Background, Structure and Financial Reforms

Owing to persistent slowdown in economic growth and failure to achieve significant improvement in the standard of living, the period of early 1980s witnessed, almost worldwide, radical initiatives aimed at safeguarding and intensifying national economic performance in a more competitive world in many developing countries. A number of new programs were aimed at stimulating productivity and improving the economic environment in a national, regional and international context (Himbara, 1994). For African countries, despite this integration of the economic environment of the world and recognition of the need for new social, economic and political strategies, the Sub-Saharan African economic direction remained unaltered. Surprisingly, as noted by Himbara, the region remained engrossed in a crisis that consisted of every conceivable malaise. In total even ‘where population were not threatened by starvation, disease, or war, dissipation of the economic infrastructure amidst astonishingly widespread corruption became the norm’ (p. 2). Due to these reasons and under such circumstances African countries became increasingly marginalized in the 1980s and early 1990s. Clearly by the mid 1980s symptoms of malaise were evident everywhere. The returns on investment projects were relatively much lower in Africa than in other regions and more than a quarter of the existing projects failed to generate a positive rate of return (World Bank, 1994). This resulted in a drastic reduction in the region's share of international trade and foreign direct investment. In effect, Sub-Saharan African countries (SSA) had the least growth compared to other developing regions (and more so as compared to East Asian Economies) (World Bank). Clearly it was time for Sub-Saharan African countries to begin to adjust and improve their policies to restore economic growth along with other developing countries including Thailand. Beginning with late 1980s many governments of the region undertook major policy reform programs and restructured their economies to varying extents. Thus this was the beginning of the era of the ‘structural adjustment program’ with the objective of establishing a market-friendly set of incentives that can encourage the accumulation of capital and more efficient allocation of resources.1 As part of the structural adjustment program, financial systems (markets) were restructured in most of the countries, with a major emphasis on liberalization measures and reduction or removal of controls and state interventions.