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"Instead, I think the FRA's success in selling off the assets with a satisfactory recovery rate within such a short period was the highlight of the Democrat Party's success in tackling the crisis," said Amaret during a recent interview.

He said the FRA managed to auction off the assets, worth a total of Bt742.4 billion, and received a recovery rate of around 36.6 per cent, or Bt271.4 billion, in one year and six months. The bidding started in June 25, 1998 and lasted until January, 2000, covering 99.5 per cent of the total assets.

By comparison, Thai Asset Management Corp (TAMC), set up by deposed prime minister Thaksin Shinawatra in 2001, took five-and-a-half years to complete the process of bidding on 99.5 per cent of bank assets worth Bt775.8 billion, with a recovery rate of only 15 per cent or Bt115.7 billion.

TAMC achieved a lower recovery rate even though the FRA's assignment was more challenging. The FRA had to deal with the assets of 56 finance companies, of which a high proportion of loans were backed up by nothing. Meanwhile, TAMC was assigned to auction off the bad loans of banks, most of which had collateral. Still, the TAMC achieved a lower recovery rate than the FRA, which also had a longer time span.

However, the FRA became the target of criticism by the opponents of Democrats and some academics.

"They didn't understand the situation," Amaret said.

Amaret's job was comparable to clearing the assets of a house on fire. He had to do it quickly before the entire property burned down.

At that time, the business community was holding its breath, waiting to see the results of the FRA's auction process, because it would re-set the benchmark of property values. If the FRA successfully auctioned off these assets, it would drive the property market again. The auction would also cut the number of bad assets from the financial system.

Amaret said the FRA's mission was to regain investors' confidence in the banking sector by showing that the authority was serious about solving the problems of the indebted financial sector.

If the FRA had been slow to act, people would have kept withdrawing money from the banks because they would have no longer had faith in the Thai financial system.

"The Bt750-billion bad debt in these finance companies might have affected the Bt6-trillion sum in the entire banking system," he said. At that time, the deposit-lending ratio was 1-12, reflecting the critically low confidence in the local banking and financial system.

In 1998, such a massive asset auction had never happened before. But Amaret had to auction off these assets fast to beat the interest rate, which stood at more than 20 per cent at that time. If the process were slow, then the value of the assets could have fallen to zero in the fourth year, as the high interest rate would have eaten up all the asset value, said Amaret.

Amaret chaired the FRA after the former FRA board, headed by Tawatchai Yongkittikul, abruptly quit on Christmas night in 1997. Two days before, the former FRA board recommended that Finance Minister Tarrin Nimmanahaeminda close 56 debt-ridden finance companies.

Amaret said he agreed to chair the FRA upon receiving personal assurance from Prime Minister Chuan Leekpai that there would be no political interference in the authority's work. He was hesitant to accept the job at first but decided to go ahead to help rescue the economy. Vicharat Vichit-vadakan became the authority's secretary-general.

"The challenge for us was not the money," said Amaret. "But we had to act decisively to regain confidence and to prove that the government would be able to solve the crisis in the financial sector."

Amaret had to dispose of these assets when there were no benchmark prices for them as prices were heading downwards.

"People lost confidence in the country. It was imperative to stop the bleeding," he said.

To start with, the FRA went through the assets of the finance companies to separate good assets from bad.

"What we found was that there was no accounting standard among these 56 finance companies. We had to deal with at least 20 accounting systems," said Amaret.

Then the FRA had to conduct due diligence on the companies' assets before forwarding their proposal to the government. As no due diligence had been performed on such a scale before, the FRA had to mobilise around 1,000 local and foreign auditors to evaluate the assets of the companies.

"The biggest gathering of auditors was in Thailand," he noted.

These auditors later recommended to Tarrin that the recovery rate of the assets should be between 42 and 68 per cent as their asset valuation was based on book value. However, it was not realistic to use book value to evaluate asset prices during the crisis. Several loans were approved without due diligence for family members and political and business cronies. Asset prices were also inflated during the boom years before the bubble burst.

Amaret thus rebutted the suggested recovery rate.

"I told Tarrin I could not accept this rate," he said. "I could not guarantee that the FRA would be able to achieve this recovery rate. The auditors had no idea how these companies had cooked up their assets. They hid their debts here and there."

In these circumstances, Amaret asked, "How could they use book value in the asset evaluation?"

That year there were few buyers who were capable of collecting the disposed assets. Moreover, the FRA had to compete with Indonesia and South Korea, both hit by the crisis, which also put their assets up for sale. Later on, the FRA managed to achieve a 36.6 per cent recovery rate, which Amaret says was the best possible in those circumstances.

However Amaret was later accused by some politicians and media of selling national assets to greedy foreigners.

"Please look at the facts," he said. "Thai investors purchased 55 per cent of the assets sold."

Amaret said the attack on the FRA was part of a political campaign to discredit the Chuan government.

Looking back, Amaret considers the FRA job a success because the sold assets later created productivity and liquidity in the system. Otherwise, the assets would have remained idle. The speedy auction was partly attributed to the fast economic recovery rate. GDP recovered from minus 0.4 per cent in 1997 to 2-3 per cent years quite quickly and 4-5 per cent in 2001 to 2002.

The FRA ceased to exist after its mission was accomplished. These days Amaret stays politically low key and spends his time studying Buddhism. He recently worked on standards for the educational system.

Instead of accolades, FRA executives have now been rewarded by potential lawsuits. The Department of Special Investigation earlier summoned former FRA secretary-general Vicharat over a charge of assisting Lehman Brothers to evade taxes on assets it purchased at auction. Amaret was also asked by the DSI to clarify some points related to the issue but no charges have been filed against him.

Amaret is adamant that there was nothing wrong with the FRA auction.

"Everything was done solemnly for the nation's interest," he said.

Besides, he noted that the allegation over tax evasion was irrelevant.

"The FRA was not a tax collecting agency," he said. "And in fact, Lehman Brothers set up the Global Thai Property Fund according to the Securities and Exchange Commission Law.

"I was accused of creating tremendous damage. But I want to ask what did I do wrong? The FRA managed to auction off the assets to recoup some of the Financial Institutions Development Fund's losses incurred by bailing out the financial system. I did my job," said Amaret.

Asked whether Thailand would experience another crisis, Amaret replied, "Thais never learned from the crisis. The crisis was a result of four Cs: cronyism, collusion, corruption and complacency. Ten years later, you tell me whether these Cs are still around."

Asked whether he has any advice to persons who may be asked to rescue the economy from a future crisis, Amaret shook his head and said, "My advice is don't put your hands in the trap! If someone calls you asking you to rescue the economy from the abyss again, just go far, far away. And shut off your mobile phone."

Jeerawat Na Thalang,

Somluck Srimalee

The Nation