LOOKING INWARD: Thaksin's alternative
July 26, 2001
Prime Minister Thaksin Shinawatra yesterday spelled out
his plan to build an entrepreneurial class and to gradually shift the
country away from reliance on the East Asian economic model.
Speaking to the Joint Foreign Chambers of Commerce at the Grand Hyatt
Erawan Hotel, Thaksin said the Thai economic crisis and lingering malaise
were caused partly by the East Asian economic model, which is founded
on multinational corporations, foreign capital, foreign investment and
Yet overall development from this export-oriented model has failed to
benefit the broad spectrum of society, and leaves the country susceptible
to another crisis due to heavy reliance on the volatile demand of the
major trading partners, he said.
Thaksin said his government's policy is to build an entrepreneurial class
and to focus on strengthening the domestic economy. By saying so, Thaksin
is clearly aiming to reduce the weight of the contribution of export earnings
to the economy, so that domestic demand can be boosted to balance the
Thaksin apparently wants domestic demand to become the main engine of
economic growth. Chief adviser Pansak Winyaratn said domestic consumption
is already worth about US$55 billion (Bt2.47 trillion) a year, making
the domestic market for new ideas and new products a massive one.
By shifting to growth spurred by domestic demand, Thaksin hopes the country
will be less vulnerable to external shocks. The European economy is 80-per-cent
driven by internal trade, while the remaining 20 per cent comprises exports.
The US domestic economy accounts for 70 per cent of its gross domestic
product (GDP), compared with 30 per cent for exports.
Thailand and other East Asian countries are appear to be heading towards
another economic storm, caused by a collapse in demand from the US and
Japanese markets. Exports account for more than 50 per cent of the Thai
GDP, while Singapore, Taiwan and Malaysia, which would be hit harder,
depend even more heavily on exports.
Thaksin was careful with his wording in yesterday's speech, trying to
reaffirm his government's commitments to promoting foreign investment
and to fulfilling international obligations. He said his government would
pursue a "dual-track" policy by continuing to attract foreign
investment and by rebuilding the strength of the domestic economy.
Thaksin avoided airing his views on the deteriorating macroeconomic conditions,
caused largely by the export slump and by the slow pace of domestic corporate
and financial restructuring. But he did give some scope to the management
of the public-sector debt, outlining a five-year timeframe in which the
government hopes to balance the budget, and explaining how the government
aims to tackle the Bt1.3 trillion in losses at the Financial Institutions
Thaksin emphasised the need to revive entrepreneurial spirit, coupled
with extending economic programmes at the grassroots level, which has
been the key policy platform of the Thai Rak Thai Party.
He said people have benefited from foreign investment and to some extent
from technology transfers, but they have not quite learned how to become
good entrepreneurs. Over the next three months, the government will establish
an SME bank, specialising in lending money to small and medium-sized enterprises.
Yesterday Thaksin launched the village-fund programme, which will extend
Bt1 million to many of the 77,000 villages nationwide. He said debt restructuring
for the farmers has been satisfactory, as is the People's Bank, which
lends Bt15,000 to small-time borrowers, and the universal healthcare programme,
which is now operated by pilot hospitals in 21 provinces.
The prime minister appeared to believe that his social platform can provide
a cushion for the effects of the slowdown in the global economy. But critics
have argued that he has not actually addressed the corporate sector, which
still provides the bread and butter for the domestic economy.