Economics: Abhisit’s Stimulus is being Buffeted by “Power and Money Cut”

The country comes after politics and money as usual

The country comes after politics and money as usual

Introduction:

Most that have been in Thailand long enough, says there is a thing in Thailand about Power and Money-that is above all other considerations. If that is a true reality of Thailand-the bottom line to realist is if that Power and Money relationship still benefits the country-meaning if that is the price Thais must pay-what the return on that cost is?

Unfortunately, the latest study on government efficiency and effectiveness, shows that the governing process of Thailand has been falling greatly over a the past 15 years-and actually Thailand governing ability has fallen by a whopping 30-40% during that time-to rank as the second worse drop globally.

The following are some facts about the current Power and Money relationship in Thailand.

My conclusion after having done this compiling of information-is that it looks bad. In The US, the Obama government set up a special unit to scrutinize the entire stimulus package for transparencies and effectiveness.

However, in Thailand, it looks like the stimulus is all about spreading the cake all around for political purposes and also corruption has already infected many projects. For example-what does education has to do with stimulating the economy and what about the 4,000 new bus order and grassroots corruption quagmires?

Current State of the Thai Economy?

  • The Thai Central Bank just lowered this year’s GDP growth by 1-2%.
  • The World Bank says next year Thai GDP will expend by 2%-but it looks like from a lower base now with that 1-2% reduction.
  • Tourism, exports and SMEs are in dire situation and looks like will take years and years before recuperating lost grounds.
  • The Thai happiness index-that links to consumers sentiments and their spending that many key units says is crucial for a Thai recovery-keeps falling on mainly politics.
  • The epidemic-highlighting government total failure-just keeps getting worse.

Observation: Economic recover still depends on a great many factors-turning positive.

 

Current Thai Power Structure

 

As that dire economic situation hits, everyone including writers at this blog-are pinning their hope on the Abhisit’s stimulus package. But after the US$44 billion stimulus plan-on top of another US$3 billion stimulus that saw the government giving checks out to everyone-now the government is rushing to pump credit into the system.

So what on earth is going on?

It has pretty much been documented that many political conflict in the Abhisit government, stems from in-fighting for the budget. And here is a great big chunk of Stimulus spending that was fought over a great deal.

While the budget has been divided and settled upon, while one would think the bickering would stop, however it didn’t stop. That is because corruption is all over the place and can’t all be hid away because of political agreement-as the press investigates these issues and the public angered.

However, we will have to see if the spending plans-laid pretty much into concrete already-will cause a stir with the public-as the corrupt “Politics and Money” alliance does its damage.

And while the stimulus is laid pretty much in concrete, those in charged of spending it-is far from having solid control over their seats.

Government:

  • Abhisit
  • Nevin plus Pragmatic Green plus nationalist Blue
  • Emerging Dems vs Entrench Dems
  • Entrench Yellow plus Extreme Royalist
  • Emerging Yellow
  • CTP plus civil servants plus community power brokers
  • Small party alliance

Opposition:

  • PT, Taksin remembrance and unifying factor
  • Democracy, Freedom and Social-Justice Alliances

Power Centers

  • Media in a war in itself
  • Well wishers Independent Agencies, Think-Tanks, Academia
  • Politicized Independent Agencies, Think-Tank, Academia
  • Business-government beneficiaries vs  hurt by government

Observation: There appears to be a certain degree of flux in the government.

 

The US$44 Billion Second Stimulus:

  • The total approved spending investment, Bt486.14 billion will be spent during fiscal 2010, which begins from October 1, 2009 to September 30, 2010, Bt510.56 billion in fiscal 2011 and Bt570.16 billion in fiscal 2012. The money will be spent in seven significant programmes.
  • However, this approved spending investment does not include another planned investment totaling Bt200 billion by Thailand’s oil and gas conglomerate PTT Public Co., Ltd. Other state enterprises are also ordered to rush their investments spending.
  • The planned investment will boost gross domestic product by 5 per cent yearly, create 1.6 million new jobs in three years and help spread investment on public service to rural area, according to Abhisit.

Observation: Unbelievable how one can do such long-term projection-in an uncertain local and global environment.

Where the money is coming from:

  • Government fiscal 2010 budget of about 613,000 million baht
  • About 700,000 million baht from the 800,000 million borrowing approved
  • Other income of about 260,000 million baht
  • All in all, the stimulus will involve 3 years of finance planning

Observation: Outlays is concrete but income to finance those borrowing is far from certain-as the government had already had to borrow to plug the gap-and this places great risk for the economy as a whole.

Seven important programmes according to NESDB

  • Improvements to water distribution systems for small-scale farming.
  • Upgrading public service.
  • Mapping plans to boost tourism revenue.
  • Improving education.
  • Improving rural people’s life.
  • Development in Thailand’s three Malay Muslim majority southern provinces.

Observations: Looks like most are for long-term development that has been on the planning books for a very long time.

Speed Up Stimulus

  • The government’s economic ministers also acted to set up a panel, headed by the permanent secretary for finance.
  • The committee is responsible for consider the projects, prioritize them, finding funding sources and allowing the private sector to jointly invest in the projects.
  • Thailand’s finance minister, Korn, is now speeding up the stimulus in general such as state enterprise investments outlays, including the Bangkok mass transit system.
  • But the reality is that the key economic people in the government are fighting among themselves and that overall, on the government as a whole level, there is a serious lack of coordination.

Observation: The economic team alone is having a hard time working together and so what of inter-ministries that crosses political boundaries, alliances and special interest?

Abhisit Cabinet

December 20, 2008-Present

  • Prime Minister:Abhisit Vejjajiva (Dem) 70% performance approval rating (PAR) Key Focus: Power vs country’s best interest
  • Deputy Prime Ministers:Suthep Thaugsuban (Dem) 46%PAR Korbsak Sabhavasu (Dem) Sanan Kachornprasart (CTP) Key Focus: Support Abhisit vs self interest
  • PM’s Office Ministers:Satit Wongnongtaey (Dem) Virachai Virameteekul (Dem)
  • Defence Minister:Gen Prawit Wongsuwan (A) Key Focus: War and peace, defense budget and conduit for military and government coordination
  • Finance Minister: Korn Chatikavanij (Dem) 48% PAR
  • Deputy Finance Ministers: Pradit Pataraprasit (RJTCP) Pruektichai Damrongrat (PPD)
  • Key Focus: Stimulus on GDP, state and commercial bank activities, borrowing and spending impact on key accounts, policy and central bank coordination on liquidity, interest rates and baht
  • Foreign Affairs Minister: Kasit Piromya (Dem) Key Focus: How can a terrorist suspect revive Thailand negative global image
  • Tourism and Sports Minister: Chumpol Silapa-archa (CTP) 56% PAR Key Focus: Revive tourism, promotion and credit to support industry
  • Social Dev. & Human Sec. Minister: Witoon Nambutr (Dem) (resigned Feb. 2, 2009) Issara Somchai (Dem) (replaced Witoon)
  • Agriculture Minister:Theera Wongsamut (CTP)
  • Deputy Agriculture Minister: Chartchai Pukkayaporn (BJT/Sora-at K) (replaced) Supachai Phosu (BJT/Newin) (endorsed May 29, 2009)
  • Key Focus: Price support, sales of stock, protesting farmers, export drive
  • Transport & Comm.Minister:Sophon Saram (BJT/FON)
  • Deputy T&C Ministers: Kuakul Danchaiwijit (CTP) Prajak Kaewklahan (BJT/FON)
  • Key Focus: Transparencies challenges
  • Natural Res. & Env. Minister: Suwit Khunkitti (SAP) 50% PAR Key issue: Environment vs development
  • ICT Minister:Ranongruk Suwanchawee (PPD/Korat) Key Focus: Media freedom, up-grade IT infrastructure and software stack
  • Energy Minister: Wannarat Charnnukul (RJTC) Key Focus: Energy prices and taxation issues
  • Commerce Minister:Pornthiva Nakasai (BJT/Mach)
  • Deputy Commerce Minister: Alongkorn Pollabutr (Dem) 45% PAR
  • Key Issues: Reviving exports, failing SME, foreign trade relations
  • Industry Minister:Charnchai Chairungrueng (PPD) Key Issues: Credit to up-grade production stack
  • Interior Minister: Chaovarat Chanweerakul (BJT/FON) 48% PAR
  • Deputy Interior Ministers: Boonjong Wongtrairat (BJT/FON) Thaworn Senneam (Dem)
  • Key Focus: Containing reds and Taksin, grassroots relations, controlling government administrative power apparatus
  • Justice Minister:Pirapan Salirathavibhaga (Dem) Key Focus: Revive poor trust in judiciary system vs bending justice for political gains
  • Labor Minister:Phaithoon Kaeothong (Dem) Key Focus: Hurting Thai labor locally and globally, immigration labor
  • Culture Minister:Teera Slukpetch (Dem)
  • Science & Tech Minister: Kalaya Sophonpanich (Dem) 51% PAR
  • Education Minister: Jurin Laksanawisit (Dem) 55% PAR
  • Deputy Education Ministers: Chaiwuti Bannawat (Dem) Narisarat Chawaltanpithak (PPD/Baan Rim)
  • Key Focus: Teachers debt, lower educational cost, privatized educational system, promoting Dems through teachers network
  • Public Health Minister: Witthaya Kaewparadai (Dem) 50% PAR
  • Deputy PH Minister: Manite Nopamornbodi (BJT) Key Focus: Epidemic, reviving trust
  • Dem=Democrat Party
  • SAP= Social Action Party
  • BJT= Bhum Jai Thai Party
  • FON= Friends of Newin Faction
  • PPD= Puea Pandin
  • RJTCP= Ruam Jai Thai Chart Pattana
  • A=Army
  • CTP- Chart Thai Pattana

Observation: It is not odd that Abhisit PAR rating is high, but for the rest is poor-because pols after polls say Abhisit’s strongest support is from women. Well Abhisit is hansom and have a polite character. So he is somewhat a “Teflon Prime Minister.

Who Gets What and Where Going?

 

  • Investments from 2010-2013 is 235,000 million baht
  • Investments from 2014-2015 is 685,000 million baht
  • Dem gets 130,500 million baht for education and 83,300 million baht for health and other agencies of 116, 500 million baht
  • PJT gets 2010-2015 for road building of about 100,000 million baht and rail development of 135,000 million baht
  • CTP gets 192,000 million baht for agriculture and water projects
  • SAP gets 21,000 million baht
  • RJTCP gets 80,000 million baht
  • PJT gets 40% of the 3 year stimulus spending-about 5,700,000 million baht.
  • CTP gets 2,300,000 million baht.
  • BJT gets 2,000,000 million baht

Observation: It is fairly clear of the correlation between political power and stimulus allocation.

Track Record on Spending:

  • PJT is being criticized for corruption and mis-management of the 4,000 bus purchase, the Thai railway up-grade and the no-dust road project
  • Dem is being criticized corruption and mis-management of the automatic lottery and grassroots village fund
  • CTP has a long track record of being criticized for close relationship with contractors and senior civil servants officials

Observation: Corruption, corruption, corruption……

CP Senior Executive on China’s Stimulus

  • China focus on stimulating the grassroots
  • China provide massive credit to broad spectrum of economy
  • China stimulus focuses on infrastructure development
  • China provides opportunity for Thailand to attract Chinese investments and market for Thai agricultural products

Observation: Looks like with these new stimulus efforts by Thailand in the past week, Thailand is copying much of what China is doing. But Thailand isn’t China.

Steve Forbes after meet with Abhisit:

  • The Government’s economic stimulus package including short-term policies for stimulating people’s purchasing power, mid-term policies for enhancing the country’s economic efficiency and competitiveness, and long-term policies for investing in infrastructure projects as well as alternative energy.
  • In response to the inquiries of Mr Forbes about the methods to attract foreign investments, PM Abhisit said the Government will accelerate businesses with high technology development and environmental conscience while attempting to rectify the tax collection system to be more flexible and convenient, which will help facilitate foreign businesses in Thailand.

Observation: Looks great in general but total failure in carrying out the plan.

Conclusion: Thai Stimulus?

  • Korn now orders state banks to inject loans into the economy on a massive scale and also orders massive credit available for tourism, SMEs and manufacturers
  • Therefore, if the US$44 billion stimulus is going to do the job, why these urgent orders to pump funds into these important sectors of the economy?
  • One can pretty much conclude with certainty, that the US$44 billion borrowing-is nothing much more than “Pork and Barrel Politics.”
  • And there will be substantial corruption associated with that.
  • Also apart from corruption, how much money will it come to for those billions and trillions of lending, that are now obviously needed, at cut rates will cost and what of the risk these state lending units are taking on?

Observation: Expect poor efficiency, lots of leakages, and under-value impact.

Addendum 1: See what Thailand’s emerging competitor, Vietnam, is doing on the stimulus front and some realistic criticism of it-to learn of the Thai package-since in Thailand much of the media is under government control: http://terrydata.wordpress.com/wp-admin/post.php?action=edit&post=326

Addendum 2: See the rising of Vietnam and its weaknesses and strength: http://terrydata.wordpress.com/2009/07/20/vietnam-rising/

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