Are Older Men in Thailand Trading Love for Financial Ruin

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THAI TALK
Premier's intervention wont resolve BOT-Finance rift
Suthichai Yoon
The Nation


Bank of Thailand chairman Virabongsa Ramangkura

BANGKOK: -- Bank of Thailand (BOT) chairman Virabongsa Ramangkura has urged Prime Minister Yingluck Shinawatra to intervene in the currency dispute between the central bank and the Finance Ministry.

But is this an issue that can be resolved through political mediation?

In fact, I am not sure that Dr Virabongsa was serious in making the suggestion. In fact, it was more like an afterthought during a surprise press conference he called last Thursday. It was clear that his intention to hold the media session was to dramatise the "failure" of the central bank in curbing the rise of the baht.

Virabongsa made no secret of his fear that that, if nothing is done to solve the problem, the country could "sink to its demise or the economy could go into bankruptcy".

But he devoted a great amount of time to discussing how difficult it is to dismiss Dr Prasarn Trairatvorakul from his post as the central bank's governor.

In fact, earlier reports said the premier, in a meeting of her kitchen Cabinet last week, had posed the question of how the bank governor could be legally replaced. Her office has yet to issue a denial to that story.

Finance Minister Kittiratt Na Ranong has gone on public record as saying he is "thinking about replacing the central bank's governor every day".

There is little doubt that the government is quite unhappy with Prasarn for not being "obedient" enough on a number of controversial policy issues, the latest being the repeated suggestion by Virabongsa and Kittirat to reduce interest rate to curb the strengthening baht.

Prasarn has argued, both publicly and in official government documents, that bringing down the interest rate won't solve the problem. But then, under the law, decisions on interest rates don't rest with the governor. The Monetary Policy Committee (MPC) is the official organ to review interest rates on a regular basis. The central bank's governor is only one member of the MPC, although the finance minister appears to believe that the governor can influence most, if not all, of the MPC members.

Can the central bank's governor be sacked? Under the law, he can be removed from office by the Cabinet on the recommendation of the finance minister - not for defying political wishes or orders, but for "serious misconduct or dishonest performance".

The BOT says the MPC is in charge of interest rates. The finance minister holds the BOT responsible for the strong baht. Virabongsa, as the BOT's board chairman, insists that he doesn't really want to see Prasarn dismissed. Perhaps he has read all the clauses in the law and come to the conclusion that sacking Prasarn for disagreeing with the government would make things worse.

Does he really think the premier's direct intervention will resolve the conflict between the central bank and the Finance Ministry?

This isn't an issue between two politicians fighting over respective interests over which the prime minister has total control. This is, in fact, a normal and healthy divergence of views over whether interest rates are related to the strengthening of the currency - and what policy options are the most appropriate. It's not about sharing the cake. It's about academic analysis and pragmatic experience. It's about mutual respect between politicians and technocrats.

It's not about threats of dismissal or you-scratch-my-back-and-I'll-scratch-yours compromises. It's about mature, responsible people putting all the arguments on the table and realising there are no panaceas, then deciding on the most practical monetary tools while closely monitoring and checking on the outcomes.

Political intervention will only raise more questions than answers. Restoring mutual respect and professionalism between the Finance Ministry and central bank, as well as the MPC, is the only path to a real solution.


-- The Nation 2013-05-09

[A Member]

Far from intervening in anything she won't open her mouth without having Skyped to Dubai first. Her only problems on a daily basis is what clothes to wear and which country she should visit next.

[Locationthailand]

Are PTP minsters really able to threaten an institution such as the BoT? I would think this become media manipulation using the threat being reported as a given, when in fact the Minister cannot remove the governor for refusing to wilt under pressure from an inept government. As much as I can't stand banks, at least these guys are adding to the possible removal of PTP. The more people in high places who refuse to comply with 'orders' then sooner this rabble of corrupt nepotistic crims will fall.

[OzMick]

Sounds like a job for the red shirts! A bit of intimidation, publication of his address, family and contact details plus a few thousand thugs baying for his blood should pull him into the "right" POV.

[chainarong]

Nothing like a bit of pressure to oust the competitor and install your own man, that's what PTP want, a yes man in this department , wow , oh what fun we'd have then guy's.

[indyuk]

Far from intervening in anything she won't open her mouth without having Skyped to Dubai first. Her only problems on a daily basis is what clothes to wear and which country she should visit next.

For the sake of your own credibility I suggest that you keep these nursery views to yourself.

[indyuk]

Are PTP minsters really able to threaten an institution such as the BoT? I would think this become media manipulation using the threat being reported as a given, when in fact the Minister cannot remove the governor for refusing to wilt under pressure from an inept government. As much as I can't stand banks, at least these guys are adding to the possible removal of PTP. The more people in high places who refuse to comply with 'orders' then sooner this rabble of corrupt nepotistic crims will fall.

Same message from you every day 'this rabble of corrupt nepotistic crims will fall' presuming that you are actually refering to the Sovereign govermwn of Thailand may I remind you that repeating you paranoia daily will not change anything.

[indyuk]

It is government policies that are drive the Thai Baht. If PTP don't like it the can moderate their policies.

[Neilly]

It is government policies that are drive the Thai Baht. If PTP don't like it the can moderate their policies.

I think you’ll find that it is the markets that drive the Thai Baht...government policies have diddly to do with it (unless they pass something that is really stupid)

[laocowboy2]

It is government policies that are drive the Thai Baht. If PTP don't like it the can moderate their policies.

I think you’ll find that it is the markets that drive the Thai Baht...government policies have diddly to do with it (unless they pass something that is really stupid)

Correct. What move a currency is the balance between buyers and sellers. in normal circumstances buyers are foreign importers (if the sale is in THB), foreign direct investors (think Japanese auto companies) and foreign portfolio investors plus Thai exporters selling the FX proceeds of their foreign sales. Sellers are importers, those Thai companies (and individuals) investing overseas. On both sides you also have non-trade items such as tourism, transport (air, sea, freight) inurance and remittances. Normally the exchange rate moves to balance these flows - with the B0T intervening to smooth out sharp moves in either direction.

What has changed now is that inward flows have been joined by a wave of international liquidity looking for yield - blame QE in the US and now Japan. Thailand is seen as being attractiv e as it is (in global terms) a stable, high GDP growth currency. The money is not moving becaue of the interest rate but rather because of the proability of both FX gain and capital appreciation on assets. Cutting interest rates would simply deliver that appreciation to investors in bonds while stoking up inflation.

I think you’ll find that it is the markets that drive the Thai Baht...government policies have diddly to do with it (unless they pass something that is really stupid)

Correct. What move a currency is the balance between buyers and sellers. in normal circumstances buyers are foreign importers (if the sale is in THB), foreign direct investors (think Japanese auto companies) and foreign portfolio investors plus Thai exporters selling the FX proceeds of their foreign sales. Sellers are importers, those Thai companies (and individuals) investing overseas. On both sides you also have non-trade items such as tourism, transport (air, sea, freight) inurance and remittances. Normally the exchange rate moves to balance these flows - with the B0T intervening to smooth out sharp moves in either direction.

[waza]

"But he devoted a great amount of time to discussing how difficult it is to dismiss Dr Prasarn Trairatvorakul from his post as the central bank's governor........Finance Minister Kittiratt Na Ranong has gone on public record as saying he is "thinking about replacing the central bank's governor every day"..........

This leads one to the conclusion its more about personality and political allegiance rather than performance.

Yingluck should show some leadership and put him in his place but I fear she lacks the will and the authority.

[Skywalker69]

Sounds like a job for the red shirts! A bit of intimidation, publication of his address, family and contact details plus a few thousand thugs baying for his blood should pull him into the "right" POV.

Only if Thaksin pay´s them. Professional demonstrators don´t work for free.

[Robby nz]

I think you’ll find that it is the markets that drive the Thai Baht...government policies have diddly to do with it (unless they pass something that is really stupid)

I t depends I suppose what you call Govt policy.

There was a news story not so long back that after a meeting with the BOT and others the Finance Minister admitted that the sale of Govt inflation proof bonds had a considerable bearing on the inflow of investment into the country.

It also appeared the Finance Ministry had not been charging Taxes and fees on these transactions (as they should) in order to make them more attractive.