Don't Follow Greece's Hidden-Debt Path: Ammar

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EXCLUSIVE INTERVIEW

Don't follow Greece's hidden-debt path: Ammar

WICHIT CHAITRONG

THE NATION

BANGKOK: -- The government's attempt to hide public debt could lead to a sovereign debt crisis similar to the one Greece faces now, noted economist Ammar Siamwalla has warned.

Nonetheless, he supports the government's plan to use part of the country's international reserves to pay off the debt of the Financial Institutions Development Fund (FIDF).

To make the government's balance sheet look good, Yingluck Shinawatra's government is trying to hide the extent of the public debt by concealing it in state-owned banks' balance sheets - the same tactic used by the Thaksin government, Ammar said during an interview with Nation Multimedia Group.

As an example he cited the government's requiring the Bank for Agriculture and Agricultural Cooperatives (BAAC) to support the rice-pledging scheme. The bank has so far spent about Bt300 billion on buying rice from farmers.

The government has bought unmilled rice for Bt15,000 per tonne, significantly higher than market prices.

"There's a 99.999-per-cent chance that the government will lose taxpayer money when it sells rice later, with the loss estimated to be about Bt70 billion," he said.

The Government Savings Bank, Government Housing Bank, Small and Medium Enterprise Development Bank of Thailand, Islamic Bank, Export-Import Bank of Thailand and Krung Thai Bank have been asked by the government to provide loans for populist schemes initiated by the government.

Ammar said this use of state-owned banks to support populist policies creates contingent liability, because if the banks have trouble, the government has to inject capital to keep them afloat.

In the past, the Greek government hid public debts. Two years ago it had to tell the world about the actual amount of debt, leading to the sovereign debt crisis, Ammar said.

He blamed politicians in both the government and opposition camps, saying they are short-sighted in their attempts to lure voters by campaigning on populist policies. "The Pheu Thai Party has gone to extremes in terms of populist policies, such as the rice subsidy, free computer tablets for kids and the Bt300-a-day minimum wage."

Increasing the minimum wage is the right thing to do, but the government should have allowed the private sector to adjust first, he said.

Even worse, the Yingluck government did not think through its policies before presenting them to voters in the last election campaign, Ammar said.

Voters had confidence in the Pheu Thai Party - a descendant of the banned, Thaksin-led Thai Rak Thai Party - because TRT implemented its election promises, Ammar said.

"Short-sighted Thai politicians just want to win elections and push fiscal liabilities into the future, similar to the Wall Street bankers who want big bonuses in the next few quarters, even though the banks may explode after that," he said.

He compared the behaviour of Thai politicians to that of US bankers, whose push for high profits in the short term without thinking about risk management contributed to the 2008 global financial crisis.

Thai politicians' preoccupation with short-term goals does not help private firms increase their competitiveness or labourers to increase their productivity, which is crucial for sustained growth, the economist said.

Ammar, however, said he agreed with the government's plan to use part of the US$173 billion (Bt5.5 trillion) international reserves held by the Bank of Thailand to partially repay the FIDF's Bt1.14-trillion debt. The government plans to use two sources of funding to pay off the FIDF's debt: fees collected from commercial banks and the central bank's annual profits.

Paying off the debt of the FIDF, which resulted from the bank bail-out during the 1997 financial crisis, would leave the government with more funding for needed infrastructure investment, he said. The government may then not worry that the public debt will approach the alarming level of 60 per cent of gross domestic product (GDP), up from 40 per cent of GDP currently.

The government plans to invest in road, rail, airports, seaports and other projects worth about Bt2.27 trillion over the next seven years.

There is room for the central bank to cut its policy rate further, from the current rate of 3 per cent, if the economic situation in Europe deteriorates, Ammar said.

-- The Nation 2012-07-06

[Scully]

Smoke and mirrors

[Moruya]

The economy is being battered. Who will want it in 2015?

[kerryk]

The economy isn't being battered it is in good shape but the guy makes a lot of good points; the government should hire him and have him regulate the banks.

[crazygreg44]

i can't see it, I can't smell it, I can't hear it. But somewhere out there it makes "buuble bubble bubble!"

[Moruya]

The economy isn't being battered it is in good shape but the guy makes a lot of good points; the government should hire him and have him regulate the banks.

Of course it's being battered with massive spending and having government debt grafted into government banks.

The banks don't need regulating any more than they are now as they keep away from risk. The government on the other hand does!

[MaxLee]

The Thai government is simply ripping their citizens off... Sims as that.

[kerryk]

The economy isn't being battered it is in good shape but the guy makes a lot of good points; the government should hire him and have him regulate the banks.

Of course it's being battered with massive spending and having government debt grafted into government banks.

The banks don't need regulating any more than they are now as they keep away from risk. The government on the other hand does!

Google Thai investment. Thailand is doing very well right now second only to China for investments in emerging markets according to Bloomberg.

'He compared the behavior of Thai politicians to that of US bankers, whose push for high profits in the short term without thinking about risk management contributed to the 2008 global financial crisis.'

The government wants loans from the banks. Two ways to stop that. Regulate the government or regulate the banks.

[kerryk]

The Thai government is simply ripping their citizens off... Sims as that.

Perhaps you could point out a government that is not? Certainly not the UK, US or France or Germany!

[LuckyLew]

Don't follow Greece's hidden-debt path: Ammar

What a good idea, what scholar came up with this?

[h90]

The Thai government is simply ripping their citizens off... Sims as that.

Rofl.....I recommend to stay for a while in Europe.....

Thailand is the hub of freedom, fairness and low tax in compare.....

[kerryk]

Don't follow Greece's hidden-debt path: Ammar

What a good idea, what scholar came up with this?

I think he graduated from Yale!

[Pib]

Short-sighted Thai politicians just want to win elections and push fiscal liabilities into the future...

Sounds like most politicians in any country.

[Moruya]

The economy isn't being battered it is in good shape but the guy makes a lot of good points; the government should hire him and have him regulate the banks.

Of course it's being battered with massive spending and having government debt grafted into government banks.

The banks don't need regulating any more than they are now as they keep away from risk. The government on the other hand does!

Google Thai investment. Thailand is doing very well right now second only to China for investments in emerging markets according to Bloomberg.

'He compared the behavior of Thai politicians to that of US bankers, whose push for high profits in the short term without thinking about risk management contributed to the 2008 global financial crisis.'

The government wants loans from the banks. Two ways to stop that. Regulate the government or regulate the banks.

The banks are regulated - but the government is forcing them to underwrite hair-brained schemes to keep the cost (debt) off the government's books.

[kerryk]

The economy isn't being battered it is in good shape but the guy makes a lot of good points; the government should hire him and have him regulate the banks.

Of course it's being battered with massive spending and having government debt grafted into government banks.

The banks don't need regulating any more than they are now as they keep away from risk. The government on the other hand does!

Google Thai investment. Thailand is doing very well right now second only to China for investments in emerging markets according to Bloomberg.

'He compared the behavior of Thai politicians to that of US bankers, whose push for high profits in the short term without thinking about risk management contributed to the 2008 global financial crisis.'

The government wants loans from the banks. Two ways to stop that. Regulate the government or regulate the banks.

The banks are regulated - but the government is forcing them to underwrite hair-brained schemes to keep the cost (debt) off the government's books.

Well yes. I agree that the government should not force the banks into hair brained schemes. What the Yale economist suggests is paying off the debt gradually from the large surpluses available in foreign exchange. It makes sense to me. Everything the guy writes above makes sense to me. That's why I suggested giving him an important job in the banking sector.

[smedly]

The economy is being battered. Who will want it in 2015?

by then it will be too late and Thaksins destruction of Thailand will be complete

[kerryk]

The government is going to lose money supporting the price of rice. 70 billion baht. Of course you would let the farmers take the loss. Right?

[Thaddeus]

The government is going to lose money supporting the price of rice. 70 billion baht. Of course you would let the farmers take the loss. Right?

The farmers will not nor should take the hit, but neither did they get what they thought they had been promised in the first place.

The millers and storage houses were the beneficiaries of that scheme, that now the tax payers have to pay for..

Edited July 6, 2012 by Thaddeus

[kerryk]

The government is going to lose money supporting the price of rice. 70 billion baht. Of course you would let the farmers take the loss. Right?

The farmers will not nor should take the hit, but neither did they get what they thought they had been promised in the first place.

The millers and storage houses were the beneficiaries of that scheme, that now the tax payers have to pay for..

Try again, "The government has bought unmilled rice for Bt15,000 per tonne, significantly higher than market prices." Or better yet read the OP. Unless you want me to quote some more?

[kerryk]

Ok I'll quote some more, "The bank has so far spent about Bt300 billion on buying rice from farmers." The OP said farmers not millers and storage houses.

[Reasonableman]

http://oryza.com/Rice-News/15288.html

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

By news desk on June 01,2012

A senior economist and an expert in South East Asian Studies has warned that unless the Thailand’s rice mortgage scheme is scrapped soon, it will likely end up hurting Thailand’s economy significantly. The economist says that high purchase prices of about 50-60% above the prevailing market price combined with failure to cap purchases, has made the Thai government the world’s largest rice trader. Rice stockpiles have reached record highs of over 12.5 million tons, and the cost of procurement, handling and storage is likely to cause a loss equivalent to 5% of its GDP, he adds.

[kerryk]

http://oryza.com/Rice-News/15288.html

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

By news desk on June 01,2012

A senior economist and an expert in South East Asian Studies has warned that unless the Thailand’s rice mortgage scheme is scrapped soon, it will likely end up hurting Thailand’s economy significantly. The economist says that high purchase prices of about 50-60% above the prevailing market price combined with failure to cap purchases, has made the Thai government the world’s largest rice trader. Rice stockpiles have reached record highs of over 12.5 million tons, and the cost of procurement, handling and storage is likely to cause a loss equivalent to 5% of its GDP, he adds.

Your article says the 2011 GDP of Thailand estimated is over $611. billion is that accurate?

[Reasonableman]

http://oryza.com/Rice-News/15288.html

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

By news desk on June 01,2012

A senior economist and an expert in South East Asian Studies has warned that unless the Thailand’s rice mortgage scheme is scrapped soon, it will likely end up hurting Thailand’s economy significantly. The economist says that high purchase prices of about 50-60% above the prevailing market price combined with failure to cap purchases, has made the Thai government the world’s largest rice trader. Rice stockpiles have reached record highs of over 12.5 million tons, and the cost of procurement, handling and storage is likely to cause a loss equivalent to 5% of its GDP, he adds.

Your article says the 2011 GDP of Thailand estimated is over $611. billion is that accurate?

Feel free to check it out. Www.google.com is popular among some posters here.

[kerryk]

http://oryza.com/Rice-News/15288.html

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

By news desk on June 01,2012

A senior economist and an expert in South East Asian Studies has warned that unless the Thailand’s rice mortgage scheme is scrapped soon, it will likely end up hurting Thailand’s economy significantly. The economist says that high purchase prices of about 50-60% above the prevailing market price combined with failure to cap purchases, has made the Thai government the world’s largest rice trader. Rice stockpiles have reached record highs of over 12.5 million tons, and the cost of procurement, handling and storage is likely to cause a loss equivalent to 5% of its GDP, he adds.

Your article says the 2011 GDP of Thailand estimated is over $611. billion is that accurate?

Feel free to check it out. Www.google.com is popular among some posters here.

Ya I did. I get around $377 billion. http://www.gfmag.com...l#axzz1zqozifFH

One of us is way off? I assume it's you as it usually is.

[h90]

Don't follow Greece's hidden-debt path: Ammar

What a good idea, what scholar came up with this?

But spend money and let the Germans pay the bill sounds like a good plan.....

[Reasonableman]

http://oryza.com/Rice-News/15288.html

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

By news desk on June 01,2012

A senior economist and an expert in South East Asian Studies has warned that unless the Thailand’s rice mortgage scheme is scrapped soon, it will likely end up hurting Thailand’s economy significantly. The economist says that high purchase prices of about 50-60% above the prevailing market price combined with failure to cap purchases, has made the Thai government the world’s largest rice trader. Rice stockpiles have reached record highs of over 12.5 million tons, and the cost of procurement, handling and storage is likely to cause a loss equivalent to 5% of its GDP, he adds.

Your article says the 2011 GDP of Thailand estimated is over $611. billion is that accurate?

Feel free to check it out. Www.google.com is popular among some posters here.

Ya I did. I get around $377 billion. http://www.gfmag.com...l#axzz1zqozifFH

One of us is way off? I assume it's you as it usually is.

That's the only point of contention? Great!! I thought you'd want to discuss the substance of the post or the topic itself rather than the usual diversion. Oh well... Yeah, let's regulate the banks, that'll fix it.

[kerryk]

That makes all of your other numbers wrong by almost 50%. So in fact not even worth discussing.

[Thaddeus]

The government is going to lose money supporting the price of rice. 70 billion baht. Of course you would let the farmers take the loss. Right?

The farmers will not nor should take the hit, but neither did they get what they thought they had been promised in the first place.

The millers and storage houses were the beneficiaries of that scheme, that now the tax payers have to pay for..

Try again, "The government has bought unmilled rice for Bt15,000 per tonne, significantly higher than market prices." Or better yet read the OP. Unless you want me to quote some more?

No, really, don't go to the extra effort, I did it the easy way by asking my neighbours. They were lucky to get 12, which the millers then sold untouched to the government for 15, if they milled it, they got more..... nice mark up that isn't it, especially for doing nothing but act as storage, and it benefited the growers, what?

Edited July 6, 2012 by Thaddeus

[smedly]

The real problem here is the high value of the baht, Thailand is primarily an exporter and that actually includes tourism because it involves foreign currency - there are a few (very few) that benefit from the high baht - the country as a whole does not, added to that inflation and you have Thailand melting before your eyes

[Moruya]

http://oryza.com/Rice-News/15288.html

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

By news desk on June 01,2012

A senior economist and an expert in South East Asian Studies has warned that unless the Thailand’s rice mortgage scheme is scrapped soon, it will likely end up hurting Thailand’s economy significantly. The economist says that high purchase prices of about 50-60% above the prevailing market price combined with failure to cap purchases, has made the Thai government the world’s largest rice trader. Rice stockpiles have reached record highs of over 12.5 million tons, and the cost of procurement, handling and storage is likely to cause a loss equivalent to 5% of its GDP, he adds.

Your article says the 2011 GDP of Thailand estimated is over $611. billion is that accurate?

Feel free to check it out. Www.google.com is popular among some posters here.

Ya I did. I get around $377 billion. http://www.gfmag.com...l#axzz1zqozifFH

One of us is way off? I assume it's you as it usually is.

Your figure is way off. Try Wikipedia- it also has around 600B