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.
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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.
BY THANONG KHANTHONG
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