LET IT BE
SURANAND VEJJAJIVA
Deputy Prime Minister and Minister of Finance, Surapong Suebwonglee, MD, a medical doctor by training and economist by chance, finally emerged with a clear, simple and right-to-the-point, short-term economic relief package which was announced on Tuesday.
For the first time in five months of deteriorating economic health, it appears that there is actually a doctor in the house.
The government's six-point package is designed to relieve the plight of the poor, who are finding it harder by the day to make ends meet. The measures hit the ongoing problem on target, correctly recognising that this is a cost-push inflation resulting from rising energy prices, and will reduce the day-to-day expenses of the general public, urban and rural alike.
The result, coupled with the Bank of Thailand's decision the following day to raise the interest rate by 0.25%, is expected to slow down inflation to within single digits, which would hover around 7-8%. That would help keep valuable cash in consumers' pockets.
The measures will last six months and cost around 47 billion baht, partly financed by the VAT windfall from the fuel price hike.
This is also the first time we are seeing a semblance of an economic team working together, although with the absence of Deputy Prime Minister and Minister of Commerce, Mingkwan Sangsuwan.
Minister Mingkwan should have been there to reassure the public about the effects of the measures on the price of goods. But it is rumoured he will be reshuffled to another post soon anyway.
Populist or not, the measures also provide tremendous political side-benefits for a shaky government that is highly anticipated not to survive the long arm of the courts and might be forced to call an election by the end of the year, or sooner.
The government hopes that by year's end, with the new fiscal year beginning in October 2008, the 2009 budget will send the economy into second-gear shift. As the last quarter of the year is usually the peak season for Thai tourism, the numbers could improve enough to win votes in a general election.
If things work out, the doctor would still be smiling by New Year's weekend.
But will he have the chance?
Being short-term in nature, what the good doctor prescribed will only temporarily relieve the pain. And that could be overtaken by events within a few weeks.
The price of oil did drop earlier in the week, but will certainly be on an upward trend again soon.
Two mortgage finance giants in the United States, Fannie Mae and Freddie Mac, have failed. Stock markets around the world are extremely volatile as investors fear a global crash. Thai financial institutions must take caution for the coming impact.
The time bought by the economic relief measures will be short. The government will have to use this breathing space to start thinking about the longer term.
To manage the economy in an increasingly turbulent world will mean the need for more complex surgery, rather than simply advising the patient to take an aspirin and call in the morning.
But Doctor Surapong may not have enough tools to work with. The 1.86-trillion-baht 2009 budget under consideration is still within the old paradigm, with only 20% set as investment budget. And mega-projects will take time before the actual ground-breaking.
There exists no long-term energy strategy for Thailand. Energy conservation is important and a stronger signal must be sent through campaigns and incentives. Energy security is the nation's top concern.
Industrial restructuring in conjunction with financial restructuring is needed to ensure efficient use of resources and to create immunity from global volatility. A tax package that favours research and development to support the restructuring must be put in place.
Investments must be based on the nation's strengths in agriculture and tourism. The sufficiency economy must be seriously implemented at the village level, providing a base for sustainable development for the rural areas.
Education and ICT policies are still seemingly lost. There is no new job creation programme. A comprehensive skills retraining programme will help the transition and prepare the Thai workforce for the new world.
The doctor will have his hands full. His effective handling will determine his and the government's future.
But the problem is compounded by the fact that, politically, the status of the doctor himself is in doubt, as the court will rule on July 28 whether he was involved in the digit lottery scandal. He may be suspended or reshuffled from his ministerial post.
The government is also in a very destabilising situation with many controversial issues, from the proposed constitution amendment, the simmering border crisis with Cambodia and the prime minister's own cases in the courts. Any one of these could prove to be the straw that breaks the camel's back.
Well then, do we have another doctor in the house?Suranand Vejjajiva served in the Thaksin Shinawatra cabinet and is now a political analyst.
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