Somkid needs to get out of first gear
March 9, 2001
THREE weeks in office at the Finance Ministry and Dr Somkid Jatusripitak
is still in low gear. But the crisis situation is building up again, threatening
to plunge Thailand into another round of recession. If he does not act
faster, or more decisively, to hit the right target, Somkid will have
a tough time staving off an economic downturn.
Somkid has been less eloquent than he should be. In meetings he is said
to keep quiet rather than do the talking. He used to say that he prefers
to let his actions do the talking. But as finance minister, sending the
right signals to the financial markets or the business community is his
responsibility. Whenever there are worrying signs, he must speak out.
So it is a disappointment that he has missed his chances to send the
right signals. When the Commerce Ministry late last month reported a trade
deficit in January for the first time in 30 months, Somkid did not react
in a timely way. Instead, Dr Chalongphob Sussangkarn, president of the
Thailand Development Research Institute, came out immediately to warn
about the danger of the trade deficit, which could weigh on the country's
macroeconomic stability. He urged the government to come up with measures
to curb imports.
Then Somchaineuk Engtrakul, the permanent secretary of finance, also
reacted soundly by calling for government agencies to cut back imports
by at least 50 per cent and buy Made-in-Thailand products instead. Earlier
this week Prime Minister Thaksin Shinawatra also gave a warning about
the trade deficit, saying if imports are not curbed, the country could
be plunged into another currency and economic crisis.
Somkid may look clumsy at this early stage in one of the country's most
important executive jobs. Obviously, he will need some time to settle
in, but he has yet to tackle the right issues or set the direction he
would like the Thai economy to take in the short or medium term.
Instead, he is focusing on the long-term problems of the real sector,
which might lie beyond his main line of responsibility. It appears that
he is more comfortable meeting with retailers than with the bankers.
What Somkid needs to do now is to work with other ministries or agencies,
probably through a committee that he chairs, to bring down imports. Thailand
went into the crisis in 1997 because it failed to address the current
account deficit. Curbing imports and saving energy can start in the public
sector before the programme is implemented in the private sector. Thais
faced power blackouts in the 1970s when the country ran into a crisis.
Therefore they understood the situation. Some kind of energy saving programme
should not face a public backlash if Thais are told the truth.
Another important signal from Somkid that is missing is how he will cope
with the economic downturn. All the economic indicators show that the
country might be running out of steam. Somkid cannot rely on exports to
drive the Thai economy as in the past three years. So what he needs to
do badly is to stimulate it.
This is the toughest nut to crack. Yet there is no priority signal from
Somkid that the economy is urgently in need of a special stimulus package
now to prevent it from slipping into recession. But fiscal spending is
the policy of the whole government, dominated by the prime minister. It
is understandable that Somkid has little clout in this regard in pushing
for a workable economic stimulus. The problem is, it is not certain what
he really means by economic stimulus.
Remember, the country had no government for three months during the election,
so business or investment stopped during the period. Instead of proceeding
with fiscal spending earmarked for infrastructure projects, the Thai Rak
Thai government has opted to scale spending down so that the saved money
- Bt9 billion - can be used to finance its campaign pledges. Earlier,
the government indicated that it might borrow Bt30-Bt40 billion to stimulate
the economy. Yet most of the Thai Rak Thai spending programmes are social
spending, which cannot really stimulate the economy and which cannot be
implemented soon enough. The time lag might cost the economy dearly.
After having missed the chance to act on two big macro signals, Somkid
has also failed to play a key role in pushing out the national assets
management company. Thaksin stole the show in Cha-Am last month by hosting
a national seminar on the AMC. Somkid not only played second fiddle to
the prime minister but was also outshone by Thanong Bidaya, the former
As it turns out, Thanong has been appointed by Thaksin as chairman of
a task force to design the blueprint for the national AMC. Thanong is
now doing the negotiations with the bankers and the Bank of Thailand on
conditions of the buy-out of the bad debts.
Somkid is being left largely on the sidelines over one of the most important
economic platforms of Thai Rak Thai. Once the blueprint is completed,
it will be sent directly to Thaksin.
The 10 advisors appointed by Somkid are not helping him much. What Somkid
needs to do now is to carve out his own turf, focus on the right issues
and ask for the mandate from the prime minister to proceed. Otherwise,
his time in the finance portfolio will quickly turn into a nightmare.
BY THANONG KHANTHOG