Emerging markets implemented ambitious liberalization programs to attract capital.
Emerging market countries, for their part, had implemented ambitious schedules of financial liberalization as a means to attract and capture these vast global resources at substantially lower costs compared with the domestic costs of funds. Typical measures included interest rate deregulation, liberalization in entry conditions, and promotion of direct financing (i.e. securities financing as opposed to indirect financing through banks and finance companies)
Thai key measures included interest rate deregulation, tax reforms, exchange liberalization, and BIBF.
In Thailand, key measures that were implemented during this period were interest rate liberalization, phased-in exchange control deregulation. And the establishment of the Bangkok International Banking Facility (BIBF) in 1993 to prepare the domestic financial system for more competition in the intermediation of financing from abroad (See Box A)
With freer and cheaper means of funding from abroad, enhanced by various tax concessions, net capital inflows of non-bank accelerated from approximately 20 billion baht per month in 1991 to some 40 billion baht per month at the end of 1995. It was thus inevitable under such circumstances of rapid capital inflows, ample liquidity and insufficient profitable investment projects to support such a large influx of capital that much investment moved into the stock and property sectors (See Box B)