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Thaksin's policies swing like a pendulum

September 8, 2000

IS there any ideology underpinning the Thai Rak Thai Party's economic platform? On the surface, it is a mixture of the socialist and capitalist models. Yesterday, Thaksin Shinawatra, the telecom tycoon, drew up an ambitious economic strategy for his party. It is aimed at lifting the country out of the pit of the crisis - if Thak Rak Thai forms the core of the next coalition government, that is. It is broad in scope, with a systematic layout. But details have yet to be worked out convincingly.

The strategy starts with the farmers and the wage earners at the bottom rung. Above this bracket are the communities, the small- and medium-scale enterprises, the white-collar workers, the banks and the big corporates, and finally the capital market, which stands at the top of the pyramid. The farmers, the low-wage earners and the communities, which represent the backbone of Thai society, are too weak to stand on their own. They need help.

The capitalist portion of Thai Rak Thai's economic platform remains sketchy and lacks substance. But Thaksin says he still has time to work on it because the Chuan government is not going to leave office early.

These people produce needed farm products but they cannot set prices. There is no crop diversification. Their access to information and marketing is poor, resulting in an oversupply of products that consumers don't want to buy. Fluctuations in global commodity prices have also hit hard. Then they have debts in the market or in the unorganised market that they can't repay. This is the vicious cycle of poverty suffered by the majority of Thai people.

Thaksin pledges to provide them with temporary relief on interest repayments for their debts - about Bt180 billion owed to the Bank for Agriculture and Agricultural Cooperatives. The debt suspension will cover three years, costing the government about Bt18 billion a year. Controversial as it is, Thaksin said the policy would allow the farmers or the less privileged a chance to stand on their own feet before they were obliged to pay back their debts. This policy is fully coated with socialism.

Then he comes to the community level. Again, a generous handout of Bt1 million has been offered to each and every one of the 70,000 villages around the country. The total bill for the government in this programme is Bt70 billion. Each village will be given an opportunity to set up its own committee to manage the money. The money can be used to finance start-up projects on their own initiative. This is another programme tainted with socialism.

Where in the world will the money come from to finance this spending spree? Thaksin defends the two programmes as social investment - not a spending spree. He pledges not to raise any additional taxes, so the money will come from "more efficient tax collection". At present, the Thai government hauls in only 70 per cent of the potential of its tax collection base.

Then he'll overhaul the national budget, formulated by the Chuan government, so money that would otherwise go to big-ticket road construction projects is earmarked to community development or debt relief for farmers. If corruption in the national budget is minimised, more money can be squeezed from it for other purposes.

Next are the small- and medium-sized enterprises (SMEs). Thaksin says Thailand will still need the export sector to drive its economy ahead, but SMEs will form the backbone of the Thai economy. Small businesses based on local ideas and creativity will be developed with foreign design assistance. They will also lead Thailand into the 'new economy' with technology-driven products. They will be supported by venture capital. Thaksin says the government will act as a facilitator to help Thai entrepreneurs proliferate. Thai Rak Thai's policy on SMEs is liberal, based on government activism to re-create a new foundation of the economy.

When it comes to the banks, the big corporates and the capital market, Thai Rak Thai is forced to confront the heart of capitalism. Thaksin remains ambiguous over how he will tackle the financial system and restore the solvency of Thai banks. Nor is he clear as to how he may turn around the banking system to allow banks to lend again. Thai corporates are also saddled with major debts. The high level of bad debts in the banking system has been a huge drag on the economic recovery. The Thai capital market suffered a spectacular collapse after the financial bubble. How can it be restored to normal health?

This is the toughest policy challenge for any government. For example, if financial sector reform or corporate debt restructuring does not progress fast enough, it will continue to stall the recovery. Thaksin would also like to set up a national asset-management corporation to buy out the banks' bad debts. But he said he would need some more time to study the issue in detail before drafting a policy, which involves financial, technical and legal processes.

The capitalist portion of Thai Rak Thai's economic platform remains sketchy and lacks substance. But Thaksin says he still has time to work on it because the Chuan government is not going to leave office early. Is Thaksin and his Thai Rak Thai for real? You can judge for yourself.




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