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An Embarrassment Of Scandals Even For Thailand

In Banharn's administration, corruption is so rife that it's affecting the entire economy

For the beleaguered government of Banharn Silpa-archa, it may be one big scandal too many. In just one year of office, Thailand's Prime Minister has been plagued by a $3 billion banking debacle, accused of letting his party accept huge kickbacks for defense contracts, and charged with handing out pork barrel projects galore to cronies. Then in early August came the accusation by Banharn's own Justice Minister that his government had accepted $90 million in bribes in exchange for licenses to operate banks. That prompted key coalition partner Thaksin Shinawatra to quit the already fragile government.

For decades, Thais have endured the collapse or overthrow of one inept, corrupt administration after another. Through it all, the economy always managed to chug along. This time, however, a deep anxiety is gripping the Southeast Asian dynamo. As Banharn scrambles to cut political deals before a September censure vote in Parliament, investors are casting a vote of no confidence. The stock market, which has been sliding since Banharn took power, plunged an additional 13% in the last two months. Currency speculators are circling the Thai baht, sensing that the country's slumping exports and yawning current-account deficit--expected to reach $15 billion this year--mean that macroeconomic management is slipping. And foreign manufacturers, frustrated at the government's failure to solve infrastructure bottlenecks and labor shortages, warn that Thailand is losing its competitiveness.