Korn blasts fiscal policy

Free-spending ways imperil future, he says

Thailand has massive potential for future economic growth over the next two decades, but only if policymakers can maintain discipline in public spending, address corruption and fix imbalances in wealth distribution, says Korn Chatikavanij, a deputy leader of the opposition Democrat Party.

From left: former finance ministers Mr Korn and MR Pridiyathorn Devakula and the current one, Mr Kittiratt, in a rare public encounter at a seminar on Wednesday. PATTARACHAI PEECHAPANICH

Mr Korn, the finance minister under the Abhisit Vejjajiva government, said Thailand's economic growth could rise nearly five-fold in the next 20 years to 50 trillion baht, assuming average annual growth of 5% and inflation of 3%.

The Stock Exchange of Thailand index, now at 1,439 points, could reach 20,000 points assuming listed company performance continues to rise at around 15% per year, with Thai companies potentially taking over a number of foreign companies and expanding across the globe.

Mr Korn, speaking at an economics seminar yesterday, said he was optimistic about the country's growth prospects, with farm income likely to gain three or four-fold over the next two decades, with productivity gains compensating for declines in arable land and labour input. Education and the social safety net will also improve, helping boost the quality of life.

But achieving this vision would depend on strong, disciplined leadership from the government, he said.

"Has the current government accomplished the tasks necessary to build this future for Thais 20 years from now?" Mr Korn asked.

"In terms of fiscal policy, this government has failed. In terms of fiscal discipline, programmes such as the rice pledging scheme, where rice is purchased at significantly higher prices than market prices, has cost the government dearly."

Mr Korn blasted the government's free-spending ways, including moves to bypass the annual budget process by enacting special funding bills to pay for its programmes.

The Yingluck Shinawatra government pushed for 350 billion baht in emergency loans last year to finance flood management programmes. But to date, Mr Korn said, only 4 billion has been spent, and the authorisation for the funds is due to expire in June.

Efforts to address social imbalances and the wealth gap within the country have similarly failed, a fact which Mr Korn said was all the more appalling considering Ms Yingluck and her Pheu Thai Party have always positioned themselves as champions of the underclass.

"But policies to date have been for the rich. The cut in corporate income taxes, for instance, has benefited large companies more than small ones, while personal income tax cuts have gone to the wealthy," said Mr Korn.

He said approvals of extra-budgetary spending programmes should require a two-thirds majority in parliament instead of a simple majority to help ensure fiscal discipline.

But Kittiratt Na-Ranong, the current finance minister, said sustainable growth, price stability and fair income distribution represent the core goals of the current government.

With the US, European and Japanese economies still sluggish, Thailand must build up its domestic market and local purchasing power to reduce the reliance on exports for growth, he said.

The fact that 2012 growth is likely to exceed 5.5% even as exports missed targets is a sign the strategy worked, added Mr Kittiratt.

"One of our strengths is the fact that debt-to-GDP remains relatively low. So we can afford to take on new debt to support future investment," he said.

The state expects to pass a new bill this year allowing 2 trillion baht in new debt to help finance infrastructure over the next seven years.

The bulk of the new spending will go towards railway improvements to help reduce logistics costs and support connectivity with neighbouring countries.

"I am confident economic growth will continue to stand at 5% to 7% per year. We shouldn't be afraid of rapid growth, which will help support employment and strengthen the economy in the long run," said Mr Kittiratt, adding that he would present the country's growth plans to foreign investors later this week at the World Economic Forum in Davos.

He said certain criticisms of the government's programmes were unfair, such as suggestions the first-time car buyer tax rebate had contributed to Bangkok's notorious traffic congestion. Only 26% of the new cars bought under the scheme were registered in Bangkok.

Mr Kittiratt acknowledged congestion must be addressed through new mass transit programmes. "We can't simply build new roads, as it will never be enough. We have to make it convenient for commuters to use public transport," he said.

About the author

Writer: Wichit Chantanusornsiri & Chatrudee Theparat