by Andrew Sheng
BANGKOK (ANN Desk) - It was with great sadness that I heard about the sudden passing of Khun Vijit Supinit, governor of the Bank of Thailand from 1990-1996.
The old saying is that central bankers may leave their positions, but their hearts will always remain in central banking. He served the Bank of Thailand for more than thirty years, and then became, like myself chairman of the securities regulator. We first met when I was an economist at Bank Negara Malaysia and he was then a rising star at the economics department in Bank of Thailand, having become Chief Economist in 1972. At that time, relations between Bank Negara and Bank of Thailand were particularly close, especially since there were excellent personal relations between the legendary Governor of Bank Negara, Tun Dr. Ismail Mohd Ali (1962-1980) and the Thai governors, notably Dr. Snoh Unakul (1976-1979) and Nukul Prachuabmoh (1979-1984).
Indeed, Tun Ismail knew the legendary Bank of Thailand Governor Dr. Puey Ungphakorn (1959-1971), since they both studied at the London School of Economics.
From their friendship and trust with each other was born the ASEAN Swap Arrangements, first signed in 1977, when Khun Vijit was Assistant Director of the Banking Department. That arrangement became the precursor to the Chiangmai Initiative to provide liquidity to ASEAN central banks in their efforts to sustain regional stability in financial markets.
During our regular exchanges, Khun Vijit and I became close friends because we shared similar backgrounds. We were both educated in England (he in Manchester University and later Yale for his Masters) whilst we both were policy-wonks, meaning that we were devoted to the technical issues of central banking and regional efforts to reform and restructure financial systems. From him, I learnt the importance of strong communication with the other agencies of government,
particularly in making sure that the central bank was closely engaged in policy formulation not just in the financial field, but to take into consideration fiscal, social and international perspectives.
Khun Vijit can be said to be the second generation of post-war Thai technocrats, if Governor Puey could be considered the first. It was under Governor Puey’s foundational tenure that he established the Bank of Thailand scholarship programme in which overseas scholarships to the best schools were given to the best and brightest of young Thai students. Khun Vijit was one of the first three to be awarded such scholarships and one of the first of that batch to become
Indeed, the results of the Bank of Thailand scholarship holders would have far reaching talent consequences for the Thai bureaucracy, making Thai officials probably one of the best educated and international-minded in South-East Asia, if not the whole of East Asia. Even today, the Bank of Thailand has strong credentials as superbly equipped to debate policy issues with the best that Washington could offer.
The long period of technocratic led officials had major influence on the growth of the Thai economy in the 1970-1980s, rivalled in tenure only by the so-called Berkeley group or American educated officials in Indonesia.
One tends to forget that Thailand achieved an average of 10 percent per annum growth in the 1980s and moved during this period from a military-led government towards democratic politics.
Khun Vijit was fortunate to have stepped down in 1996, before the advent of the Asian financial crisis one year later. Although there were those who criticised the opening of the Bangkok International Financial Facility in 1993 as opening the channel for capital inflows, the ideas embodied in financial liberalisation were mainstream thinking that pervaded both regionally and the Washington Consensus thinking from the IMF and the World Bank.
To be fair, no one, including myself then working in the World Bank, could have foreseen the dangers of volatile capital flows, the risks of fixed exchange rates and rise of financial derivatives (now called weapons of mass destruction). It was later analyses at the regional level by myself and others (From Asian to Global Financial Crisis, Cambridge University Press, 2009) that revealed that the capital flows originated not just from hedge funds, but from Japanese banks’
withdrawal from the region after their own banking problems.
In short, the Asian financial crisis had internal financial fragilities, but also external and global weaknesses that were neither monitored or fully understood.
As a friend, I could always count on Khun Vijit to give me a frank and balanced assessment of regional and global conditions. A private person who has a great sense of humour and irony when you get to know him well, he understood how bureaucracy, business and politics functioned.
American political scientist Allen Hicken (2003) argued that Thailand’s political structure of coalition governments made up of multiple, factionalized parties presented enormous obstacles for would - be reformers. In the 1980s, there was an informal compromise between party politicians and technocratic reformers that enabled reforms that laid the foundation for the economic boom of the late 1980s and early 1990s. But these broke down and laid the foundations for later problems.
He was always interested in education, and since 2003, he became on top of his busy schedule also the Dean of the Business School at Siam University, helping to educate many MBA students. He was a wise, astute and insightful friend. I consulted him often on issues of central banking, securities markets and also how we could advance the deepening of Asian financial markets. Few in Asia could rival his deep understanding of how markets and business worked within the complex
political and bureaucratic sphere. My last meeting with him was lunch at the banks of the Chao Praya when we debated the failures of the 2007 Global Recession and how Asian public intellectuals should work together to formulate a different narrative from the Washington Consensus. In his modest way, he urged me to push that envelop forward.
I shall miss him, as will many of his former central bank and securities regulator friends. His memory will always be with us as an important contributor to Asean and regional friendship and trust.
Andrew Sheng was formerly with Bank Negara Malaysia, Hong Kong Monetary Authority (1993-1998) and Chairman of the Hong Kong Securities and Futures Commission (1998-2005).