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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

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MARCH 17, 2000 VOL. 26 NO. 10

Picking Up The Pieces
After The Furor, Krung Thai Bank Moves On

Think Krung Thai Bank, think bad debt. Last year a scandal erupted after a preliminary audit report classified more than eight out of every ten loans held by Thailand's largest state-owned bank as non-performing. Krung Thai had reported the proportion of non-performing loans (NPLs) to the total at only 59%. The furor led to the controversial sacking of the bank's board of directors, which had commissioned the audit. Bank president Singh Tangtatswas, 58, says he has found the last six months to be especially tough. The former head of the Stock Exchange of Thailand spoke with Asiaweek's Julian Gearing. Excerpts:

Cover: Stock Options
Still relatively rare in Asia, companies are likely to start giving employees equity as an incentive to work better and stick with the job. Thank the Internet
• Glossary: A quick guide to cashless collars and other terms
• Japanese Dream: It isn't hip to be a salaryman

Asiaweek Salaries Survey 2000
Jobs in the region and how much they pay

Taiwan: The race for president is too close to call. Whoever wins, the island and its relations with Beijing will never be the same
• Interview: Chen Shui-bian does not want war with China
• Black Gold: Of gangsters, vote-buying and political corruption
• Geopolitics: The influence of Taiwan's brand of democracy
Thailand: What the Senate election means for political reform
Malaysia: Behind a debate on special privileges for Malays
East Timor: Why Falantil members are now rebels without a cause
Viewpoint: Vajpayee masks the fundamentalist threat

The Net: A geek summit in Taiwan
Computing: Hong Kong's hidden software industry
Cutting Edge: Simulating real life

Cash: With $1 billion, San Miguel goes shopping
Marketing: Notebooks as status symbols in Asia
Interview: Krung Thai Bank head says changes are coming
Investing: Mining resource stocks for profit

People: A*Mei drops pop for the classics
Entertainment: The hot spot for survival docu-dramas
Health: Protecting against Alzheimer's disease
Newsmakers: Zhu Rongji lays down the line
Looking Back: Mourning South Korea's President Park

An audit by PricewaterhouseCoopers (PWC) last year put your level of NPLs at 84%.

Based on our analysis, I would say PWC jumped to a conclusion too soon. Under the definition set by the central bank, NPL refers to a default in payment of the principal or interest for three consecutive periods. Even though you are not in default, if the future prospect of the business's survival is in question, you have to classify the loan as doubtful, and you have to provide provisions for [a potential] loss. So normally, the so-called "questionable" loans are much higher than NPLs. When you are talking about classifications, it is pretty much up to your judgment [because] there is no definite rule. Our income figure very much contradicts what PWC [came up with]. If PWC confirmed that only 16% of our loans are good, that means we have to charge our customers as much as twice our competitors [to make a profit], which is impossible.

One of the PWC's concerns was that normal lending procedures were not followed strictly.

I have to admit that [our] credit processes may not [have been] that good, but it was the standard practice in Thailand. Why? It would be very, very difficult for us to get any financial statements from our customers. You have only a handful of customers who produce them. This is a fact. In many countries, if you don't produce a financial statement you are not going to get credit. But that is not the case for Thailand.

Is the lending process being tightened?

It is. We implemented new internal standards [for issuing] credit, but it is still in the process of being implemented. The practice in Thailand, even now, is still very much based on personal contacts and personally overseeing the real business - not by computerized methods. Western banking has a 200-year history, but for Thai banks, it is 50 years at the most.

This is not going to help your privatization effort.

Who is going to buy the shares if they are not sure the management or the overall operation of the bank have been privatized and operate just like any other private bank? So my priority, which is more or less the same as that of government ministers, [is to change] the working process and the mindset of the people. It is not easy to do. Why? Because our people still think we are a government-owned enterprise. [They think] if there is anything wrong with the bank and we need to recapitalize, the government will step in. The realization that you have to perform and try to stand on your own feet is not there.

Politics caused problems for the bank. Are we out of that phase?

No [laughs]. Many merchants become politicians. They have a lot of rivals who try to dig up something. I would say these people have a lot of relations with a number of banks, but since these banks are private, you cannot raise a political issue. But Krung Thai being a state bank, they could claim damage to public property. There will be a lot of cases dug up and they will use Krung Thai as a pawn [in the lead-up to the general election this year].

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