Trade Policy Note Final-rev08 - Development

On the contrary, a sharp decline has been observed after the reform. SMEs and
operators in the agriculture sector have been particularly affected by limited access to
credit. Experience shows that countries should carefully assess the potential
implications of reform on the basis of national realities, 150 designing appropriate
financial services liberalization policies to suit country-specific conditions;
determining the potential costs and benefits of reforms and also the appropriate pace
and sequence of the process. In the absence of adequate prudential policy,
liberalization may contribute to financial instability.
Box 26: The Thai Experience
The Thai experience and financial crisis in 1997 shows that "fast and furious" liberalization
has not worked well. Liberalization should have been planned as a process and implemented
in steps rather than being set out as an objective to be achieved through incoherent policy
measures. The experience also demonstrates how challenging it is to adapt external fast
developments to a country's needs and readiness. The rapidly growing banking system and
the influx of short term foreign capital proved, for instance, to be too much and too fast for
the Thai authorities to catch-up with on the regulatory front. While financial reform and the
strengthening of the financial system are of paramount importance, they should be devised
and implemented on a continuous basis and not only when an acute need or extraordinary
circumstances force a country to undertake drastic reforms. 151
150 International Monetary Fund, International Capital Markets: Developments, Prospects, and Key
Policy Issues (Washington, DC: September 2000)
(http://www.imf.org/external/pubs/ft/icm/2000/01/eng/index.htm).
151 WTO, Communication from Thailand - Assessment of Trade in Services , document TN/S/W/4, 22
July 2002.
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