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Kittiratt deplores lack of power to take monetary action
By Digital Media



BANGKOK, April 25 – Deputy Prime Minister/Finance Minister Kittiratt Na-Ranong insisted today that the policy interest rate must be reduced to tackle the swift surge of Thai baht, but said that his ministry lacks the power to take action.

Renewing his lament on the rocketing baht, the minister said an excessive capital inflow into the bond market has contributed to the strengthening Thai currency but that the Finance Ministry is not duty-bound to slow down the inflow.

The Finance Ministry is responsible for overall policy while related agencies control the issuing of appropriate measures, he said.

At today’s seminar on the World Bank’s governance indicators of Thailand’s capital market, Mr Kittiratt said the country must develop its governance quality despite foreign investor satisfaction with the conveniences they have received.

Vorapol Sokatiyanurak, Securities and Exchange Commission (SEC) secretary general, urged caution in issuing measures to fasten short-term capital flow into Thailand to avoid deterring foreign investors from reinvesting in the Thai capital market.

“The SEC and Stock Exchange of Thailand (SET) have continuously built up foreign investor confidence in the Thai capital market. Measures must not be too harsh, or foreign investors will not come back to invest here,” he warned.

SET president Charamporn Jotikashira said the Thai bourse surged to Asia’s top rank for good governance development this year as indicated by the World Bank, enhancing foreign investors’ confidence on the country.

He said the SET has enforced measures to prevent speculation in the Thai stock market, adding that investors who cash in on the fluctuating exchange rate represented only two per cent in the stock market while the overall volatility is 25 per cent.

The degree of risk in the stock market is lower than in the bond market, he said.

According to the World Bank survey, the Thai stock market was given 82.83 out of 100 points with the highest compliment on disclosure of information and transparency. Thailand received 67.66 points in the previous survey in 2005.

Hong Kong-based CLSA Asia-Pacific Markets, one of Asia's largest equity brokers and financial-service groups, recently elevated the Thai bourse to the third from the previously-held eighth rank in 2007. (MCOT online news)


-- TNA 2013-04-25

[kblaze]

Thank goodness your ministry "doesn't have the power to take action".

Why are you so upset about the baht strengthening? Oh thats right because it makes it even more difficult to sell rice that is already 50% overpriced.

[Tatsujin]

Is this one of those "see who's standing last when the music stops" moments when it comes to someone taking responsibility for actually doing something?

[DeepInTheForest]

Thank goodness your ministry "doesn't have the power to take action".

Why are you so upset about the baht strengthening? Oh thats right because it makes it even more difficult to sell rice that is already 50% overpriced.

Kittiratt's concerns are well-founded. In the neoliberal economic system, capital flows circle the globe seeking higher interest rates. When they find a "good investment opportunity", they can destabilize a developing economy, as has been demonstrated many times, recently in Iceland and Cyprus.

This occurred in Thailand in 1997. Capital rushed in, created an unsustainable bubble, and when the bubble burst, rushed out just as fast, leaving a near-catastrophe in its wake.

Malaysia's Mahathir (whose unsavory political tactics and trampling of human rights are not examined here) installed capital controls. For this he was roundly condemned by the world's economic experts. But Malaysia avoided the worst of the downturn, and he was proved correct.

... Rather than going cap in hand to the International Monetary Fund, the former prime minister of Malaysia was called an idiot, an ignoramus and a pariah.... Now look what's happening in Europe, especially with the latest rescue of Cyprus' banking system...

... the Cypriot government is expected to impose capital curbs...

Iceland, another tiny country, has also imposed capital controls since 2008. It is not part of the euro zone and was denounced by Western savants and pundits. Now its economy is recovering rather nicely. In December, the IMF effectively changed religions by claiming capital controls may sometimes be necessary and be the lesser of evils. Previously, it had favoured unfettered flows of money across borders. It's obvious that surging hot money moving swiftly in and out of developing economies without deep markets and well-functioning financial institutions could be highly destabilising. Since 2010, emerging countries such as Brazil, Indonesia, Thailand and Korea have introduced capital curbs to counter the ultra-loose monetary policy pursued by beleaguered Western economies.

http://www.scmp.com/comment/insight-opinion/article/1200513/malaysian-pm-was-ahead-his-time

Edited April 25, 2013 by DeepInTheForest

[DeepInTheForest]

Another worthwhile read, by an author who greatly distrusts capital controls, even as he validates them:

http://business.time.com/2010/10/27/are-capital-controls-good-for-the-world-economy/

[samran]

The alternative to an independent central bank is monetary policy run by populist politicians.

Best keep monetary policy in the hands of an independent BOT with an aim of price stability.

You make the baht cheaper, the clowns in govt effectively starts printing money. Let's see how that goes!