Virabongsa diagnoses ills, offers no cure

September 5, 2000

SHARP-TONGUED macroeconomist Virabongsa Ramangkura is annoyed with the government's economic mistakes, and those of the previous government, and he hasn't been afraid to speak out. But he hasn't offered any solutions, either.

At a seminar held by Siam Rath over the weekend, Virabongsa said he doesn't put faith in any party's economic policy. After the elections, politicians were more interested in manoeuvring for Cabinet positions than implementing their economic platforms or political pledges, he said.

"I am more a believer in leadership. If we have a leader who has vision and understands the future and is ready to tackle the problems, then this is much more important than the party's platform," Virabongsa said.

Virabongsa spoke at length about what he believes were the economic-policy mistakes of the Chavalit and Chuan governments.

The Chavalit government followed the tight monetary and fiscal policies proposed by the International Monetary Fund. This exacerbated the economic crisis, he said. Its most serious mistake was defending the baht until the country ran out of foreign-exchange reserves.

When the Chuan government took over, Virabongsa said, it failed to comprehend the problems it faced, and made the same mistakes, primarily heeding the bad advice of foreign advisers with vested interests in the government's policies.

The Chuan government held to tight fiscal and monetary policies in the early part of its administration, again exacerbating the bad debts in the banking system, Virabongsa said.

Then, when the situation stabilised in 1998, the government allowed imports to surge. As a result, only the automobile sector and big corporations owned by multinational firms enjoyed a significant recovery, he said.

The Chuan government also prescribed the wrong medicine in 1999, when it reduced tariffs on components and raw materials. In doing so, it reduced protection for small and medium-sized businesses, and the economy continued to contract, he said.

Virabongsa also pointed to worrying signs about the future, including an eventual slowdown in the US economy, higher oil prices and the emergence of the electronic marketplace.

US corporations, for example, will use their dominant position in electronics, telecommunications and space technology to call for the further liberalisation of the information-technology sector, he said. They employed a similar strategy with the financial-services sector, he said.

"The US will act as a mediator for goods and services transactions in the e-market, while Asia will become the producers," Virabongsa said.

Politically and economically, Thailand is not prepared to face the challenges ahead, Virabongsa said. Given the low rate of tax collection - 16 per cent of the GDP - and the narrowing gap in current accounts, the next government may not have the resources to manage the economy.

However good Virabongsa was at describing the mistakes of the past two governments, he failed to provide any solutions. Throughout his lecture, he did not provide a single specific suggestion as to how the country might strengthen the fragile recovery.

BY THANONG KHANTHONG