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Chaotic 100 days for Thailand Inc's CEO

May 21, 2001

Prime Minister Thaksin Shina-watra's roller-coaster ride has taken another dip as he clears his first 100 days in office.
Whether he emerges at the top of the loop again to continue the ride depends on two key factors, analysts say.
First, how he manages the weak economy while trying to deliver on his election promises. Second, whether he prevails in the Constitution Court trial over his alleged failure to disclose his assets as required by law.
It might be too early to write a score card for Thaksin, but his first 100 days in office have already provided ample clues about his style and his leadership qualities. The CEO likes a quick fix, wants quick results and fast delivery for Thailand Inc.
So far, more than a dozen workshops on various issues have been held, with the turbo-charged prime minister acting as the moderator. Thaksin is attempting to ram through the Thai Rak Thai's one-size-fits-all policies, which form part of an ambitious social platform.
The policies sounded marvellous on the campaign trail. All farmers borrowing money from the Bank for Agriculture and Agricultural Cooperatives, regardless of their need and creditworthiness, are entitled to debt forgiveness. All Thais, regardless of their age, income and need, are entitled to medical treatment at a cost of less than one US dollar per hospital visit. All banks are entitled to a bailout, regardless of how they have managed their operations. All villages, regardless of their need or economic conditions, will be given Bt1 million each as working capital to start up local businesses. All tambons, regardless of their need, will develop one product for the market as part of rural rehabilitation.
Implementing this ambitious social platform is going to be tough, as witnessed by the participation of only 10,000 farmers in the debt-suspension programme. MR Chatu Mongol Sonakul, the Bank of Thailand governor, sarcastically declared the debt-suspension programme as a big success because of the small number of farmers participating in it. The bottom line is, the government does not have to dig deep into its hollow pocket to compensate for the losses.
By trying to fulfil its campaign pledges, which centre on Thai Rak Thai's social platform, Thaksin has gotten his priorities wrong. This is because the biggest and most immediate challenge facing the prime minister is how his government is going to manage the slowing economy and prevent an all-out recession. Apparently, Thaksin and his economic advisors have misread the economic data or have underestimated the sharpness of the downturn.
Warnings were already being issued as Thaksin was forming his government in late February that the US and Japan would be heading for a downturn this year. This implied that the economy could not rely on exports, which brought in almost US$70 billion (Bt3.15 trillion) last year, making it the engine of growth, as it had been for the previous two years. Without growth in exports, projections for gross domestic product (GDP) growth will have to be slashed sharply. The weak export growth means some Bt200-Bt300 billion will not be forthcoming.
So, the first order of business of the Thaksin government should have been directed at preparing stimulus measures to head off the recession. The prime minister and his team have done the opposite. They have spent more time on the social platform than the real economic platform. They have let the economy slide without adequate fiscal stimulus and other supportive measures. They messed with the investment spending in the 2001 budget approved by the previous Chuan government, diverting money to their own priority programmes. State enterprises also get mixed signals to invest as they have been asked to curb their imports following the January trade deficit, the first deficit in almost three years.
It was not until April that Thaksin began to feel the heat from the economic downturn, compounded by the weakness of the baht. The National Economic and Social Development Board also sent overoptimistic signals over GDP growth. Now projections for GDP growth have been revised downward to be at best 3 per cent. Chances are that this growth rate could be revised downward further if the external factors continue to deteriorate.
Last week Thaksin scrambled to get out supportive measures to cope with the downturn. The arrival of economists Virabongsa Ramangkura and Kosit Pampiemraj at Government House could be interpreted as Thaksin's need for a genuine economic reading from the experts. Yet the measures announced subsequently were too little, too late. Economist Olarn Chaipravat recommended the government should be prime-pumping the economy by making sure that at least Bt100 billion of budget and state-enterprise money is spent every month.
Still, Thaksin's strategists believe that once the Thai Rak Thai's policies kick in beginning next month, they will help stimulate demand.
The Thai Asset Management Corporation legislation will come out in June. Finance Minister Somkid Jatusripitak will order government-controlled banks to lend money according to specific targets to cash-strapped companies. The village fund will be in action in July, pouring some Bt10 billion into the economy in its first year to stimulate demand at the grass-roots level. The People's Bank, an adjusted role for the Government Savings Bank, will follow suit.
If the growth rate reaches only 2 per cent this year, it means that only Bt100 billion will be added to the Bt5-trillion economy. That is almost no growth at all. And perhaps worse for Thaksin, it compares badly against the 4.2 per cent economic growth the much-maligned Democrat-led government achieved in 2000.

Thanong Khanthong






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