DIPLOMACY FALLS VICTIM TO ECONOMIC

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               FEATURE/THE COST OF INTERNATIONAL STANDING


DIPLOMACY FALLS VICTIM TO ECONOMIC DOWNTURN
2.9.97/BANGKOK POST
SARITDET MARUKATAT, NUSSARA SAWATSAWANG AND ACHARA ASHAYAGACHAT

IF YOU HAVE MONEY, YOU HAVE CLOUT. THAILAND IS NOW FINDING OUT
WHAT HAPPENS WHEN THAT MONEY RUNS OUT.

The economic crisis has deprived Thai diplomats of a major tool
in promoting the country's international standing and has also
stalled its fledgling bid to graduate as a donor nation.

Thailand had been held up for seven years as a model for many
developing countries as part of the socalled East Asian Miracle,
assisting a great deal in the work of Thai embassies abroad as
well as that of officials responsible for international
negotiations.

But the country's current status as a debtor of $16.7 billion
(567.8 billion baht) to the rescue package spear-headed by the
International Monetary Fund will change all this, point out
officials and academics.

"The economy cannot be a diplomatic tool any longer. Rather, it
has become a hindrance," said Kobsak Chutikul director-general of
the Foreign Ministry's Economic Affairs Department.

Thai delegates will find it very hard to put forward proposals at
international forums like the Asia-Pacific Economic Cooperation
(Apec), the Asia-Europe Meeting, or even towards the
neighbourhood Asean Free Trade Area, he said.

"Now they might say you can't even put your own house in order."

All country participants in the $16.7 billion standby credit line
arranged by the IMF to maintain Thailand's-reserves at $23
billion (782 billion baht), or about 3-1/2 months of imports, are
member states of Apec.

The Bank of Thailand yesterday signed an agreement with Japan's
Export-Import Bank for a loan of $4 billion (136 billion baht),
the biggest portion of the package approved by the IMF on August
21.

Australia, China, Hong Kong, Malaysia and Singapore pledged
offers of $1 billion (34 billion baht) each. Indonesia and Korea
each pledged $500 million (17 billion baht). Thai officials also
are drafting projects for loans totalling $2.7 billion (91.8
billion baht) offered by the Asian Development Bank and the World
Bank.

Pending payment of the IMF package, the United States and other
G10 member countries have offered to make available a bridging
loan of $1.1 billion (37.4 billion baht) through the Bank for
International Settlements.

Both the Foreign Ministry, which is responsible for developing
international relations at the bilateral and multilateral level,
and the Department for Technical and Economic Cooperation (DTEC),
which is a major player involved in administering assistance to
neighbouring countries, share large slices of the 59 billion baht
in budget cuts for fiscal 1998 as part of fiscal discipline
demanded by the IMF.

The Foreign Ministry, which had the lowest allocation of all
government ministries, at 4.13 billion baht, took the fourth
largest cut in percentage terms at 7.6 percent.

Foreign Ministry spokesman Surapong Jayanama said the cut
affected procurement, travel and the promotion of Thailand's
image by the country's 70 embassies overseas. The budget for
cultural diplomacy alone shrunk from 11 million baht last year to
2 million-3-million baht, with the result that kathin Buddhist
robe presentation ceremonies will be held in Burma alone, instead
of Cambodia, Laos, Sri Lanka and the southern Chinese province of
Yunnan as well, as was the case last year.

The DTEC, which is attached to the Office of the Prime Minister,
took a 100 million baht cut so that it now has 340 million baht
to finance aid for all developing countries.

Of this amount, the lion's share 307 million baht, is going to
four of Thailand's immediate neighbours: 117 million baht for
Laos, 85 million for Cambodia,-65 million for Vietnam, and 40
million for Burma.

"The department continues to give priority to the four countries
which need aid," said DTEC Director-General Pichet Soontornpipit.

But there remains some flexibility in the actual disbursement of
the aid, depending on the need and urgency of recipients, he
said. For instance, the renewed fighting in Cambodia might lead
to the postponement of projects in that country and allow the
department to reallocate the money elsewhere.

But all commitments with other aid recipients "will be
respected", including those with Laos and Vietnam, and the 280
scholarships promised to African countries by Prime Minister
Chavalit Yongchaiyudh during the meeting of the Asia Africa Forum
in Bangkok in June.

Laos and Vietnam have asked the DTEC specifically whether
Thailand's economic crisis will affect their cooperation
programmes, said Mr Pichet.

A senior official at the Finance Ministry, which manages a
separate Neighbours Economic Cooperation Fund, confirmed that the
500 million baht allocated for this purpose would not be affected
by the budget cuts.

Of this amount, 230 million baht will go to the development of
the Myawaddy-Moulmein route and 200 million baht to the
Kengtung-Dalua road, if the Burmese government asks for it,
according to an official with the National Economic and Social
Development Board.

Mr Pichet expects two more years of budget cuts, but said the
department would try to sustain Thailand's role of donor to the
Indochina countries by a more active search for trilateral
cooperation involving a second donor country.

"If we can't, we probably will lose the leading role in the
region," he said.

Mr Pichet said the budget cuts forced closer consultation between
government agencies before they make commitments to neighbours.
Officials cited previous occasions of the DTEC having to shoulder
the burden of promises made to neighbouring countries by other
agencies without prior consultation.

On other related issues, Mr Pichet said the collapse of the
financial sector militated against plans to promote Thailand as a
regional financial centre.

He also expressed concern about the future of the Bank of
Thailand's technical training programmes for bankers in Indochina
in view of the central bank's loss of credibility following its
failure to stabilise the baht, and poor handling of financial
firms plagued by bad debt.

Foreign Ministry officials said the reception Japan and Australia
give Prime Minister Chavalit Yongchaiyudh in visits scheduled for
October and November respectively will tell how much Thailand's
economic crisis is affecting its international standing.

Teerana Pongmakapat, of Chulalongkorn University's Economics
Faculty, said Thailand economic success was its only saving
grace, as child prostitution, drug abuse and vote-buying have
kept it in poor repute in political and social terms.

But he also was critical of Thai diplomats for failing to make
the best of things when the going was good.

"When we had economic clout, we did not use it to apply a
pro-active foreign policy because of the conservative mindset of
policy makers and bureaucrats," he said.

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