Southeast Asia

Dec 22, 2006

Page 2 of 2
Thailand's man in the hot seat
By Shawn W Crispin

frequently refers to himself as more of a practitioner than a technocrat, broke with market orthodoxy when he raised interest rates at a time the Thai economy was sputtering. After harsh criticism of the policy, he eventually reversed course and lowered rates to help stimulate growth.

He also locked horns with sovereign analysts when, on his orders, he loosened the definition Thai banks must use to qualify non-performing loans (NPLs) on their balance sheets, a move that

some analysts contended made the banking sector look healthier on paper than it was in reality. Pridiyathorn famously locked horns with a local Fitch Ratings analyst when he suggested Thai banks' NPLs were nearly twice as high as BoT statistics suggested.

That statistical fudge and Pridiyathorn's presumed inside knowledge about the true financial health of Thailand's banks could explain why the capital-controls policy was introduced and why the country's largest financial institution, Bangkok Bank, was publicly supportive of the controversial move - even as its shares were dumped by institutional investors and lost more than 15% on Tuesday.

Indeed, Pridiyathorn had previously opined that capital controls were the wrong tool to regulate short-term foreign investment flows. In a July 2001 interview with this correspondent, he said: "Capital controls do not only prevent outflow of funds, but they prevent inflow of funds. So a capital-control policy would be very unwise if implemented - we still need inflow of funds. Not only now, but in the long-term future, we are still a developing country. That is the clear rationale - don't do it."

Why the change of heart? Some Bangkok-based financial analysts who requested anonymity contend that the new government could soon make an announcement that shows that the national finances are not as strong as official statistics have indicated, and then move strategically to blame the ousted Thaksin for the statistical discrepancy. Following that logic, capital controls would guard against a massive outflow of foreign capital.

With questions rising against the military-appointed government's competence and long-term intentions, it's unclear whether Prime Minister Surayud Chulanont would have the political fortitude to jettison Pridiyathorn in favor of another candidate. Apart from spooking foreign investors, Pridiyathorn's capital controls have alienated many of the Bangkok business elite who until now had largely lent their support to both the coup and the new military-appointed administration.

What is clear is that the unfortunate policy will only bolster calls for a return to democracy as the military has promised by 2007, and perhaps even a new yearning for the technocratic competence of the until now unelectable Democrat Party.

Shawn W Crispin is Asia Times Online's Southeast Asia editor.

(Copyright 2006 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

1 2 Back

Bangkok Hotels

Phuket Hotels

Pattaya Hotels

Samui Hotels

Bali Hotels

Kuala Lumpur Hotels

• Thailand Hotels
• Phuket Hotels
• Bangkok Hotels
• Pattaya Hotels
• Phuket Forums
• Thailand Photos

Head Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong Kong
Thailand Bureau: 11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110