Monday, September 22, 2008

Biggest test for Thailand since 1997

Suchart front-runner for Finance hot seat


Thailand's new economic policy team will enter office during a period of turmoil and uncertainty unrivalled since the Asian crisis over a decade ago.

Prime Minister Somchai Wongsawat's cabinet, expected to be announced this week, is reported to be largely comprised of political neophytes, a concession to the demands made by the coalition parties to participate in the new government.

Suchart Thadathamrongvej has been tipped for the finance portfolio, succeeding Surapong Suebwonglee. Dr Suchart, an economist and academic, held a short stint as deputy finance minister in the Samak Sundaravej government.

Also mentioned to join the cabinet, possibly as deputy premier for economic policy, is Olarn Chaipravat, a former president of Siam Commercial Bank.

Business leaders agreed that rebuilding confidence and decisive leadership were critical in today's uncertain environment.

Economic growth, which reached 5.7% in the first half, could fall to 5% for the full year due to the impact of high oil prices and a slowing global economy.

But the meltdown on Wall Street this month is likely to have an even greater negative impact on the Thai economy, as investors remain wary of new risks for the near future and the US grapples with its greatest economic crisis since the Great Depression.

Dr Surapong, commenting on his last day in office yesterday, said the market events of the past month would certainly have some impact on Thai exports.

"What the government must do is strengthen the real sector as much as possible, accelerate spending under the fiscal 2009 budget and move forward with the infrastructure megaprojects, particularly the mass transit programmes, to help stimulate growth," he said.

Tim Condon, the Singapore-based Asia economist for ING, said restoring investor confidence was top of the agenda for the new economic team.

"From the outside looking in, political uncertainty is the most important problem for the Thai economy. We hope the new finance minister will be someone who is senior enough in the coalition so that politics will not complicate economic policy. While the economy is the back seat, politics is the front seat," he said.

"The first priority that the new cabinet and the finance minister needs to deal with is the political uncertainties."

Foreign investors want to be reassured that the country pressed ahead investment in the delaying large-scale infrastructure projects so that it provided economic stimulus in the wake of global credit crisis, Mr Condon said.

"Politics should not be an extra problem for Thailand. Political uncertainty has made foreign investors feel that it is more difficult making money in Thailand," he said.

Fukujiro Yamabe, president of the Japanese Chamber of Commerce (JCC) Bangkok, said foreign investors were always looking for economic policy consistency. "Similar to Japan, many changes of personnel are not good for the economy," he said.

"[Businesses] want economic ministers who could work with the prime minister and other cabinet members with no conflicts. They should be knowledgeable in the areas they would be responsible for and know how to tackle with the global economic slowdown."

Karl-Heinz Heckhausen, a former president of the German Chamber of Commerce, agreed. "They have to convince foreign investors and tourists that Thailand is a safe place and a democratic country," he said.

James Blaney Davidson, vice-president for international business development of Central Pattana Plc (CPN), said the new ministers should have strong leadership skills and be able to unify the country and business community.

"But much more important [than ability] is the integrity of every one in the cabinet," he added.

"They should understand businesses' and foreign investors' needs."

Local business leaders expressed similar sentiments. Dusit Nontanakorn, vice-chairman of the Thai Chamber of Commerce, said he hoped the new cabinet comprised qualified professionals.

"It is completely inappropriate that the cabinet lineup comes from siblings and spouses of existing politicians. Thailand is not a company owned by any one family," he said.

Tanit Sorat, a vice-chairman of the Federation of Thai Industries, said experienced candidates were crucially needed in troubled times.

"Considering that the world is facing a financial meltdown, Thailand will no doubt suffer an impact. We need a financial expert who understands the financial market and can manage the difficulties, not just someone who knows what is taught in economics classes," he said, adding that the new finance minister needed to be able to work closely with the Bank of Thailand.

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