The Thai economy has gained little traction in recent months. Despite the restoration of confidence and the clearing of many legislative bottlenecks since the middle of last year, GDP growth still came in at just 0.7% in 2014. Nor have we seen any big return of momentum in domestic consumption or investment. Even during the recent New Year festivities, consumer spending was weak, despite the long holiday period. There isn't much to celebrate on the economic front.
A man wearing a Batman costume led Khlong Thom vendors to protest against the policy to clean up night markets. Efforts to crack down on illegal businesses have contributed to the economic slowdown. (Photo by Thiti Wannamontha)
One has to wonder if growth is being stifled partly by the anti-graft movement. After all, the push to restore social order, prevent negligence and end corruption has unavoidably impacted some everyday economic activity.
For instance, reclaiming Phuket's beaches from encroachment by chair, umbrella and food vendors means that those locals have to find new ways to make a living. The implicit cost to Phuket's local economy is estimated to be around 5 billion baht a year.
In Bangkok, the recent negotiations between Khlong Thom street market vendors and government officials revealed that as many as 5,000 stalls are affected. The government has made life harder for underground lottery and gambling dens. Within government operations, extreme caution and more scrutiny have resulted in delays in public spending.
Thailand is certainly not the only country feeling the effects of an anti-graft movement. China began its own anti-corruption drive in 2012. President Xi Jinping vowed to take down both "tigers" and "flies" — corrupt officials of both high rank and low. Various analysts estimate that this has reduced China's GDP growth by as much as two percentage points each year during the campaign's first few years. Domestic consumption, for example, has suffered from a big drop in spending on fancy watches, lavish banquets, costly liquor and other luxuries often presented to officials as business favours.
If fighting corruption drags down GDP growth in Thailand as it has in China, will this be too high a price to pay? Are the benefits worth the cost?
That depends on how much Thailand is really losing to graft. Different studies and anecdotal accounts produce a wide variety of estimates, but can range as high as double-digit percentages of public spending.
A 2013 survey report by the University of the Thai Chamber of Commerce indicated that corruption accounted for an alarming 30-35% of the value of capital spending and public procurements from the budget. It would appear that nearly 4% of GDP is being wasted each year. Such huge sums could vastly transform Thailand if used to benefit the public instead of corrupt officials.
It's no coincidence that societies with low levels of corruption, like the Nordic countries and Singapore, also have the world's best schooling, health care, roads, mass transit systems, public parks, museums, environmental protection and so on. The quality of life goes way up in a clean, rules-based system that spends government resources effectively.
The shady economic growth that comes from clamping down on bending the rules, greasing a palm and turning a blind eye will be painful and widespread. But this sacrifice is justified if and only if it is temporary and our society can become stronger.
The most important thing is that the anti-corruption movement must endure.
Putting social order in place will not happen overnight. The real test is whether the government can retain public support to do what is necessary. In China's case, some observers say that the battle against corruption has gone deeper and lasted longer than anyone initially thought possible.
Why so? The answer may be the fact that the move has netted "tigers" such as former state security chief Zhou Yongkang and well-connected mining tycoon Liu Han. Prosecuting high-profile officials not only convinces everyone that the government is serious about tackling corruption; it also minimises the burden on the ordinary affairs of the general public.
Thailand's anti-graft drive has thus far netted "flies", inadvertently affecting the livelihoods of thousands of people. The government's actions therefore risk losing the public's goodwill. Prosecutors ought to catch more of the "tigers". A high-profile corruption trial is needed to instill public confidence — a necessary, though not sufficient, condition for a successful anti-graft campaign.
How to win the war against corruption in the long term? We need permanent, systematic changes that must include better protection for whistle-blowers, freedom of the press, commitment to the rule of law and strong mechanisms ensuring real competition and transparency in all government tenders. Concrete changes like these will make office-holders think twice before seeking kickbacks.
For now, we shouldn't panic over a bit of slow growth. If we stay committed to reform, this temporary pain will not go to waste. Thailand will emerge as a stronger, more orderly society. That would be a true cause for celebration.
Sutapa Amornvivat, PhD is Chief Economist and First Executive Vice President at Economic Intelligence Centre, Siam Commercial Bank. She has international work experience at IMF, ING Group and Booz, Allen, Hamilton. She received a BA from Harvard and a PhD from MIT. eic@scb.co.th | EIC Online: www.scbeic.com