Thais Nervous At Thaksin's Plans For Building Boom

[george]

Thais nervous at Thaksin's blueprint for a building boom

BANGKOK: -- Campaigning forre-election, Thaksin Shinawatra, Thailand's prime minister, declared that the past four years, when the national economy revived after a post-crisis slump, was a time for "repairing" the country. The next four years, he said, would be a time for "building" it.

And building is what he intends. The centrepiece of the premier's agenda is to spend Bt1,500bn ($39bn, €30bn, £21bn) on huge infrastructure projects, including the expansion of Bangkok's mass transit system, a new satellite city and a causeway from the capital to the beach resort of Hua Hin.

But while Mr Thaksin says infrastructure projects will keep the economy humming, his government has yet to outline how it intends to fund the schemes. Economists are also urging careful evaluation of the investments to determine whether they will generate strong, long-term returns or end up as a drag on the economy.

"It should be clearly stated: are these projects for resolving infrastructure bottlenecks or for economic stimulation?" asked Kosit Panpiemras, a former economic minister and now executive chairman of Bangkok Bank. "Proposals are fine, but you have to separate between stimulation and economic requirements."

Local businessmen, foreign investors and credit-rating agencies want Mr Thaksin's new administration to focus more on legal reforms and human capital improvements, so the country can cope in an increasingly competitive global environment.

"We certainly need to prepare ourselves, using this opportunity where we still benefit from high [agricultural commodity] prices and other favourable world conditions, to improve our own productivity, to upgrade our own production system, move up the value chain, and those kinds of things, which have been discussed for so long," Mr Kosit said.

For the past three years, Thailand's economy has grown strongly, fuelled by surging exports and strong domestic consumption. It has also benefited from global factors including high agricultural commodity prices, low interest rates and strong growth. Government stimulus measures, in the form of populist schemes, also fuelled a spending boom.

But Mr Kosit believes Mr Thaksin should now ease up on stimulus measures. Instead, he says, government policy should focus on long-term reform challenges, such as encouraging technological innovation.

According to a recent World Bank report, Thailand has south-east Asia's best business climate if measured by basics such as ease of starting a business, hiring and firing workers, registering property, obtaining credit and enforcing contracts. But the report said other factors for business success lagged behind, including technological development and availability of telecom and IT infrastructure, fighting corruption and bureaucratic efficiency.

Over the past year, investors' perceptions of Thai public institutions have deteriorated due to "irregular payments" for importing and exporting, organised crime and perceived "favouritism in decisions of government officials", the World Economic Forum's Global Competitiveness Report found.

Executives surveyed identified bureaucratic inefficiency, corruption and lack of an educated workforce as key barriers to business investment.

According to Phatra Securities, Thailand's net foreign direct investment in 2004 was zero, down from around Bt60bn the previous year and far lower than in the immediate aftermath of the Asian financial crisis.

While most economists agree Thailand also needs fresh public investment in infrastructure after having almost none since the economic crisis, Ammar Siamwalla, a Thailand Development Research Institute economists, says projects need "more vigorous screening procedures" to ensure they are viable.

The lack of clarity about how the grand infrastructure schemes will be funded is also causing unease among foreign investors.

Pansak Vinyaratn, the prime minister's chief policy adviser, said last week that Bangkok could use its surplus foreign exchange reserves to fund some infrastructure development. This was immediately and publicly rejected by Pridiyathorn Devakula, the central bank governor.

"By law, no one can use the reserves directly or in any other way," Mr Pridiyathorn said. "It can land you in jail."

The number and scale of the proposed infrastructure projects have also generated concerns about corruption, and public money being skimmed into the private pockets. Mr Thaksin has sought to reassure the public with promises that he will use transparent "e-bidding" - computerised auctions - to prevent fraud.

But Somkiat Tangkitvanit, a TDRI policy analyst, said fighting corruption in infrastructure development required transparency throughout the entire process - with full public disclosure of all the details and specifications of the project, not only a public auction in the bidding stages.

"Everyone knows the real manipulation doesn't happen at the time of the bidding," he said. "It happens at the time of the project formation, the budget allocation. There is so much manipulation upstream, you cannot just do something downstream and pretend the problem goes away."

--FT 2005-02-14

[chingy_]

like i said, i fail to see where the income are coming from, difinitely not from rice and shrimp or even chicken for that matter. he's gonna dig the reserve if im not wrong

[Heng]

Yeah, you're right, CP and Saha Farms are likely not going to be paying for any of it.

[Diggerbasher]

Tax revenues are sure going to have to rise to pay for all the spending as there is a cap,i believe,on borrowing as a percentage of GDP.

[eljeque]

Thailand is TOPS in the ease of hiring and firing employees. That is also known as a dynamic economy. If this is th easiest country to set up a business, I would not want to have to try and do it in another country

[The_Moog]

Thais nervous at Thaksin's blueprint for a building boom

Which Thais?

Yes, I checked and this was the actual Headline in the Financial Times. Very sloppy on their part.

(At first I thought it was George writing in a sensationalist headline - sorry George!)

The Central Bank Governor in this article is the main one with reservations - specifically concerning the Forex reserves...yet I doubt he'd characterise himself as 'nervous'

I think most educated Thais are satisfied about the new infrastructure plans.

[Diggerbasher]

The locals here think Mr Thaksin is marvelous and are pleased that things are actually getting done under this administration.Certain academics may be nervous but the general population is all for it.

[penzman]

Discussions often revolve around Thaksin on my daily visits for cofee and chat at the hardware store. I hear more and more bad comments on Mr T. The som tam lady pushing her cart has to pay taxes now. The owner of small appartment buildings has seen his taxes raised 100% in a year. The hardware shop with not much business is also hit hard for the few items it can manage to sell. The guys were sayng this morning that all this spending is badly planned and unecessary and that the promise to eliminate poverty is really just a dream now and was a lie then.

[marquess]

On the subject of the infastructure: What is happending with the Bts extension over Taksin Bridge? This has been going on for about four years, if this can not be successfully completed in that time, then what chance do these other grandiose plans stand??