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STREET WISE

Rocky or rosy path for Virabongsa?

Achara Deboonme

The hottest issue in the financial market now can be nothing but the selection process of the Bank of Thailand's chairman.

BANGKOK: -- If The Nation's sources predict correctly, the government's nomination Virabongsa Ramangkura would eventually become the new chairman, succeeding Bank of Thaiand's choice MR Chatu Mongol Sonakul. Why wouldn't it be so, when from seven members of the selection committee, six represent the Finance Ministry.

It is an open secret that Virabongsa has secured strong supports from Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong. That is not surprising. Both men have talked in the same language and seen the world with similar views. When the senior economist floated the idea on transferring debt obligation of the Financial Institutions Development Fund to the Bank of Thailand, Kittiratt acted accordingly. When Virabongsa saw an opportunity in retrieving foreign reserves for mega project investment, Kittiratt shows no objection to that.

That may explain Virabongsa's great affection for Kittiratt. As a senior, he has extended full kindness to the younger.

That was so apparent on May Day when Prime Minister Yingluck Shinwatra called for an urgent meeting to discuss the good prices direction.

A number of ministers were there, with representatives from economic institutions. Yingluck also invited her economic advisors, including Virabongsa and former deputy prime minister Olarn Chaipravat. As The Nation has heard, Virabongsa and Olarn seemed to win much of respect from the prime minister.

She specifically asked for explanation on current price hikes from the two renowned economists. The source said that while Olarn based his explanation on academic knowledge and experience, Virabongsa pulled in examples with apparent aim to attack the Bank of Thailand. Virabongsa’s views surprised those who attended the meeting. Why Bank of Thailand is attacked for goods prices? It is the responsibility of the government, particularly the Commerce Ministry, isn’t it?

When the meeting was over, Virabongsa admitted that the attack carried no purpose at all. It is just biting the central bank "is under his skin". That’s all.

The closeness of Virabongsa and Kittiratt as well as his attitudes towards the Bank of Thailand are worrying people in the financial industry. Would this heighten political interference in the country's top economic institution, if Virabongsa is appointed BOT chairman?

Indeed, they may prefer the time when finance minister and BOT governor exchanged different opinions on monetary policy. That was a lot going on between Kittiratt and Prasarn Trairatvorakul. Will that continue if Virabongsa is appointed BOT chairman?

Indeed, people in the international financial market have also expressed concerns over the government's move. Questions are in the air on the influence of the chairman over the policy rate direction. That's natural given that BOT is half dovish and hawkish, in light of increasing inflation amid negative external factors particularly the eurozone crisis. And economists viewed that a wise policy. With massive post-flood investment and higher wage, inflation is set to rise. But a drop in external demand could pull the brake on the economy and inflation. As we have witnessed, in the world today nothing looks certain.

So, if Virabongsa is BOT chairman, how would he influence the central bank to cut the policy rate to boost the economy?

Under the revised Bank of Thailand Act, the executive power is shared by three committees, chiefly the Monetary Policy Committee which decides on the policy rate. Legally, chairmen can give opinions. Chatu Mongol has so far preferred the hands-off policy, to let the existing mechanisms run their courses. Will Virabongsa be the same? And if he opts for the hands-on policy, would that lead to a clash with the governor?

A hot question now is how solid Virabongsa's chairmanship would be, if Kittiratt becomes a victim of an upcoming Cabinet reshuffle. Talks come so frequent of another reshuffle now that the political ban on many Thai Rak Thai Party executives comes to an end. While urging Yingluck to show her leadership, Democrat Party Leader Abhisit Vejjajiva said that if any cabinet members are to go, they should be the commerce and energy ministers who are most responsible for the recent increase in cost of living.

He still has Yingluck on his back. But as the prime minister has so far shown that she is not ready for any apparent collision, Virabongsa should prefer supports from an outspoken and daring finance minister like Kittiratt.

It seems nobody is entitled to everything.

-- The Nation 2012-05-07