The Yingluck Shinawatra government must draw up a clear long-term economic policy for maintaining growth in a fast-changing world, says Kobsak Pootrakool, an executive vice-president of Bangkok Bank.
Kobsak: Subsidies are habit-forming
The chief concern is that the current policies are aimed merely at short-term stimulus, he said during yesterday's seminar entitled "Thailand's Future under Yingluck's Economic Policies".
"The government should have clear long-term policies for education and innovation, and improve other basic infrastructure, in addition to high-speed trains, such as laws," he said.
Growth in recent years has ranged from 3.5% to 4%, down from 7-8% previously.
Since Ms Yingluck took the helm in mid-2011, the government has launched a series of populist policies and stimulus measures including the daily minimum wage hike, the tax rebate for first-time car buyers, the rice pledging scheme and corporate and personal tax cuts.
Mr Kobsak said the government has been welcomed by the private sector for its ability to carry out election promises in such a short time.
On the downside, the rice pledging scheme has distorted local market mechanisms.
Some Thai exporters have shifted to buying rice from Myanmar and Cambodia, as their prices are far below the pledging price set by the Thai government, said Mr Kobsak.
The risk is that people become addicted to populist policies such as subsidies, making it difficult to revoke or even minimise them.
The government has slightly modified the rice pledging scheme by capping the pledged amount at 350,000 baht per farming household for the main crop.
It cut the pledging price for the second crop to 13,000 baht a tonne, with a limit of 300,000 baht per household.
Mr Kobsak said the state should work together with business on development, as the government's investment budget accounts for just 5% of GDP.
Kanit Sangsuphan, an adviser to the Fiscal Policy Research Institute, said the Yingluck administration decided from the beginning to launch only short-term stimulus measures designed to strengthen purchasing power.
The government is now in the phase of building up competitiveness, and the 2-trillion-baht megaproject plan will not only save logistics costs but also develop the country, he said.
The big question is how to encourage industry to relocate upcountry to boost economic growth there.
The high-speed train project, estimated to yield an economic return of 15%, can answer that question, said Mr Kanit.