Experts Want Parliament To Control Thai Govt Spending On Populist Projects

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POPULIST POLICIES
'Need for law' on public debt
Somluck Srimalee
The Nation


Nipon Poapongsakorn, senior lecturer at the Thailand Development Research Institute, left, former finance minister Thirachai Phuvanatnaranubala, centre, and former deputy prime minister and finance minister MR Pridiyathorn Devakula are among panellists

Experts want Parliament to control govt spending on populist projects

BANGKOK: -- Parliament should enact a law similar to the "fiscal cliff" legislation of the United States to control Thailand's public debts, which may exceed more than 60 per cent of the country's gross domestic product in 2019, economic experts said yesterday.

Thirachai Phuvanatnaranubala, who served as the Yingluck Shinawatra government's first finance minister, said that due to the risk of higher public debt, a law was needed to manage public debt by restricting the budget for projects stemming from populist policies.

The legislation should require that the government inform the public where the funding for the policies comes from. Parliament should have the power to control government spending, a requirement similar to that in the US fiscal cliff laws.

"Parliament has to concentrate on the government's off-budget spending. This will help monitor the risk of public debts exceeding manageable levels and losing the credit rating in the long term," he said.

Thirachai was among panelists at a seminar, "Critique of the Populist Policy and Its Impacts on the Economy, Financial and Fiscal Affairs" at the Golden Tulip Sovereign Hotel. It was organised by the Senate committee on finance, banking and financial institutions.

MR Pridiyathorn Devakula, former deputy prime minister and finance minister, said he was concerned the country's public debt will surpass 60 per cent of GDP and may reach as high as 80 per cent by 2019.

He voiced support for some of the government's populist policies, such as the Bt30 medical scheme and the Village Fund, which are cost-effective and provide benefits to the poor. But he was critical of projects that are losing money, such as the rice-pledging scheme, which shows a net loss of Bt189.14 billion.

"If the rice-pledging policy is maintained until fiscal year 2018-19, the government will lose Bt1.47 trillion. This will be a big burden of public debt," said Pridiyathorn, a former Bank of Thailand governor.

Based on the country's economic growth average of 4.5 per cent a year from GDP of Bt11.09 trillion as of September 2012, the country's GDP will be Bt15.62 trillion in September 2019. Public debt is projected to reach Bt10.3 trillion by then, about 65.96 per cent of GDP. This is near the red line for risk management, Pridyathorn said.

"The estimate of 65.96 per cent is based on a conservative scenario. If based on the real behaviour of the government, it will be nearly 80 per cent in 2019," he said.

The government has promised to keep the public debt below 50 per cent.

Nipon Poapongsakorn, a senior fellow at Thailand Development Research Institute (TDRI), called on the government to avoid off-budget spending.

"The government has to identify the source of funds and how to generate income to cover the spending. Fiscal discipline is needed to ensure sustainable growth and manage the country's risk of rising public debt," he said.

Korbsak Phutrakul, a Bangkok Bank executive vice president, said public debt has rapidly increased from 36 per cent in 2008 to 44 per cent last year. Although the ratio was still acceptable, there are signs of a faster increase as the government has added more and more projects.

"We have to warn the public before the country faces the risk of unmanageably high public debt. The global economy is still affected by the US and European financial crises. In the next five years, Asia may face a similar crisis. That's why we have to manage the country's public debt now while it is healthy," he said.


-- The Nation 2013-03-15

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Populist policies 'piling up public debt'
Somluck Srimalee
The Nation



BANGKOK: -- Financial and economic experts yesterday criticised the populist policies of the Yingluck government, saying it will surge the level of bad debts to an unacceptable level.

They were speaking at a seminar on the impact of the policies on the country's economy, finances and fiscal budget. The seminar was organised by the board of commissioners of the Senate finance and banking and financial institutions yesterday.

MR Pridiyathorn Devakula, former deputy prime minister and finance minister, said that the public debt level was expected to increase sharply to about 60 per cent of gross domestic product (GDP) and may even hit the 80-per-cent level in 2019 if the government continued to pursue populist policies to achieve its political objective.

"I have high concerns about some populist policies, which do not fit in with the fundamental demand of the country as they will be a big burden on the government in the long term," said Pridiyathorn.

He cited the rice-pledging scheme, which had been implemented in fiscal 2004-5 until 2011-12, and caused a net loss of Bt189.14 billion.

The government, however, decided to continue this rice-pledging measure for this fiscal year as one of its long-term policies.

"We estimate that if the government continues its rice-pledging policy till fiscal 2018-19, the government will lose Bt1.47 trillion. This will surge the level of public debt in the future," he said.

Meanwhile, Nipon Poapongsakorn, senior fellow at the Thailand Development Research Institute (TDRI), said that the government had avoided the use of the budget but used contingent liability instead.

"If the government engages in more investment projects to support its populist policies, it would need to propose the sources of fund and how to generate income to cover the spending.

It is an issue of fiscal discipline and how to manage the country for sustainable growth," he said.

Korbsak Phutrakul, executive vice president at Bangkok Bank, said that the country's public debt level had increased significantly from 36 per cent of GDP in 2008 to 44 per cent last year.

Although, the ratio is still at an acceptable level, there were negative signs of it increasing steeply as the government is launching more populist projects that would pile up the public debt. Driven by populist policies, the country's public debt level is expected to be nearly 80 per cent of GDP in the next five or six years from now.

Former finance minister Thirachai Phuvanatnaranubala suggested that the country enact a law to manage the country's public debt by restricting the use of the government budget for such populist policies.

Such a law would require the government to declare to the public the source of funding for its populist campaigns. Parliament would also have the authority to control the government's income and expenditure from populist campaigns similar to the fiscal cliff act of the US.

Au-Ari Unjanil, lecturer at Chulalongkorn University's Law Faculty, agreed on the need to

have a law to manage the public debt.

The current Constitutional Law's category 8 has already referred to the government's financial and budget management.


-- The Nation 2013-03-15

[dcutman]

We are only looking at current scams populous programs. There is still over 2 years left for this administration to pile even more on. Then of course they have to get elected again, that will be a populous show to behold.

[NongKhaiKid]

Good advice BUT PTP under Thaksin are the gold standard for populist parties and they control Parliament so that ends that

[Locationthailand]

Nice idea, absolutely no way will it be implemented as law has to pass through parliament and it will never be passed. Certainly agree with it, but it will never happen.

[OzMick]

I'm sure that PTP will abandon the rice scam after this year's foray in face of mounting public debt and rotting rice stockpiles. Just in time for the election. Sure they will.

SARCASM

[bigbamboo]

For once the Nation is talking sense. Of course parliament should control government spending, that's one of the reasons they are there.

You wouldn't let the pigs run free on your farm would you?

[NeverSure]

There is an undercurrent of worry in Thailand that few want to talk about. Even when they talk about it, it is in couched terms. But they are worried.

There is a baht bubble brought on by foreign investment. Some of that investment is in government debt which no one wants to talk about seriously. There is a condo bubble which is barely mentioned, but it is speculative. There is the new vehicle rebate of 100,000 baht which is only part of what is contributing to consumer debt. There is a bare land bubble which extends to farmland or any land, even into the netherworld of the most rural areas.

There is almost totally unconstrained borrowing by the government which I suspect is much more than they admit. There is the disastrous rice support scheme with rotting rice and more coming right behind it. China's economy is taking a dump and Thailand will be affected.

The stock market has quadrupled. Everyone is high on something. I don't know what they are smoking but it isn't common sense.

[Moruya]

Wake up and smell the coffee time

[JetsetBkk]

1997 Asian financial crisis

From Wikipedia, the free encyclopedia

The countries most affected by the 1997 Asian financial crisis.

The Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.

The crisis started in Thailand with the financial collapse of the Thai baht after the Thai government was forced to float the baht (due to lack of foreign currency to support its fixed exchange rate), cutting its peg to the U.S. dollar, after exhaustive efforts to support it in the face of a severe financial over-extension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt...

What are the chances?

[NeverSure]

1997 Asian financial crisis

From Wikipedia, the free encyclopedia

The countries most affected by the 1997 Asian financial crisis.

The Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.

The crisis started in Thailand with the financial collapse of the Thai baht after the Thai government was forced to float the baht (due to lack of foreign currency to support its fixed exchange rate), cutting its peg to the U.S. dollar, after exhaustive efforts to support it in the face of a severe financial over-extension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt...

What are the chances?

I don't see any way out of a collapse. The wiki article above describes almost exactly what is being repeated now.

The difference right now is that Thailand is awash in foreign currency. But that could change overnight if the public worldwide loses confidence in Thailand again. They'll pull their money and the stock market will crash first.

Someone once said that when you are getting stock tips from your cab driver, it's time to bail. It's time to bail.

[Thai at Heart]

I thought some approval was needed for more than 50 percent

[NeverSure]

I thought some approval was needed for more than 50 percent

If you mean national debt to GDP ratio? No. There is another thread where some leaders want that, but they aren't going to get it. The current leaders are keeping their power by promising the moon to the voters, and spending like drunken sailors. Apologies to sober sailors.

[belg]

the politicians are pushing hard to get to the fiscal cliff with all those policies ruining slowly the country

great job.... voted mostly by farmers who do not pay 1 baht in tax

[khunken]

Parliamentary approval? Not when you have a government run by Thaksin. It's far too bloody democratic.

[waza]

Its hardly likely the PTP government would approve greater oversight and accountability just when they are trying to change the constitution to remove the present judicial oversights

[pedro01]

Parliamentary approval? Not when you have a government run by Thaksin. It's far too bloody democratic.

They'll approve it - he told them he'll cut their allowances if they don't

[NeverSure]

Haha. I don't know if anyone is serious, but the current government is getting reelected by promising the moon to the voters. They aren't going to pass any new laws to stop that. They are going to keep borrowing and spending until there's nothing left to spend.

[hellodolly]

For once the Nation is talking sense. Of course parliament should control government spending, that's one of the reasons they are there.

You wouldn't let the pigs run free on your farm would you?

If you were a PT member of a red shirt you would.