Thailand Moves To Revise Economy

[george]

Thailand moves to revise economy

BANGKOK: -- In an effort to pump new life into Thailand's flagging economy, the government on Tuesday approved plans to spend $42.5 billion over five years on major public works projects.

The government announced that it intended to borrow close to half of the amount needed to pay for them.

The plan provides for spending 423.4 billion baht, or $10.4 billion, more than a quarter of the total infrastructure outlay, on expanding Bangkok's mass transit system, according to Finance Ministry officials cited by the Thai press.

This investment will add about 277 kilometers, or 172 miles, of underground and overhead rail in an effort to tame the capital's traffic congestion and achieve some savings on fuel consumption.

Among other projects, the government has also earmarked 342 billion baht for telecommunications and other industries, 200 billion baht for improving water supply and around 96 billion baht each for health and education.

It will finance these plans by borrowing 715 billion baht, or 40 percent of the cost, 305 billion baht of it from overseas, the Finance Ministry said in a statement. It said the rest of the financing would come mainly from taxes and state enterprise spending.

The announcement drew a cautious welcome from economic analysts, who saw it as positive for investor sentiment that has been hit by a succession of bad economic news and mounting consumer anxiety over rising prices.

But some analysts cautioned that the economic and financial assumptions on which the plans are based appeared unrealistic.

"It's a wish list," Vikas Kawatra at Kim Eng Securities in Bangkok said of the spending plans. "We are still at the approval stage. I'm not sure, in reality, that amount will be spent."

Thailand started out the year hoping for growth of around 6 percent, but economic planning board figures showed it achieved barely half that rate in the first quarter of the year, with gross domestic product growth running at an annualized 3.3 percent.

Output in the agricultural sector, which was hit by drought, shrank 8 percent, while the hotel and tourism industry dropped 2 percent and production from manufacturing and other sectors also slowed.

Consumption and investment also flagged. And while imports rose 10 percent from a year earlier, weaker foreign demand pushed exports down 0.1 percent, turning the current account into a $1.5 billion deficit in the first quarter from a healthy surplus last year. To make matters worse, the current account registered a deficit of $1.6 billion in April.

The Finance Ministry said the government expected spending on the projects to rise from about 67 billion baht this year to 277 billion baht in 2006 and 400 billion baht for each of the three remaining years, helping to keep growth to an average of 5.5 percent a year from 2005 to 2009.

But the government has little expectation of achieving anything near that level of growth this year.

Thaksin admitted for the first time on Tuesday that it would be difficult for Thailand to achieve even 5 percent GDP growth this year, given its poor showing in the first half of the year.

"The third and fourth quarter will be better for sure," Thaksin said, "but in the second quarter we may not see much improvement."

The government's announcement may give a quick lift to investor sentiment, analysts say, but the long-term nature of the projects ensures that economic benefits will not be felt until well into 2006.

In the meantime, doubts persist over what the government will be willing or able to spend. Although Thailand had a hefty current-account deficit in the first four months of the year, the Finance Ministry projections start from an unrealistic assumption that there will be no current-account deficit in 2005 or 2006, said Supavud Saicheua, head of research at Phatra Securities.

The government calculates that the infrastructure spending program will help push the current-account deficit to around 1.8 percent of GDP, well within its self-imposed ceiling of 2 percent of GDP.

But "the way we're going, we don't even have to start the megaprojects and you have a current-account deficit of 1.8 percent right there," Supavud said.

Failure to make allowance for that deficit at the start could lead to problems implementing the project later, he said.

"If we continue to have this deficit going forward then there will be a lot of pressure to delay these projects or do other juggling with the budget," Kawatra of Kim Eng Securities said.

--International Herald Tribune 2005-06-15

[mnoorsapl]

"The government announced that it intended to borrow close to half of the amount needed to pay for them."

Borrow from World Bank? Again?

[Sphere]

Thailand moves to revise economy

<{POST_SNAPBACK}>

Shouldn't that be "revive economy" - or are you quoting the dear leader?

[Thetyim]

Thailand moves to revise economy

Shouldn't that be "revive economy" - or are you quoting the dear leader?

Neither actually. It should read

Thailand moves to revile economy

[Buff-horns]

If it wasnt for planeloads of 'hansum men' , bulk buffalo buyers. cheapcharlies, and farang khinoks ,not to mention feelthy backpackers the country would be in dire straights

[samran]

If it wasnt for planeloads of 'hansum men' , bulk buffalo buyers. cheapcharlies, and farang khinoks ,not to mention feelthy backpackers the country would be in dire straights   

<{POST_SNAPBACK}>

Um.... no actually.

[samran]

It is pretty simple to get the fundamentals right, if they could be arsed to...

This includes:

1) Stable and independent monetary policy with a primary focus on stable prices (and not playing with the exchange rate)

2) Freeing up bottle necks in the economy, including more efficent and productive transport links

3)Developing a basic but effective social safetly net (the 30 baht system is a good start).

4) Ensuring free and fair competition and lowering tarriff barriers to make Thailand globally competitive.

Edited June 16, 2005 by samran

[mnoorsapl]

Very good suggestions samran.

Am sure they would not like to be arsed to...

[~G~]

It is pretty simple to get the fundamentals right, if they could be arsed to...

This includes:

1) Stable and independent monetary policy with a primary focus on stable prices (and not playing with the exchange rate)

2) Freeing up bottle necks in the economy, including more efficent and productive transport links

3)Developing a basic but effective social safetly net (the 30 baht system is a good start).

4) Ensuring free and fair competition and lowering tarriff barriers to make Thailand globally competitive.

<{POST_SNAPBACK}>

Good points. May I add dealing with corruption in institutions involving commercial activity (mostly Ministry of Commerce related, customs).

Investing in education, mostly technology related, in addition to seriously dealing with the low level of English.

[itsme]

It is pretty simple to get the fundamentals right, if they could be arsed to...

This includes:

1) Stable and independent monetary policy with a primary focus on stable prices (and not playing with the exchange rate)

2) Freeing up bottle necks in the economy, including more efficent and productive transport links

3)Developing a basic but effective social safetly net (the 30 baht system is a good start).

4) Ensuring free and fair competition and lowering tarriff barriers to make Thailand globally competitive.

<{POST_SNAPBACK}>

Good points. May I add dealing with corruption in institutions involving commercial activity (mostly Ministry of Commerce related, customs).

Investing in education, mostly technology related, in addition to seriously dealing with the low level of English.

<{POST_SNAPBACK}>

Would help to keep the entertainment venues open all night as it used to be few years ago?

[samran]

Would help to keep the entertainment venues open all night as it used to be few years ago?   

Keeping a nightclub open isn't going to improve overall productivity in the economy

[TokyoT]

I think that some people over estimate the value of tourism and such not only to the current Thai economy but especially to the future of the Thai economy. This is not to say that tourism is not a factor, but a smaller one than many think and much more localized as well.

Points made by samram are strong points that Thailand needs to consider for the long-term growth and more importantly the long-term development of the Thai economy. I do not think one can emphasize enough the importance of the rule of law in this aspect. Western companies need to feel their investments will be secure and that there is a set of laws/rules that are adhered to; as well as having a playing field that is reasonably level. While many seem to think this type of changes would only benefit Western businesses in Thailand, all good businessmen can benefit from such changes.

Additionally I do not think enough emphasis can be place on education. Thailand could see a significant return on their investment if they could manage to improve/adjust the educational system – especially with more emphasis on critical thinking and problem solving.