Five years after Thailand plunged into an economic crisis, the country's corporations still struggle to pay off massive debts. But a national asset management corporation may be able to restructure the worst of the debt so companies can return to financial health.

Thailand's new central asset management corporation, or TAMC, is gradually chipping away at a huge pile of corporate debt. Analysts say the agency could go a long way toward improving Thailand's corporate health.

In the early 1990's the Thai baht was pegged to the U.S. dollar. Thai companies borrowed billions of dollars, certain they could handle the repayments as Thailand enjoyed strong economic growth.

But the government was forced to let the baht fall against the dollar in mid-1997, setting off the Asian economic crisis. Thailand, and the rest of Asia, plunged into recession, and companies in much of the region no longer could pay their debts.

That overhang of debt hampers Thailand's economic growth, because heavily indebted companies can not expand. At the same time, banks with huge piles of bad loans lack the cash to lend to healthy businesses.

Arporn Chewakrengkai, chief economist for the Government Pension Fund and a former government economic adviser, says the new asset management corporation is going a long way toward resolving the problem of non-performing loans, or NPLs.

She says Thailand's progress is faster than Indonesia's but considerably slower than South Korea's. Both countries also suffered badly in the Asian economic crisis.

At the height of the economic crisis, non-performing loans totaled nearly 60 percent of all the loans held by Thai banks. Since then, the level has fallen, but recent central bank data show they still total 22 percent of all credit in Thailand. That equals about $31 billion.

South Korea's level of bad loans equals just over three percent of total credit. South Korea was one of the first countries to recover from the Asian economic crisis, in part because of aggressive government action on bad loans.

In Indonesia, however, the Asian Development Bank warns that legal reforms are needed to speed the process of debt restructuring.

Marc Lavoire, head of research of Asset Plus Securities in Bangkok, says the TAMC is under considerable political pressure to perform. But problems persist, he says, especially because it can be difficult to enforce the restructured deals. "I think there is some genuine restructuring going on at the TAMC. But the TAMC is limited in its ability in the longer run by incomplete levels of legal support, perhaps. "The legal system is probably not sufficiently strong to fully support complete restructuring loans in the system," he says.

Mr. Lavoire says that Thailand's new bankruptcy court will help ease the problem, but he argues much still needs to be done. "The level of the problem debt is still so overwhelming that even under the best circumstances it will take a number of years to really clear the whole system," he says.

To move things along, the TAMC managing director, Somjate Moonsirilert, hopes to list companies on the stock exchange once they have been restructured and can make a profit. Mr. Somjate also is adding more staff and is making the TAMC's operations more transparent. That will help prevent shady deals from taking place.

Bill Anderson, a vice president at UOB Kay Han Securities in Bangkok, thinks the TAMC has performed better than many had expected. The TAMC aims to restructure around $23 billion of debt. It is on target to work through more than half that amount, $12 billion, this year. "I think a lot of people thought they were going to be ineffective. But I think the general market view is that overall they have done a reasonable job," he says.

But few deals have been made public. One was a deal in which lenders took shares in a bankrupt maker of computer chips. Mr. Somjate says more announcements of restructured deals can be expected soon.

Analysts say overall debt restructuring will only succeed if the Thai economy maintains the present pace of economic growth of around four percent. Investment banks in Asia forecast the Thai economy will be able to maintain that rate next year.

Economists say growth means corporations will have the cash to pay their outstanding debt. It also means the assets of troubled companies are more attractive to potential buyers.