December 19, 2006
BANGKOK (AFP) - Thailand's stockmarket crash Tuesday, triggered by panic selling after the central bank imposed draconian currency control measures, was an unsettling echo of the 1997 Asian financial crisis.
Thailand was the epicenter of the 1997 meltdown when excessive borrowings in US dollars coupled with high interest rates forced the Thai government to float the currency, which then promptly collapsed along with the economy.
The baht nosedived to 56 to the dollar from 25, took the Thai economy with it and then sent a tidal wave of debt and default sweeping across the region which cost billions of dollars to put right.
Over late 1997, the contagion spread unchecked, hitting Southeast Asia first, with Malaysia and Indonesia the worst affected as their currencies and then economies crumpled before the onslaught.
Then it was the turn of South Korea -- an apparently strong economy whose Achilles heel of massive debt forced the government to go to the International Monetary Fund for a huge and humiliating bailout.
All the while, the shockwaves reverberated around the region, sparking a concerted attack on the Hong Kong government's cherished dollar-peg currency system in mid-1998.
Combined with the Russian bond crisis of that same year, global markets were put firmly on the defensive.
As currencies and stock markets failed, businesses went bankrupt and recession followed, governments became frantic to shore-up their economies, with some, such as Malaysia introducing a series of capital controls to effectively insulate the economy from the surrounding storm.
The crisis forced Thailand to also seek help from the IMF but when premier Thaksin Shinawatra, a self-made telecoms billionaire, came to power in 2001, he promised to use his business savvy to restore the country's lost fortunes.
He was seen to be doing that successfully, paying off the country's debt and pursuing modern economic management methods before the public mood turned sour on his family's business interests.
The wider economic success could not help Thaksin in the end, with the premier deposed in a September 19 bloodless coup led by the army.