 February 1998

Excellencies

Distinguished Guests

Ladies and Gentlemen

It is a great pleasure to be in Nepal, a kingdom that has so much in common with my own. Not only do we share similarities in our cultural heritage; through the centuries, both our countries have managed to remain free of foreign rule.

But in our own way and in our own time, Nepal and Thailand has each had to open up and adapt to the currents of globalization. And judging from rush-hour traffic in Bangkok and Kathmandu, it seems we also face many of the same challenges on the road to development!

Thailand, of course, had something of a head start. And by most conventional measures, we succeeded spectacularly. In some three decades, we had gone from practically nothing to become a role model for the developing World. Between 1985 and 1995, we achieved the fastest economic growth in the World, were hailed as the latest Asian economic tiger, and made the World Bank's top-ten list of projected biggest economies in the year 2020.

Our crash, when it came in 1997, was equally spectacular, sparking an Asian crisis that has since gone on to engulf much of the developing World. It has also given rise to much soul-searching over whether our development path was the correct one.

The question asked most frequently is: How can Thailand's development experience turn so quickly from blueprint for success into cautionary tale? How can something so right turn out so wrong? Or was it wrong to begin with, only we didn't know it, like someone who only realizes there is a problem with his diet and lifestyle when he gets a heart attack?

There are no simple answers. National development has never been a cut-and-dried proposition. You base your actions on the available knowledge at the time and make corrections as you go along. Certainly, the crisis has severely shaken our confidence. But we must be careful not to throw the baby out with the bath water. Yes, we made mistakes along the way, but there were also some things that we did right. Today, with the 20/20 vision of hindsight, I hope to share with you some insights on how to tell them apart.

First, to give you some idea how far Thailand has come, let me take you back some four decades, before we began to even think of economic development. In 1956, Thailand was what economists in those politically-incorrect days called a backward economy. The country's population stood at a mere 23.4 million. Bangkok was a tranquil city of placid canals and tree-lined roads, its skyline dominated by temple spires. By far the most important sector of the economy was agriculture, which accounted for 42 percent of the country's GDP, engaged 88 percent of the country's labor force and made up 98 percent of total exports. Industry, which consisted of light manufacturing aimed mainly at the domestic market, made up only 12 percent of GDP and employed just 2 percent of the country's labor force.

Fast forward to 1995, just before the first signs of trouble appeared. Thailand's population had more than doubled to almost 60 million. Most Bangkok canals had been paved over, the trees cut down to make way for more cars, the temples long since eclipsed by high-rises. Bangkok had come to dominate the economy as few cities in the World do, accounting for over 42 percent of Thailand's GDP and almost 15 percent of its population. In the country as a whole, the contribution of agriculture to GDP had fallen to just over 10.4 percent, while that of industry had risen to almost 40 percent.

What had happened in those forty years to bring about his transformation?

The short answer is a combination of laissez-faire capitalism and fortuitous timing. Over the years, a series of shifts in economic policy integrated Thailand ever more closely into the World economy.

Beginning in the late 1950s, upon the advice of the World Bank, Thailand's leadership decided to pursue economic development through private-sector-led, import-substituting industrialization, while reducing the role of State enterprise in the economy.

Another significant shift in policy was the change from industrialization based on labor-intensive, import-substitution to capital-intensive, export-oriented production. Announced in the early 1970s, this policy began in earnest in the early 1980s.

Finally, and most controversially in light of the financial crisis, a process of financial liberalization took place between 1991 and 1994, resulting in huge inflows of capital that, in hindsight, we were unprepared to deal with.

The pace of foreign investment inflows began to quicken at about the same time that Thailand launched its export-oriented industrial promotion drive in the 1980s. When the Plaza Accord of 1985 pressured Japanese companies to move their manufacturing operations offshore, Thailand was a logical choice-thanks to its abundant natural resources, cheap labor, investor-friendly policies and a strong Japanese market presence.

And when Western fund managers began looking for alternatives to the unexciting rates of return offered in the advanced industrial economies, open, dynamic Thailand emerged as a strong favorite. Between 1985 and 1990, foreign direct investment flowing into Thailand shot up from $178 million to $2.5 billion, with Japanese investment rising from $124 million in 1986 to $1.2 billion in 1990. When that flow began to slow down in the early 1990s, foreign portfolio investment took up the slack. Net portfolio investment, which averaged $646 million in 1985-89, rose to $927 million in 1992 and jumped to $5.5 billion in 1993.

Thailand was no longer a backward economy, but an East Asian miracle, a Newly Industrialized Country. Thailand did everything by the book, and had the numbers to show that neo-classical economics worked.

But there was a darker side to the success story. Even as Thailand was logging record growth rates, the country was showing signs of strain. Rapid industrialization was creating social and environmental externalities that could not be addressed within the existing growth-oriented paradigm. The private sector was extracting resources and polluting the environment faster than they could be replenished or restored, creating ecological devastation on a grand scale. The income gap was widening between rural and urban areas, and between the rich and the poor, resulting in a flow of labor from rural communities to the city. Bangkok became overcrowded and polluted, with the slums, disease, drugs and prostitution that typify so many of today's mega-cities.

Was this a reasonable price to pay for a decade of double-digit growth? The answer would depend on whom one asks. Those paying the price and those enjoying the fruits of rapid growth were not necessarily the same groups of people. Our economic growth, while high, was unbalanced, inequitable and unsustainable.

Does this represent then, as some have suggested, the failure of capitalism?

To be sure, if we had not opened up to global capitalism, there would have been no crisis, or at least the Asian crisis would not have started in Thailand. But that is like saying one would never have fallen if one had not attempted to walk.

Capitalism is not inherently good or evil. As long as man continues to be driven by self-interest, capitalism will remain the least "evil" way of allocating resources. Like it or not, it is more useful for us to learn to manage capitalism, rather than repudiate it.

The financial crash may also be seen as a harsh market correction, or in the words of Joseph Schumpeter, an act of creative destruction, from which hopefully we will draw the right lessons. So if anything, I would say that the crisis is a reaffirmation of the laws of the market-place.

I would further suggest that Thailand's lopsided growth and financial crash occurred not because we were abiding too faithfully by market principles, but because we did not take those principles sufficiently to heart.

This may be a somewhat controversial Statement, so let me explain.

Earlier I stated that Thailand undertook policies to integrate itself with the World economy. But if you look more closely, you will see that while we adopted the outward trappings of capitalism, much of our economy continued to be dominated by practices that were not market-friendly -- in particular traditional social relationship patterns involving personal connections, patronage and paternalism.

Thus it was that instead of allowing the laws of demand and supply to determine prices and the most efficient allocation of resources, the State directed the process. Instead of developing our comparative advantage to the fullest, we inadvertently weakened it. Instead of fostering a competitive domestic environment, we encouraged monopolies and oligopolies as a means of capital accumulation.

One of the clearest examples of this unwitting distortion of the marketplace can be seen in our agricultural policy. Thailand has long had a tremendous natural comparative advantage in agriculture. Every Thai child knows by heart the ancient inscription describing 13^th century Siam: "in the water there is fish, in the fields there is rice" - an apt description of Thailand even in the 20^th century.

It is therefore rather ironic that farmers have always been the poorest members of society. Ever since Thailand began exporting rice in the mid-19^th century, the rice surplus was taxed, enriching the land-owning upper classes while keeping farmers mired in poverty.

When we decided to industrialize the economy, it was again achieved at the expense of agriculture. Industrial enterprise was subsidized through tax breaks and other preferential privileges.

Rice exports, meanwhile, were subject to a tax - the so-called rice premium-, which was, ended only in 1985, in response to US subsidies of its rice exports. What the rice premium did was raise revenue for the State and keep rice prices artificially low for the benefit of urban consumers. Unfortunately, it also reinforced the chronic impoverishment of rural farmers. Allowing the market to determine prices instead would have raised the income of farmers and energized agriculture, but it was feared that the resulting higher cost of living would spark urban unrest.

Agricultural small-holders therefore remained dependent, orphan-like, on the "patronage" of the State. It was the State that farmers relied on to provide infrastructure, to grant loans and subsidies, even to tell farmers what crops o grow, how to grow them and what animals to raise (advice which often turned out to be misguided). The effect of this culture of dependence and the anti-agriculture bias in government policy was to weaken the agricultural sector by discouraging initiative, innovation and improvements in efficiency on the part of farmers.

I raise the issue of agriculture not only because it illustrates how political considerations have pervaded the process of resource allocation, but also because it is crucial in understanding many other phenomena in Thailand. Many of our social problems can be traced to rapid industrialization and the imbalances it creates or aggravates between agriculture and urban interests. Chronic rural poverty and indebtedness have transformed farmers- the "backbone of the Thai economy" - into unskilled labor feeding the country's industrial expansion. Rural communities are sapped of their vitality, as Bangkok becomes ever more crowded, its infrastructure and services stretched to the limits.

Another reason farmers have been so exploited and dependent on the State is lack of education. Thailand's development policy has always rested on the assumption that our biggest strengths lay in natural resources and cheap labor. Successive governments have therefore paid scant attention to upgrading the quality of the workforce, preferring instead to promote our advantage in cheap unskilled labor.

But the entry of new players into the global market after the Cold War has shown that cheap labor is an advantage all developing countries have. Thus it was only relatively recently that human resource development became a new mantra in policy circles, with an emphasis on the upgrading of technical and management skills.

Here I should also add that HRD should not be confined to only the industrial sector. We must make sure that farmers are not excluded, but encouraged to learn how markets work and to develop the skills that will allow them to make independent, informed choices. Education is a public good, like roads and public utilities, without which development is impossible. This may seem obvious, but the short shrift education tends to receive in our development policy suggests that the link between education and development may not be as widely appreciated as it should be.

So far I have argued that the State should let market forces do their work without imposing distorting incentives favoring or punishing a particular sector. I have also pointed out that it is the obligation of the State to provide public goods such as education to allow the economy to achieve its full potential.

That said, I must also note that markets as a rule do not function perfectly. Left to themselves, markets give rise to monopolies, speculative bubbles, insider trading and other assorted distortions.

Hence, the State cannot totally disengage itself from the economy and rely on the invisible hand alone to maintain proper functioning. The State has an obligation to foster competition, prevent market failures, and ensure that private gains are not made at public expense. A minimalist State, or a State that is co-opted by the private sector, will have difficulty performing such duties.

A peculiarity of the Thai State is that it was too hands-on with regard to agriculture, but too hands-off with regard to industry and finance. Even in 1991, a World Bank report noted that Thailand was "a private enterprise system where few controls are imposed, [and] increased material standards and private gains have been secured at an observable communal expense."

This insight is helpful in explaining how unintended consequences came about. When capital and currency controls were lifted in the early 1990s, it was with the intention of taking Thai industry to a higher plane of development. The policy of financial liberalization, combined with fixed exchange rates and high interest rates, did indeed attract a torrent of foreign capital. The missing part of the equation was the mechanisms and institutions to ensure that this glut of capital was channeled into productive activities, such as agriculture or manufacturing. The situation thus unleashed unprecedented opportunities for the nimble to make quick profits- in stocks, real estate and other speculative areas.

The mood in those years became one that Alan Greenspan aptly describes as irrational exuberance. Flush with cheap money in search of borrowers, banks and finance companies became undisciplined, grossly inflating asset values and over-extending credit. Short-term loans, unhedged thanks to the perceived safety of the baht's peg to the US dollar, were taken to finance long-term activities such as construction projects. Businesses began ploughing their earnings from manufacturing into property speculation. Over-capacity began to build up in sectors such as housing, industrial estates, petrochemicals and steel, many sectors of which had been promoted by the State itself.

By 1996, signs appeared to suggest the party was over. As the US dollar strengthened, so did the pegged baht. Export growth dropped from 24 percent the previous year to zero percent, while the current account deficit stood at a worrying 8 percent. Foreign investment began moving out. Despite reassurances by the government that all was well, it was apparent that the baht was overvalued, a point not lost on speculators. After a series of bruising currency attacks, the government was forced to float the baht on July 2, 1997.

This episode in our economic history demonstrates that if we wish to prosper in the modern market, we cannot afford not to play by its rules.

Here again we have a clash between the traditional and the new. A banking system based on mutual trust and support between lender and borrower, such as that which exists in many Asian countries, is fine for the domestic capital market, but hopelessly out of step in a globalize capital market.

Not only financial institutions but the State as well have to adjust their way of doing things. In an open capital market system, the State, because it usually guarantees bank deposits (with taxpayers' money, no less), must supervise the banks to ensure that the risks taken by the banks are based on project evaluations and kept within certain bounds. This means that a clean, transparent and effective corporate governance system must be in place. Shareholders in a company that misuses other people's money must be punished and not bailed out by the taxpayers. To enforce this, effective supervision by the central bank is required, which in turn presumes that a clean, transparent and effective government is in place. The problem for most developing countries is how to get such a government -- one free of corruption.

Another area where the State has an important supervisory role to play is in promoting sustainable development. Developing countries, Thailand included, tend to take their natural bounty for granted. Forests are chopped down for timber or farmland, minerals are extracted with little regard for environmental damage, pollution clogs rivers and lungs, all in the name of progress.

Thailand is beginning to realize, hopefully not too late, the importance of sustainable development, which the Brundtland Commission's 1987 report defined as development which meets the needs of the present without sacrificing the ability of the future to meet its needs.

From the beginning, the Thai development model has focused single-mindedly on rapid growth. In recent year, as our economy grew while our environment deteriorated, more and more people are wondering if growth is really the panacea it is often made out to be.

Given time, nature replenishes its resources, such as trees, and breaks down most waste products. But rapid industrialization and rampant commercialism tends to create social and environmental externalities that outstrip the carrying capacity of nature: prawn farms that destroy mangrove forests, logging that destroys human and wildlife habitats, vehicle engines that emit noxious exhaust fumes, factories that release toxic substances into the underground water table and waterways. It is by no means certain if our runaway growth has not already compromised future generations' ability to enjoy a reasonably good quality of life.

Here then is clearly a case where unfettered market forces cannot be counted on to work for the greater good, particularly in the context of a global economy, which by its very nature encourages large-scale resource extraction. The pervasiveness of patronage and graft in Thailand aggravates the situation even further. Export-oriented exploitation of resources is therefore simply not sustainable without some degree of government regulation.

What the State should do is to inject greater rationality into the balance between economic and environmental priorities. It can pass and strictly enforce environmental legislation. It can require that prices reflect the internalization of such externalities, rather than allow the socialization of environmental costs. But too often, the State's agents are beholden to well-connected private interests and not particularly keen to protect public resources.

So overall, Thailand's growth has been a mixed blessing. We have tried to compress centuries of industrialization into a few decades, and in the process have discovered how detrimental some of our most entrenched traditions and social institutions are to our country as it tries to fit into the global market.

If those old ways were to disappear, I for one would not be nostalgic. In many cases, they hark back to an unjust social hierarchy that perpetuated poverty for the masses and enriched a wealthy few. I am not saying that we should dispense with our cultural identity and blindly embrace the monoculture of the global market. What I am saying is that, as in any culture, there is much that should be retained and much that needs to be changed. If we are wise enough, we will know the difference.

Indeed, some wisdom seems to be emerging from the ashes of the financial crisis. Thai society has become more introspective, asking itself where its strengths and weaknesses really lie, and what are the things that really matter in life.

A reform process has begun towards an open society and more effective rule of law. In the aftermath of the crisis, this movement has gathered momentum and is enjoying wide public support. The shortcomings of the State are being redressed through political reform as well as good public and corporate governance. The State is trying to reduce its role in directing the economy, while strengthening its supervisory and regulatory capacities. Transparency, full and timely disclosure of information, and accountability have become watchwords in both the corporate and government sectors.

At the same time, the State and the market are also being monitored by a society that is more aware than ever of the potential for excess and inefficiency. Civil society -- and NGOs in particular -- is playing a more active role in strengthening communities and empowering ordinary citizens. The media have also been a powerful force for change, especially by exposing wrongdoing in high places. Citizens now have the right to access official information, a right that is being vigorously exercised and receiving the backing of our independent judiciary.

The financial collapse therefore marked the beginning of a new chapter in Thailand's development. We are under no illusions as to when we can achieve our goal of development that is just, equitable and sustainable. We recognize that our efforts towards an open society must proceed in tandem, at roughly the same pace, in both political and economic areas.

What we have learned is that when you take steps towards greater economic openness, and especially financial openness, there are a few rules of thumb to bear in mind: Do let the market do its work of determining prices; do provide public goods such as education and infrastructure; do intervene to correct market failures; and do intervene to prevent private self-interest from damaging the common interest. There are also a few don't 's: Don't second-guess the market; don’t favor certain sectors or groups over others; and don't use public funds to bail out private mistakes.

Even when we know the rules, it is not always easy to live by them. South East Asia has the advantage of being able to learn from the successes and mistakes of others. You also have much experience in the way of appropriate technology, which is usually more environment-and community-friendly. We should use the various regional fora-- such as the Bangladesh-India-Myanmar-Sri Lanka-Thailand Economic Cooperation forum, or BIMSTEC--not only to promote trade and economic cooperation, but also to exchange ideas on development strategies.

Globalization, like capitalism, is a powerful force that should be harnessed for the greater good of mankind. We need to change and grow and become wiser if we are to survive it with our identity intact, so that future generations may look back at us with approval for bequeathing them a World that is not chaotic and bursting at the seams, but a World that is just, equitable and sustainable.

Thank you.

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Constitutionalism and Democracy in Asia

by Mr. Anand Panyarachun
1997 Ramon Magsaysay Awards
Awardees’ Forum Series No. 1
Manila, September 1, 1997

The link between constitutionalism and democracy in Asia is, in certain interesting ways, reminiscent of the inter-action between law and order. Law and order comprise a neatly matched term commonly associated with authoritarianism, or autocracy. It is often said – through clenched teeth – that law and order constitute the primary legacy of nineteenth-century colonialism in Asia. However, the disdain with which the term is often used contains a kernel of truth and even a faint wisp of humanity that we would do well to consider further.

Much of Asia today treads a thin line between authoritarianism and populism. The former represents the subjugation of the people to political masters who, only in the most fortunate and rare of circumstances, provide enlightened leadership. The latter spells political chaos, and typically results in metamorphosis into the most vicious sorts of authoritarianism.

If we are to avoid straying from the thin line between authoritarianism and populism – that is, if we are to have law and order without its accompanying evil of a new, home-grown, indigenous colonialism consisting of a master class ruling a subject population – we must pursue constitutionalism.

What do I mean by “constitutionalism”? I am not too humble to admit that my views on that subject derive from the political theories initially advanced by the ancient Greeks. It was Aristotle who referred to constitutionalism as “the arrangement of the offices of a State.” Based on that definition, every State, no matter how badly governed, has a constitution, written or not.

But the mere existence of a constitution does not represent constitutionalism. That is because a constitution, to be respected as viable and democratic, must fulfill certain necessary conditions.

A constitutional government must, first and foremost, be “representative”. The people must decide who is to lead them, and those in office must conduct themselves as representatives of the people.

Second, enhancement of “individual rights or liberties” should be a cornerstone,

Third, a system of “checks and balances” is required of any constitutional government to deter against abuse of power. Constitutional governments, therefore, typically divide power between the legislature, executive and judiciary, as well as between the center and the State, provincial or local levels of authority.

Fourth, “simplicity” of form and of modus operandi is required so that the system can be understood by the people and not only by the professional politicians, and in order that it avoids the pitfalls and loopholes that are the bedfellows of verbosity.

A fifth requirement is “procedural stability”, meaning that certain fundamental procedures of government must not be subject to frequent or arbitrary intervention. Citizens must know the basic rules according to which politics are conducted. Stable procedures of government provide citizens with adequate knowledge of the probable consequences of their actions.

Sixth is “accountability”. Measures must be in place to ensure that those who govern consistently account for, and can be held accountable for, their actions on behalf of the governed.

The final essential element of a constitutional government is “transparency”, as only through full openness and disclosure about the affairs of government will the people be able to make informed judgments and decisions on the future course of governance.

Written constitutions provide a firm standard by which the legitimacy of government action may be judged. In constitutional democracies, accountability can be enforced through a great variety of regular procedures, including elections, systems of promotion and discipline, fiscal accounting, recall, and referendum.

The accountability of government officials to the citizenry makes possible the citizens’ responsibility for the acts of government. The most obvious example of this process of responsibility and accountability is the electoral process.

In constitutional systems, as we have noted, powers of legislation and enforcement are divided among executive, legislative and judicial components, and the ability of any one person to continue to hold power is subject to periodic recourse through the electorate.

In contract, totalitarianism amounts to the abdication of constitutionalism. Totalitarian regimes emerge when an organized minority seizes power by force or fraud, or through the apathy of the electorate. Opposition to the dictator is stifled by the imposition of State control over all forms of expression; the institution of clandestine police and intelligence networks; and the suppression or destruction of all opposing political parties.

Autocracy is sometimes difficult to distinguish from democratic rule. As we have often seen, autocracies try to borrow legitimacy by adopting the language of the constitutions of democratic regimes or by camouflaging themselves as “shadow” institutions.

It is common practice in modern totalitarian States to establish such shadow institutions as parliaments or national assemblies, elections and political parties, courts of justice and legal codes, and similar so-called “constitutional” bodies that differ little in appearance from the institutions of genuine constitutional democracies. Similarly, the language of constitutions promulgated by totalitarian regimes is often couched in terms of the doctrines of popular democracy.

Despite the facades, the underlying realities of totalitarian rule are invariably the concentration of power in a single centre and the mobilization of force to prevent the emergence of opposition, democratic or otherwise.

Constitutional democracy is, as its name indicates, based on (1) a constitution, or basic law, and (2) the people’s active participation.

The essence of a constitution is that it formalizes a set of fundamental norms governing the political community and determining the relations between the rulers and the people and the inter-action among the centres of power.

The “political party” is the other chief instrument of constitutional democracy. It is the agency through which the electorate is involved in both the exercise and transfer of power. The party in a constitutional democracy is at once a means of representing a mass electorate in the exercise of power and also a device for the peaceful replacement of one set of power holders with another.

In short, a constitution provides the starting point for the pursuit of democracy and the building of good governance.

Those of you who have been following developments in Thailand can see that our current economic crisis is a result of the weakness in Thailand’s political structure. We face an erosion of faith and confidence in our political institutions that needs to be urgently addressed for the continued advancement of Thai society.

The political reform process that has been initiated, provides Thailand with an opportunity to take the first step in laying the foundation for true democracy and good governance.

For the last eight months now, I have been intensively engaged in the process of drafting a new constitution for Thailand, a process that – I am happy to report – has been marked by its openness to public participation and debate.

As some of you may know, Thailand has the dubious distinction of having had 15 constitutions since the inception of its constitutional monarchy 65 years ago. Some of these constitutions have been discarded as a result of coups d’etat; some have been distorted through ill-advised amendments. The common feature of all these 15 constitutions is that they have all been drafted by those in power, and not through any process of consultation with the people.

As a result, these constitutions have not been respected, nor have they ensured good governance. We aim to change that. Taking into account the guiding principles that I have referred to earlier, the Constitution Drafting Assembly of Thailand during the course of the past eight months was engaged in an intensive process of dialogue with the people in the preparation of the draft constitution, to ensure that it addresses the concerns of our citizenry.

People’s participation in the process of decision-making has been an important concept in the political reform process. We feel that it is necessary to instill a sense of ownership among the people of this important social contract between the State and the people.

There is no political system in the world that can claim legitimacy that was not in some sense based on “the will of the people.” This is the first time in Thai history that the people have the right to contribute to this important process. We hope to have a government “of the people, by the people and for the people.”

But I must emphasize here that the adoption of an enlightened constitution represents only an initial step to the goal of stabilizing democracy in Asia. For democracy to function effectively in Asia, we must also address the fundamental socio-economic problems prevalent in Asia.

The first is to eradicate absolute poverty. Every one of Thailand’s citizens deserves the opportunity to achieve an acceptable standard of living. Any obstacle in the way of such opportunities, whether constitutional or extra-constitutional, must be removed. This is axiomatic in any political system that claims to call itself a democracy. It is also a pre-condition for sustainable democracy. As has been most evident in modern Thai history, poverty is an invitation to one of the easiest steps to authoritarianism: vote-buying. We must reduce the demand for vote-buying through reducing the level of poverty in our countries. Otherwise, vote-buying will continue to compromise the integrity of our electoral process. Asian governments thus need to pursue “growing with equity” and bridge the gap between rich and poor.

Secondly, we must provide our people with the education, skills, and opportunities to enable them to function effectively in society and secure a livelihood. Experience has shown that as peoples’ income rise and their horizons broaden, they will more likely demand the right to participate in government and to enjoy full protection under the rule of law. An informed electorate that is politically aware, knowledgeable and committed to democratic principles is the key to good governance.

Thirdly, we must develop civil society. The Philippines has led the region in this respect and provides a valuable role model for the rest of Asia. The contribution of non-governmental organizations to national development has been commendable. The Philippines’ respect for freedom of speech and the press should be the norm for the region.

Donald Kagan, a distinguished scholar of ancient Greek history, in his book Pericles of Athens and the Birth of Democracy, writes that democratic governance relies on three conditions:

The first is to have a base of well-established political institutions;

The second is to have a body of citizens who possess a mature understanding of the principles of democracy;

The third is to have capable and responsive leadership.

We must recognize that all this takes time – not just years, but decades and the passing of generations.

The road to democracy is long and arduous, especially for countries which have long suffered economic disadvantage. It is claimed by some in Asia that democracy is economically inefficient, and that, “enlightened authoritarianism” is a more effective means of generating economic growth. Some go so far as to say that this is a basic Asian value, to be cherished and nurtured. This to some degree may be true. I would, however, like to express a word of caution here. While a strong hand may guide a nation out of hardship, even the most compassionate authoritarian leader is likely to be vulnerable to the corrupting influence of power.

Asia today faces a moral dilemma. Constitutionalism is being questioned by powerful voices, often acting in what they believe are the best collective interests of the people. It has been implied that constitutionalism is anti-ethical to Asian values, that it is an alien intrusion carrying the seeds of chaos.

Yet, it is my contention that constitutionalism is the key to law and order in the best sense of that term. Strong and effective leadership in this region must be based on the will of the people and must respect individual freedom. Only through constitutionalism can this region hope to sustain its moral integrity, and thus its vigorous progress, into the coming millennium.

I should like to conclude this address with a modest proposal. I propose that each Asian State establish an independent body, representative of the people, to review its national constitution. That review would assess the extent to which the constitution fulfills the seven requirements of constitutionalism that I have outlined here. It would propose means whereby constitutional reforms might be pursed to ensure the full and free participation of all the people in the life of the nation. By that means Asia would come to lead the world in our continuing struggle for law, and for order.

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Forging A Partnership with the New Asia

Address by H.E. Mr. Anand Panyarachun
Former Prime Minister of Thailand
The Trilateral Commission
Tokyo, March 22, 1997

Excellencies, Ladies and Gentlemen,

I am very pleased indeed to have the honour of addressing this distinguished gathering.

The world today is almost unrecognizable from that which existed when the Trilateral Commission was formed in 1973.

There is no longer a single defining factor of international politics. In place of the Cold War is a “hodge-podge” of economic and political issues, over-lapping one another, blurring the traditional boundaries between the sub-national, the national, the regional and the global. The pace of technological advancement has so compressed space and time that ever more issues and players compete for our immediate attention. Global-free market forces have pervaded every aspect of economic life, bringing prosperity and growth even as they constrain the ability of governments to manage national economic policies.

Obviously, the complexity we now face is different from that which had shaped our way of thinking for over four decades. With the growing number of issues and actors, traditional notions of economics, security and national sovereignty are increasingly called into question or even flouted outright. One would think that after Francis Fukuyama announced the end of history, the important questions would have been handily resolved. Instead, vigorous debates are going on about the place of cultural values, growth-oriented policies, the role of the State, and the role of the market in promoting human welfare. In the arena of politics, speculation is rife as to whence the next major conflict is likely to come.

Amid all these changes, a major testing ground will be Asia.

Asia has now joined the ranks of North America, Western Europe and Japan as an engine of world economic growth.

Asia, of course, is not so uniformly industrialized or democratic that it would constitute a true and comprehensive third side of the Trilateral Commission. In fact, its success poses something of a conundrum. Can the Asian miracle be replicated elsewhere? Is there an Asian model of development? Is there a set of Asian values that underlie the region’s stunning performance? Or is it simply a matter of mobilizing capital and labour inputs in sufficient quantities?

The diversity of Asia allows no easy answers. Every explanation begets a counter-argument. All that can be agreed on is that the rise of Asia is the biggest event of the late 20th century. Even if we allow for the recent drop-off in Asian growth rates, or a downward revision in the GDP based on purchasing power parity (as the World Bank did for China last year), the economic weight of the region will still be considerable, thanks to its enormous and ever-wealthier population. For the rest of our lifetimes, at the very least, the impact of developments in Asia will be felt far beyond its shores.

Asia’s economic resurgence has led to a new-found confidence. Pundits such as John Naisbitt foresee an increasing assertiveness of Asian identity, and prominent Asian leaders are making a case for the importance of Asian cultural values for economic growth and development. A growing number of influential thinkers, led by Samuel Huntington, ascribe to culture a significance that surpasses even traditional economic and political factors.

This is actually a replay of a debate in political science circles that took place a few decades ago, when American academics were assessing the development chances of Third World countries. The difference is that this time the cultural explanation is receiving a wider audience in policy circles.

The trouble with culture and values, as the debate on political culture the first time around showed, is that they are so hard to pin down.

In this world of inter-dependence and globalization, I suppose the assertion of values as an explanatory variable can be re-assuring to some. It is difficult to tell how much of, say, Asia’s economic success can be attributed to values or to the right policies and institutions. What’s more, nations do not always fall neatly into the civilizational slots assigned them.

When the concept at hand is so vague and impractical, yet is presented as the major force that will lead to future conflict, it can hinder us from taking a constructive approach towards one another. Rather than a clash of civilizations, the true clash may be a clash of dogmas.

I think we should recognize the values debate for the distraction it is and focus on ways to build bridges among us. The world has a vital stake in the future of Asia. Our common interests will be better served by concentrating on that which binds us together, by identifying areas where we can co-operate for mutual benefit. It is our duty to prove that the champions of cultural and civilizational rifts are wrong.

More substantive challenges face the international community as it attempts to come to terms with Asia’s growing economic - and inevitably political - clout. There seems to be an odd mixture of optimism and apprehension in the West over the prospects of an Asia ascendant. I tend to see the challenges as opportunities in disguise. The trick is to approach them in the right frame of mind, to keep things in perspective.

Keeping things in perspective can be hard, but it is necessary if we are to continue on the right path. Seeing skyscrapers spring up from rice paddies and fields of roof-top satellite dishes can easily lead one to take for granted the glowing projections about Asia in the 21st century.

There is no greater hype about Asia than the label “economic miracle.” To paraphrase an old show biz saying, it took the East Asian countries decades to become “overnight successes”, and plenty of toil and tears to pull off the miracle.

A miracle is by definition an un-natural phenomenon. As such, it should not be expected to last indefinitely.

Admittedly, it is heart-warming to see institutions such as the World Bank use boom-year figures to extrapolate Asia’s growth up to the year 2020, because that would make Thailand the 8th largest economy in the world by that time.

When we consider how hard it is to forecast accurately even the next five years in this fast-changing world, such academic exercises can lull us into complacency.

In between World Bank projections of Asian economic dominance, we should also take into account the predictions of the doom-sayers. Andy Grove of Intel Corporation says only the paranoid survive, and I think that’s an appropriate sentiment to bear in mind as we sail into the uncharted waters of the new millennium.

Whether and how quickly Asia fulfills the prophecies made for it will depend on how it strikes a balance between sometimes conflicting priorities.

One example is the balance between the State and the market. Many governments are paranoid, but not quite in the way Andy Grove meant. They want both the benefits of opening up their economies, yet balk at the prospect of surrendering control to the vagaries of the market. As globalization intensifies, as market forces and technology strip away the ability of central authorities to control flows of capital and information, governments still attempt to cling to the old certainties.

In Southeast Asia, we see evidence of this ambivalence. At one level, the region is heading towards greater economic openness and integration. The ASEAN Free Trade Area, which is on track to be completed by the year 2003, will make ASEAN a market comprising some 470 million people. The ASEAN members are firmly committed to AFTA, because they recognize that delay or backtracking means AFTA will be made redundant by APEC and the WTO. ASEAN’s competitive edge and credibility depends on AFTA staying one step ahead of the game.

At another level, there is evidence that not all countries in the region are quite ready to let the market decide. While Thailand has become a regional hub for the automotive industry without State direction, countries such as Malaysia and Indonesia have invested heavily in national car projects, and Malaysia is promoting a huge Multi-media Super Corridor designed to attract hi-tech companies, in an Asian version of Silicon Valley. Such efforts may well turn out to be successful in the long run, but more importantly, they show that despite what proponents of the border-less world say, governments are not about to go quietly into the night.

This ambivalence about giving market forces free rein is part of a larger trend. Mainstream liberal thinkers, including Robert Kuttner and even George Soros, are increasingly questioning the gospel of free-market capitalism.

In economies newly emerging from the constraints of central planning, laissez-faire is the order of the day. In Asia, unfettered market forces are creating new wealth and prosperity. At the same time they are also creating new problems, of widening income gaps, of environmental degradation, of unsustainable resource use.

This presents another dilemma for Asia. The very factors that will make East Asia an economic colossus, pose challenges for long-term growth. This is the world’s most populous continent, with almost 1.3 billion in China alone. The latent energies of this mass of humanity are only beginning to be tapped, as governments open up their economies and compete for foreign direct investment. As the developing countries’ manpower enters the world labour market, it forces earlier industrializers to upgrade their production structure to stay one step ahead, in a kind of economic domino effect.

The upside to all this is that incomes will rise, as will demand for goods and services. This will in turn spur trade and investment, within Asia and with the world. Barring catastrophic upheavals, Asia will become the pre-eminent economic centre of the world, even if actual growth rates fall short of those in the late 20th century.

The downside to Asia’s growth is the strain it will exert on the environment and the earth’s resources. This can in turn lead to international frictions.

Neo-Malthusian predictions, of course, are nothing new. The population bomb scare of the 1970s was eventually proven wrong (or premature, depending on how one looks at it), thanks to scientific advances and the “green” revolution. Current thinking, though, has it that the limits of sustainability are quickly being reached. Not only is the population growing, industrialization and its side effects are on the verge of outstripping the earth’s ability to repair itself. This sort of argument comes not only from dyed-in-the wool tree-huggers, but increasingly from mainstream research.

Among the most pressing issues for Asia is water. A recent UN report noted that only 0.007 per cent of the earth’s water is readily accessible for human uses, and that water use has been growing at more than twice the rate of the population increase during this century. With the world population expected to increase from 5.7 billion now to 8.3 billion by 2025, with more water needed for agriculture, irrigation and industry, and with a growing proportion of consumers, the strain on water resources can lead to more frequent international disputes over water rights. The Asia Development Bank estimates $80 billion to $100 billion will be needed over the next five years to lay an acceptable foundation for a water infrastructure in Asia.

Moreover, as arable land is increasingly converted to industrial use, grain production in rapidly industrializing economies may not be able to keep pace with demand. Likewise, the demand for energy will surge as Asia’s newly affluent adopt Western life-styles, with TVs, refrigerators, computers and cars.

Already, trade in non- or semi-renewable resources has burgeoned, as wealth spurs demand for such commodities as timber, oil and gas, and even endangered animal species believed to have medicinal properties.

These developments will play a key part in determining foreign policy, as nations seek to secure supplies and supply lines. Poorer countries, which tend to also be the most abundant in natural resources, will have little choice but to comply with the demands of the market.

This is one key area where the West and Japan can make a useful contribution. Asia’s industrialization has come at a high environmental cost, and this is one of the most serious obstacles to sustainable development. As early industrializers, Western governments are familiar with the growing pains of rapid development, and have worked out ways to manage resources and even undo decades of damage. A growing environmental movement is gathering strength in Asia, and companies from America, Europe and Japan are well placed to address their concerns. As Asia seeks to clean-up, so can environmental management companies.

There are other areas, such as information technology, where our interests coincide - where the strengths of the trilateral countries can help Asia’s development, while themselves benefiting in the process. Let us not be side-tracked into giving tangential issues more importance than they deserve. It is not in anybody’s interest to attempt to remake others in their image, as the only response will be resistance. As inter-action and inter-dependence increase, a certain degree of convergence will occur naturally. Let us remember that diversity is healthy for the survival of the species. Let us find mutual benefit in our diversity, and learn from one another, for only by doing so can we grow together into a community that transcends all boundaries.

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Keynote Address

by Mr. Anand Panyarachun
Former Prime Minister
Chairman, Saha-Union Public Co. Ltd.
in the Fourth AFCRA Conference on
“Competitiveness of Asian Emerging Economies”
November 29, 1996

Mr. Chairman,

Distinguished Guests and Colleagues,

Ladies and Gentlemen,

It gives me great pleasure to be here in another activity representing the development of cooperation among ASEAN member countries, namely the Fourth AFCRA Conference.

For many years I have witnessed the increasing sense of ASEAN spirit and partnership which translates cooperation of organizations and professionals across the region into important and visible institutions in their own right. Such a leading institution has been the ASEAN Forum of Credit Rating Agencies or AFCRA.

AFCRA has been a successful model of ASEAN values of consensus and cooperation in action. As you know, rating agencies provide a crucial role in today’s global financial markets. They inform investors of the risk of their investment and this creates a better climate for future investment.

They also send signals to governments, such as Thailand, to improve their financial and economic directions as well as to companies to maintain prudent debt management.

AFCRA should be congratulated on its past development and is to be encouraged to continue its successful collaboration.

Let me begin my discussion of competitiveness with a personal observation.

I have often found discussions of competitiveness very much like the proverbial ten blind men describing an elephant from one of its parts. No one has a full picture of it. Therefore, I am very pleased that AFCRA has taken the challenge of trying to understand competitiveness in all its facets.

When we look at the top 25 companies in ASEAN, three observations come to mind. First you will see international companies: SONY (3), CALTEX (4), SEAGATE (5), MATSUSHITA (9) and HEWLETT PACKARD (11).

These companies represent consumer electronics, computer-related and energy. They are all based in Singapore.

Secondly, you will see a variety of public enterprises:

Pertamina (1), Petroleum National (2), Petroleum Authority (7), Singapore Airlines (8) and Electric Generating Authority of Thailand (12)

These are all State-owned companies in the energy sector, with the exception of Singapore Airlines, which has been privatized.

A final group of companies representing major local businesses are Astra International of Indonesia (6), Sime Darby of Malaysia (10), Siam Cement of Thailand (15), San - Migual of the Philippines (18) and Hong Leong Investment of Singapore (21).

These are businesses, which have achieved a strong level of performance and a recognized level of business leadership in ASEAN.

Two key questions are reached:

First, does it appear that countries are not competitive while companies are?
Second, why are international companies so often based in Singapore - is it because Singapore is the number one in competitiveness or is Singapore number one because so many leading companies, because of their own competitiveness, choose Singapore for strategic reasons?

My own assessment is that it is the competitiveness of companies that is the key factor. Countries that provide excellent supporting conditions attract the companies and this in turn stimulates the economy.

Let me support this assertion by looking at the factors or criteria used to indicate competitiveness:

1. Economic strength
2. Internationalization
3. Government regulations and policies
4. Financial market
5. Science and technology
6. Management
7. Infrastructure
8. Human resources

It is interesting that with the exception of management, the remaining factors are all public policies related.

The key point is that a climate supportive of competitiveness requires effective public policy to guide the economy and international trade, science and technology, infrastructure development arid human resource development. Thus, what is perceived, as “a country’s competitiveness” is more likely a measure of how good its public policy is?

Let me consider the definitions the World Economic Forum used of management:

“Management measures the effort of business leaders and business organizations to respond to market opportunities. The countries with a well managed capacity will display a higher rate of economic growth.”

To simplify this:

Management capacity and business capability - sustained economic growth.

It is the role of business to develop the economy, and the role of government to provide the supporting environment for this development. It is not the other way round.

Let us consider the ASEAN rankings for competitiveness:

Singapore (1), Malaysia (10), Thailand (14), Indonesia (30) and the Philippines (31).

What this indicates to me is an assessment of how good public policy is in the various member countries.

Please allow me to draw your attention on the role of human resources and competitiveness.

One major failure in supporting competitiveness in the ASEAN region has been the insufficient attention to human resource development.

For example, in basic skills the rankings are not very promising: Singapore (29), Malaysia (31), the Philippines (33), Thailand (39) and Indonesia (45)

On the contrary, in this same ranking the U.S. is #1 and Japan is #10. This strongly indicates to me the lack of attention ASEAN members have for human resource development.

It seems to be that it is not the cost of labour, which relates to competitiveness but the skill and quality that labour can provide.

This conclusion can also be illustrated by another factor, i.e. the comparison between productivity and wage increases over time, between 1983 and 1993.

	Productivity	Wage Increases
Singapore	$4.8	$11.3
Malaysia	$4.8	$5.3
Thailand	$5.7	$8.8

For these three examples, wages have grown faster than productivity. This means that labour is becoming more expensive. It also means that management has been slow to develop ways to enhance the performance of business. There is a business failure of competitiveness to improve the productivity of employees and the profitability of companies.

The last issue that I would like to share my opinion with you is the new direction of human resources development for competitiveness.

It is always true that companies will strive for competitiveness despite what government does or does not do. This often leads to companies re-locating where public policy is more supportive.

At this point I would like to make a modest proposal - that governments in ASEAN, but particularly in Thailand, can demonstrate a public policy supportive of competitiveness by giving a strong priority to quality human resource development.

Policy initiatives to do this could include:

1. Raise attendance at primary and secondary schools.
2. Improve the quality of educational programmes and institutions at all levels
3. Establish more comprehensive vocational training programmes.
4. Emphasize more science techno1ogy and engineering programmes.
5. Enhance education and development programmes for managers to become more globally aware and professionally capable.

Skilled people are the key resource for competitiveness and education creates the foundation for this advantage.

Well-planned educational policy accelerates human capital development, which is essential to factors supporting competitiveness that I had mentioned earlier, namely, science and technology, internationalization, financial development and economic strength.

Developed and capable human resources provide better quality, greater innovation and higher productivity. They save more, invest more and pay taxes

In other words, human resources development brings the highest return on investment.

On this note, you have my best wishes for the success of this conference!

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Asian Business Leadership: Planning for the Future

Dusit Thani Hotel
March 3, 1996

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Quest for Investment Liberalization

Distinguished Guests, Ladies and Gentlemen,

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AIDS and Social and Economic Progress

Excellencies, Distinguished Guests and Participants, Ladies and Gentlemen,

II. The Case of Thailand

Ill. Implications for the Region

As we consider the implications for other countries in the region, I think we must accept several hard truths.

Despite some action and awareness, the progress made to date is still small.

AIDS is prevalent throughout the region, now more than ever. AIDS will affect

ALL countries in the region - rich and poor.

IV. Conclusion and Call to Action

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The Future of Asia’s Past –
Bringing Conservation Philosophy into Practice

by Mr. Anand Panyarachun
Chairman of the Council of Trustees, Thailand Environment Institute
Chairman, Thailand Business Council for Sustainable Development
Chiang Mai Orchid Hotel, Chiang Mai, Thailand
January 11, 1995