Page 2 of
2 ASIA HAND The urge to splurge in
Thailand By Shawn W Crispin
exactly the upstart party would put
atop the main economic portfolios if it formed the
next government, but the party's candidate list is
lacking in economic and financial gurus.
Meanwhile, the upstart Matchima Thippitai
Party (MTP), led by former cement and
petrochemical tycoon Prachai Leophairatana, is
promising an even more aggressive populism of 42
welfare-oriented policies. The MTP's targeted
infrastructure spending
plans
overlap with those of the Democrats and the PPP,
including new mass transit lines for Bangkok and a
major upgrade of the national rail system.
However, Prachai has also oddly broached
resurrecting the Kra Canal project, which was
first talked of over a century ago but never
realized because of the extraordinary costs
involved. The project would cut across southern
Thailand to link the Andaman Sea and the Gulf of
Thailand, saving maritime traffic from having to
use the Malacca Strait.
The MTP is also
offering to serve up an even larger entree of
populist spending programs, including a
significant expansion of the previous government's
universal health care scheme, doubling the size of
the previous government's 1 million cows policy to
2 million cattle, and a richer universal education
scheme, including free food, uniforms and
textbooks for schoolchildren.
Prachai, who
famously defaulted on billions of dollars worth of
debts held by foreign banks in the wake of the
1997-98 Asian financial crisis, and who also
helped to finance the anti-government rallies
which contributed to Thaksin's demise, has let it
be known he expects to be appointed finance
minister in exchange for delivering his elected
MPs to any Democrat-led coalition government.
Moreover, his pitched battle with foreign
creditors to retain control of his indebted
companies, and his recent statement that Thailand
needs to follow the strong state-led economic
models seen in Singapore and Malaysia, have
already raised reservations among some foreign
analysts about a new wave of market-distorting
economic nationalism if Prachai has significant
sway over the next government's economic
policymaking.
Fiscal fears Fears
of a possible fiscal blowout similarly attended
Thaksin's populist pledges after his landslide
election win in 2001. Despite a weak fiscal
position and underlying financial problems on bank
balance sheets, those concerns never materialized
as the country exported itself back to financial
health. Despite aggressive political marketing,
Thaksin's grassroots spending never amounted to
more than 80 billion baht (US$2.5 billion) per
year, much less than the amount he dedicated to
bailing out indebted corporate elites through the
Thailand Asset Management Company.
While
Thailand now has more fiscal room to maneuver,
with strong reserves and a more manageable public
debt load, some economic analysts still fear that
poorly designed populist spending programs could
give rise to new financial problems, particularly
if they lead to one-off spending and fail to spark
substantially faster economic growth. Local
investment bank Phatra Securities warned in a
recent research note that "more populist spending
by the next government could seriously affect the
country's fiscal position over the medium term" -
particularly if as expected export growth
continues to slow.
Yet it seems just as
likely that the next government will not be able
to spend as fast as promised on the campaign
trail. Even Thaksin's aggressive approach to
fiscal spending was restrained by a slow-moving
bureaucracy, where several layers of approvals are
required to actually disburse funds earmarked and
approved by Parliament. Now with the recent
investigations into and recriminations against
Thaksin's government, the bureaucracy is likely to
move even slower when making future disbursements,
due to concerns that they could be held
accountable in a possible future opposition-led
purge.
At the same time, the old-school
machine politicians queuing up to join the next
coalition government will after several years of
political paralysis and a recent period of
military rule be eager for new government
contracts to revive their starved patronage
networks. If history is any guide, competing
political interests in the next coalition
government will complicate the design and delivery
of both populist and big-ticket infrastructure
projects and the inability to ram through spending
will likely put added stress on what is expected
to be an already delicate political balance,
regardless if the Democrats or PPP are in the
lead.
Indeed, Democrat deputy leader Korn
recently told a group of foreign investors that
his party expects the next coalition government to
last for only two of its four-year term before
collapsing due to factional infighting. He said
that if the Democrats form the next government
they plan to quickly ramp up spending and
stimulate the local economy to bolster their
chances at the next round of polls. If that's the
plan, it seems unlikely all the political spending
promises will be money well spent.
Shawn W Crispin is Asia Times
Online's Southeast Asia Editor. He may be reached
at swcrispin@atimes.com.
(Copyright
2007 Asia Times Online Ltd. All rights reserved.
Please contact us about sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road,
Hua Hin, Prachuab Kirikhan, Thailand 77110
