The savviest finance ministers are using the crisis as an opportunity to restructure their economies so that going forward they will be more robust and competitive. In Thailand, the aim is to reduce exports as a share of gross domestic product (GDP) by boosting domestic consumption and to increase funding possibilities for business by allowing more foreign ownership of banks and carrying out Big Bang-style capital market reforms (Big Bang being the name given to the stock market reform of London in 1986).
Thailand's finance minister, Korn Chatikavanij, is a former banker - he founded Finance One, which joint ventured with Jardine Fleming and then sold the operation to JPMorgan in 1999 - so he naturally sees the possibilities for using the capital markets as a springboard for growth. The present crisis, with its origins in the capital markets, has not caused him to think differently. The problem, he says, was not the scale of banking assets in Western countries, but that they were not based on productive activities. In Thailand, he says, the Asian crisis banks have been excessively conservative with deposit-to-loan ratios in the 80% range. "Banks were funding themselves entirely from deposits and so were not exposed to risky assets in the same way as Western banks. The negative side of that was that the costs of capital for borrowers remained high," says Mr Korn, who was interviewed in London during a break at The Economist magazine's emerging-markets summit last month.
