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CP chief seeks quick govt steps to save economy

 

SHANGHAI Devaluation of the baht would cause more damage to the plummeting economy than good, but the government must move fast for alternative solutions before it is too late, the head of the Charoen Pokphand Group said.

Dhanin Chearavanont said newly-appointed Finance Minister Thanong Bidaya must move to ease the malaise with urgency. ''The country needs somebody who can declare, 'I will take sole responsibility', and then goes ahead and does it," the chief of one of the country's largest conglomerates said.

''I think he [Thanong] will step in with an axe to chop the economic problems. Right now it is clear to everybody what the problems are. They have all come out for him to see in plain view without having to be X-rayed."

Dhanin said that if the government moves too slowly, it could be forced to devalue the baht, a move that he said would wreak havoc on the economy. ''If we cannot tackle the problem, we'll be worse off than Mexico," he warned. ''Mexico has the US as a big brother. But we have no one."

A full array of measures to stabilise the economy must be pumped out immediately to restore confidence in the government's promise to refrain from devaluing the currency, Dhanin said.

Any delay will further aggravate the plight of the business sector, he said, adding that for every single percentage point in the interest rate, businesses pay Bt63 billion a year out of an outstanding credit of Bt6.3 trillion in the system.

''If we can reduce the interest rate by 2 percentage points, the business sector will save about Bt120 billion a year and might improve their earnings," he said.

The economic crisis, Dhanin said, has taken its toll on the currency, the final indication of macroeconomic stability.

A senior executive at a brokerage firm said that in order to stem the outflow of capital, which is pressuring the baht, the government must privatise or issue bonds on the international financing markets to bring in fresh capital.

''Right now there is a consensus among foreign investors that we need to devalue," the broker said. ''But is that going to be enough if we don't do any thing else?"

Dhanin and the broker agreed that thus far the government has moved too slowly and tentatively in its handling of the crisis and has allowed the problem to sink to deeper levels.

Dhanin said the best hope is for the US dollar to lose strength, thus lessening the pressure to devalue the baht.

''But we should make it policy to manage the baht so it is at its weakest and has no further room to weaken. Besides, interest rates for borrowing should not exceed 10 per cent." He pointed out that Japan's interest rates are at three per cent, while rates in the US are at five per cent. Dhanin questioned whether Thailand could compete in the world market with rates exceeding 20 per cent.

 

BY THANONG KHANTHONG

 

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