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Thaksin must tackle capital market woes

March 30, 2001

TOMORROW Prime Minister Thaksin Shinawatra will present another showcase. He will chair a full-day workshop on capital market development at the Regent Bangkok Hotel. Some 50 top people in the capital market will be invited to this closed-door session. After this crash course the prime minister will produce a magic formula for reviving the sagging capital market.

It all sounds easy. After moderating workshops on the national asset management corporation, the anti-drug war, universal health care, the debt suspension programme for farmers, small-and medium-scale enterprises, Thaksin has really developed his expertise as a seminar organiser. Predictably, a consensus will be built up quickly after this Saturday's session over ways to prop up Thai stocks. By the way, who dares to raise a voice against the prime minister? It reminds one of a famous BBC series called "Yes, Prime Minister".

If his political fortunes or stock holdings in Shin Corp happen to melt down, Thaksin certainly can carve out a new career as a seminar moderator.

The Tourism Authority of Thailand is preparing another workshop on tourism. It has been given a tough assignment from the prime minister to raise another Bt50 billion on top of Bt320 billion in annual tourist earnings for the country. The tourist agency had better do its homework well as the headmaster is wielding his cane.

Half a dozen workshops in a period of one month in office is quite a remarkable achievement for the prime minister.

It exemplifies the hyperactive character of Thaksin, who promised to work hard from day one to tackle the urgent problems of the country. It shows the voters that they did not make a mistake in putting him in the highest office of the land. It illustrates his attempt to fulfil his election promises.

It also shows his management style in marked contrast to his predecessor, Chuan Leekpai. Typically, Chuan would attend a seminar by reading out a two-page statement. Then he would sit for 10 minutes before leaving for other errands. That was the end of it.

Yet running workshops and running the country are two different things. The tough act will be passed on to the bureaucrats, who will have to keep up with the man who was elected in a landslide victory through a broad populist agenda. The prime minister would really love to please all of his constituencies.

His message is that he can cure all of their problems. There is indeed a lot of merit in the populist programme, which seeks to redress the income distribution gap and lay a stronger foundation for the rural economy and the entrepreneurial class. These are long-term problems that need to be tackled seriously.

But soon Thaksin & Co will begin to realise that they cannot please all of the people all of the time. Nor can they afford to hand out money to all of the people all of the time. Thaksin will need to focus on a narrow agenda, instead of trying to accomplish everything at one time.

Thaksin is confronting an array of short-term problems that he cannot ignore. After this frantic pace of workshop after workshop, the prime minister will be forced to reckon with the immediate problem of stimulating the economy in the face of the global economic slowdown. Details of the stimulus measures are still to be worked out, but it is highly doubtful that they will be effective enough to prop up the Thai economy. Injecting new money into the economy to revive business activity and create jobs is the priority.

Second, he will have to seriously preside over the restructuring of both the banking and corporate sector. If this very important problem is not resolved, it will put a further drag on the economic recovery and leave no room for Thaksin to pursue his populist agenda. Although the Thai Asset Management Corporation will be formed some time in the middle of this year, it won't be until year's end that it can buy out the remaining Bt1.2 trillion in bad debts from the banking system. But Thaksin is also facing a new problem of new bad debts rising at 0.5-0.6 per cent of total loans every month.

Third, any formula by Thaksin to tackle the country's problems must not create off-balance-sheet debt for future generations to pay. There is a tendency for the government to spend its way out of short-term problems. The Education Ministry is reportedly pondering an issue of Bt100 billion in bonds to reform the education system. The debt of the Thai Asset Management Corporation is also another form of off-balance-sheet burden.






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