BRINGING BACK MEMORIES OF 1997

       The lifestyles of the rich and famous are up for sale at the Marketplace of the Formerly Rich By Nina Suebsukcharoen

       Disturbing memories of the Asian economic meltdown of 1997 are flooding back with the revival of the Marketplace of the Formerly Rich by Benz Thonglor at its seven-storey building in the chic Thong Lor neighbourhood of Bangkok.
       However, there is a big difference this time. Company president Wasant Pothipimpanon says that this time around, it is mostly businesses selling surplus inventory, including
       jewellery, used high-end watches earlier destined for the US and antiques.
       Of course there are also second-hand Mercedes-Benz saloons for sale too but these are being sold by private individuals who are saddled with too many belongings, and not out of financial desperation as happened during the last economic shake-up.
       "I am clearing goods for the private sector and those people who have accumulated too many things," says Mr Wasant."These people brought in their stuff to sell for fun but they are not in trouble yet, they haven't reached that point. Right now it is companies and not private individuals that are in trouble."
       However, Mr Wasant is very pessimistic about the general outlook and expects households to face more financial woes very soon.But he believes that Thais are born to buy and think it is a loss of face to sell one's possessions."It's not like farang - they have garage sales, they aren't ashamed, they try to sell when they move house."
       He blames the banks and their unreasonably tight credit policies for the problems that many businesses are currently facing, noting that they have gone beyond just pressuring executives to not giving them any additional loans at all."I talk to bankers but I don't understand their philosophy."
       As Mr Wasant sees it, if a company wants to borrow money against a building worth 100 million baht, banks will only give 50% of that value today although previously they gave 80%, or even 100% if the borrower's credit was good. Those who had previously borrowed against a building and repaid, say,80% of the loan over seven years will not get additional credit even if the building today has appreciated in value by 50%, he says.
       Mr Wasant himself ran into this problem with his building, which is worth 300 million baht. He had previously borrowed more than 200 million against it, but reduced the loan to around 100 million baht over a seven- to eight-year period. He asked the bank whether he could borrow more against it for working capital but was turned down. He asked whether he could take out a second mortgage with another bank and was again rebuffed.
       "So I had to find 100 million baht from elsewhere to clear [the original loan] and then I moved to another place and got 250 million baht. But at that time, finding 100 million baht to clear it was difficult. Businesses have plunged into this trap and are stuck there.
       "I don't understand banks today, they have my 100 million baht back but now have to find new parties to release the money to,maybe 10 parties at 10 million baht each and the assets placed as collateral may not be as good as this one. I don't know what goes on in their heads."
       Mr Wasant maintains that the Thai economy need not have deteriorated so much,regardless of what has been taking place elsewhere. Again he blasted bankers for dragging the country down by not adapting foreign economic theories to Thai conditions. In other countries, if a loan against a building turns bad, they have other options besides seeking a court-ordered seizure, which could take five or six years. Instead, they could sell the building and lease it back.
       "I go to the bank with my 300 million baht building, I transfer it to the bank, it's a sale and I lease it back with a buy-back option. If I don't buy it back they can seize it without having to sue. Why is this not in place in Thailand?"
       Mr Wasant also pointed to another key difference between today and the 1997 crash,which is that the latter hit very suddenly like an earthquake, while this time it is more like a flood but with the waters slowly rising.This has given businessmen time to adjust and move on but some have scaled back their businesses and are not investing anymore. The reduced business activity in turn means less revenue for the government which needs money to help farmers and those who are jobless.
       Mr Wasant says the government could promote the sale of goods by restructuring tax collection with automobiles a prime example. Vehicles are currently taxed as they leave the factory, not when they are registered by their owners as occurs elsewhere. This approach deters foreigners from buying.
       "Here we collect beforehand because we are afraid we won't be able to collect anything at all. This makes it expensive for people coming from overseas. The tax on a car sold for four million baht is three million baht. If I could park a car here for sale at only one million baht, a foreigner might buy it and take it home."
       However it is reassuring that today's economic situation is not as bad as in 1997, with the price of second-hand saloons being sold at the Benz Thonglor fair one indicator. Back in 1997 Mr Wasant recalls selling a 2.4 million baht car for 1.6 million baht and throwing in a house to sweeten the deal. The discounts at the current fair are around 10-15% below the market price, basically the amount saved by cutting out a second-hand dealer.
       Mercedes-Benz saloons continue to be big local favourites based on the perception of durability and fuel efficiency - up to 19 kilometres on a litre of diesel, he says.
       While the cars are pricey - the cheapest new one at Benz Thonglor costs 2.5 million baht - one can get a 15-year-old vehicle in passable condition for just 300,000 baht.
       "Fifteen years old but still a good car, a 15-year-old Benz is still perfect, but Japanese cars can't run after 15 years. While already 15-years-old, a Benz can easily operate for another 10 years."