Since today's topic is "The Path to Asian Revitalization", I will present to you my observations concerning the impact of the Asian financial crisis as well as my personal views on how to bring about the revitalization of Asia's economy.

Ladies and Gentlemen,

It has now been nearly three years since the financial crisis struck in East Asia before spreading to the whole region. Although there are conflicting views regarding the state of Asia's economy, I personally believe that the Asian economic recession has bottomed out and that there are evident signs of economic growth. In Thailand's case our exports have grown by 7 percent in 1999 as compared to a rate of -6.8 percent in 1996. Our foreign reserves increased considerably from 29.4 billion U.S. dollars in 1998 to approximately 35 billion U.S. dollars in 1999, and this year it is projected that the Thai economy will achieve GDP and export

growths of 5 percent and 12 percent respectively. Taking a quick glance at other countries in the region, the Singaporean economy recorded a 9.1 percent growth in the first quarter of this year. And in the case of China its foreign trade had reached 98.2 billion U.S. dollars in the first quarter alone which is an increase of 40 percent over the same period of last year, while its industry is projected to grow by 9-10 percent this year.

Although there are clear signs of economic recovery, I must point out that there are still many major problems and obstacles which stand in our way. In particular, the level of Non-Performing Loans (NPLs) which currently stand at about 38 percent of the total loans is still excessively high and must be effectively dealt with before we can return to full economic recovery. We have all seen what the Asian financial crisis of 1997-1998 can do to our economies; the short-term, direct damages have been and are still being felt, but the long-term and indirect effects will remain with us for many more years.

In Thailand's case, short term and direct costs from the financial crisis are evident from the depletion of over 30 billion dollars worth of foreign reserves which were used to defend the baht's value under the pegged exchange rate regime prior to the baht's floatation in August 1997; the closure of 56 finance companies which comprised about half of all the firms in our financial system; the losses from international business transactions resulting from the crippling of the credit and financial systems, as well as the losses from the baht's depreciation from the original rate of approximately 26 baht to the dollar compared to the present rate of approximately 39 baht to the dollar.

On the other hand, the indirect costs or long-term impacts of the crisis comprise, among other things, the outflow of 50-60 percent of capital and credit facilities which existed during the pre-crisis, most of which are already tied up in non-performing loans (NPLs); the damage to the reputation and confidence of the Thai businessmen; mass unemployment leading to social problems and political pressure, not to mention the losses of potential businesses and investments from abroad.

Since the crisis struck the Thai Government has taken many painful steps in devising and implementing measures, at first to stabilize, and then later on to stimulate the economy. At the outset, it was recognized that restructuring and recapitalizing of the financial sector, and the restructuring of Non-Performing Loans (NPLs) would be instrumental to Thailand's economic revival. Therefore, in August 1998 the government announced a reform package which focussed on the following aspects, namely :

1. Accelerated consolidation of bank and finance companies through interventions

2. Encouragement of private investment in banking systems

3. Provision of public funds to recapitalize remaining financial institutions

4. Development of the framework for the creation of private asset management companies

In 1999 the government also delivered additional economic stimulus packages, comprising of expenditure measures, tax reductions, as well as measures to lower energy prices. In March 1999 a huge stimulus package of U.S.$ 3.5 billion designed to create employment and stimulate production and consumption was also announced.

Ladies and Gentlemen,

In our effort to revitalise and strengthen the Thai economy, the Government has not only confined itself to devising and implementing economic measures. We have given just as much attention and effort to the improvement of our legal framework. In this regard new laws were passed which are designed to create a legal framework to expedite the corporate restructuring process, and resolve prolonged negotiations between debtors and creditors.

For example, we have enacted a new Bankruptcy Act which encourages debtors and creditors to come together and push for rapid debt restructuring negotiations. We have also removed any tax disincentives to debt workout initiatives and provided additional mechanisms to expedite debt workout schemes, such as foreclosure reforms through the amendment of the Civil and Commercial Codes in order to facilitate the debt restructuring processes. Furthermore, we have amended a number of key legislations to offer more opportunities to foreign investors as well as enhance the competitiveness of the Thai economy. Among others, the government has enacted a new Competition Law which became effective on April 30, 1999. The objective of this law is to encourage and promote fair business practices by prohibiting the abuse of market dominance and create opportunities for new entrants to gain market access.

Moreover, we have also developed a "Master Plan" for a massive privatization of state of state enterprises in order to reduce the government's role, increase private sector participation, and promote welfare of all Thai citizens. Currently, the government is in the process of privatizing many large state-owned enterprises such as Thai Airways International, Electricity's Power Plant Generation and Petroleum Authority of Thailand.

On August 10, 1999 the Cabinet also approved a set of measures to encourage private investment with a view to ensuring economic recovery. This package consisted of tax and tariff measures; equity investment measures; measures to promote the recovery of the real estate sector, as well as measures to improve the financing for small-and-medium enterprises (SMEs).

These are just few of the measures that we have taken in strengthening our fiscal and financial disciplines and the legal framework. In fact, the reforms undertaken by the Thai Government are very far reaching and encompass the political, civil services, military, industry and educational systems. But on top of all we now have a new constitution which provides a solid framework for good governance through the following mechanisms:

1. A new electoral system which encourages more abled people to become involved in politics.

2. Mechanisms for disclosure and accountability of policymakers; including more stringent requirements for financial disclosures, as well as the allowance for the public's vote-of-no-confidence,

3. Enhanced authority of independent agencies that are responsible for monitoring the government.

With the painful reforms that we have undertaken I believe that in the long run our economy will be stronger than before. However, individual efforts would come to no avail and the revival of the affected economies are only possible through closer cooperation and integration between trading partners. Any unilateral effort at economic and political reform by any one country is unlikely to achieve favorable results if their trading partners resort to protectionistic measures and market access is cut off. Despite the collapse of the Ministeral Meeting in Seattle and the prevailing economic crisis, Thailand remains firmly committed in its support of further trade liberalisation. In particular under the ASEAN framework Thailand and other Members have continued to expand their

economic cooperation, moving towards becoming a free trade, free investment and free services area.

Ladies and Gentlemen

Before the economic crisis, ASEAN was the fastest growing region in the world. Between 1991-1996 ASEAN grew by an average of 6.38 percent per year with a combined nominal GDP of 713.8 billion U.S. dollars. Following the crisis, GDP in 1997 fell to 646.2 billion U.S. dollars and 399 billion U.S. dollars respectively, with real GDP growth of only 4.5 percent and -5.5 percent. Nevertheless, growth has picked up in 1999 and a growth rate of 3.2 percent is expected this year.

Furthermore, ASEAN has expanded its membership from seven to ten countries and has accelerated the establishment of AFTA, ASEAN Investment Area, and the liberalisation of the service sector. Acceleration of AFTA comprises of tariff reduction to 0-5 percent for all items by 2002 instead of 2003 for initial members. The acceleration of the ASEAN Investment Area will result in the liberalisation taking place in 2003 instead of 2010 for initial members including Myanmar, while the gradual liberalisation of the services sectors will result in complete liberalisation by the year 2020.

Although in the past 2-3 years the ASEAN economy has shrunk slightly, this does not mean that ASEAN's contribution to the world economic system will deteriorate. Many countries have now begun to show clear signs of recovery. China's membership in the WTO will also help boost the ASEAN economy, being ASEAN's fourth largest trading partner.

Japan is ASEAN's second largest trading partner behind the U.S. It is not only a major trading partner of ASEAN but also maintains close economic cooperation with the region. Regular meetings are held between ASEAN Trade Ministers and Japan's Ministers for Trade and Industry. Even in times of difficulty, Japan has closely stood by and supported ASEAN, particularly of its new members by providing assistance to ensure their smooth transition into the group. By providing such assistance, new members will have greater economic potential that would be passed on to ASEAN as a whole, and which in turn will eventually lead to the expansion of trade and investment between both ASEAN and Japan. Indeed, continued collaboration between Japan and ASEAN are vital to ensure Asia's economic recovery and revival.

I also strongly praise and support Japan's intitiative in proposing the setting up of the Asian Monetary Fund (AMF). In view of the uncertainly and volatility in the international financial markets, it would be necessary to create a financial safety net, especially for the open economies of Asia in order to cope with future financial crisis. In my opinion the IMF alone is not capable to sufficiently manage the increasing number of problems and crisis occurring around the world, since the IMF may not directly understand the problems which are unique to each region. Furthermore, the IMF's resource of funds are limited as can be seen in the difficulties raising funds. I also believe that Asian countries should help ourselves more, and therefore it is imperative that the AMF is established.

Ladies and Gentlemen,

In order for us to obtain the maximum benefits from globalisation, we need to do our utmost to cooperate, share our resources as well as maintain open markets. And given this excellent opportunity, I wish to encourage Japan to play the leading role in Asia's economic recovery and revival in order to achieve sustained growth and prosperity in the twenty-first century. The more we cooperate with each other the more competitive we will become, both as individuals and as a group in an increasingly fast paced and highly integrated world economy. As the world becomes increasingly smaller, we must work together, share our learnings and exchange our best practices in order to prosper.

Thank You.