Thai­land's Gen­er­als don't have an eco­nomic plan

The Pak Banker - - OPINION - Wil­liam Pe­sek

Mil­i­taries tend to jus­tify coups d'etat by mak­ing as­sur­ances of po­lit­i­cal com­pe­tence: The pre­vi­ous gov­ern­ment failed the peo­ple, and mil­i­tary tech­nocrats will now re­store or­der, cleanse the sys­tem and get big things done.

The gen­er­als who seized power in Thai­land in May 2014, how­ever, have es­sen­tially ab­di­cated that ar­gu­ment. To be sure, Prayuth Chan-Ocha and his fel­low of­fi­cers pledged to re­store po­lit­i­cal calm, end cor­rup­tion and bring hap­pi­ness to tens of mil­lions not ben­e­fit­ing from $373 bil­lion of an­nual out­put. But 440 days on, Prayuth's regime has only made things worse.

Thai­land's growth is the slow­est among de­vel­op­ing na­tions, its ex­ports may con­tract 4 per­cent this year and Bangkok is the only ma­jor Asian stock mar­ket ex­pe­ri­enc­ing out­flows. The cur­rency is down 7 per­cent in six months. Thai­land's new regime has learned the hard way that run­ning South­east Asia's sec­ond-big­gest econ­omy isn't as easy its of­fi­cials once thought.

Prayuth's main prob­lem is that he lacks an eco­nomic strat­egy. He and his team are so pre­oc­cu­pied mi­cro-man­ag­ing small-scale public or­der is­sues (like ban­ning al­co­hol sales near schools) that they're ne­glect­ing the big pic­ture.

Thai­land, long a man­u­fac­tur­ing pow­er­house, needs a se­ri­ous fis­cal jolt. Fac­tory out­put has fallen ev­ery month but one since March 2013, while ex­ports have de­clined ev­ery month this year. The only thing the junta is do­ing about it is of­fer­ing spin.

In a se­ries of speeches, mil­i­tary lead­er­turned-Prime Min­is­ter Prayuth has claimed the coun­try's de­clin­ing gross do­mes­tic prod­uct is the prod­uct of his valiant cor­rup­tion crack­down (and partly weak ex­ports, too). "It's be­cause some peo­ple spend money from illegal busi­nesses and money from fraud," he said June 5. "Now the gov­ern­ment has come to set things right, caus­ing that money to dis­ap­pear."

But av­er­age Thais try­ing to eke out a liv­ing tell another story. As doc­u­mented by my Bloomberg col­league Chris Blake on July 1, bribes de­manded by public of­fi­cials and the mafia are in­creas­ing un­der the junta, par­tic­u­larly in Bangkok's red- light dis­tricts. "Thai­land's shadow econ­omy ranks glob­ally among the high­est," says economist Friedrich Sch­nei­der, au­thor of "Hid­ing in the Shad­ows: The Growth of the Un­der­ground Econ­omy." He es­ti­mates Thai­land's shadow econ­omy was 40.9 per­cent of real GDP in 2014, in­clud­ing some illegal sec­tors such as gam­bling and small weapons, but largely ex­clud­ing drugs.

Prayuth would be wise to reshuf­fle his cab­i­net, half of which is com­prised of mil­i­tary per­son­nel with lit­tle ex­pe­ri­ence in their port­fo­lios. That would re­lieve some of the so­cial pres­sure bub­bling around his regime. The coun­try's al­ready el­e­vated lev­els of house­hold debt are ris­ing as growth and wages stag­nate. In the first quar­ter alone, out­stand­ing house­hold debt from com­mer­cial banks alone jumped 7.2 per­cent.

But Prayuth all but ad­mit­ted on July 27 that he doesn't un­der­stand the ba­sics of mod­ern po­lit­i­cal lead­er­ship when he said he won't be pres­sured to make changes "just be­cause some­body is at fault or be­cause of so­cial pres­sure." Spec­u­la­tion had been rife that Prayuth might tap Somkid Ja­tus­rip­i­tak, who was deputy prime min­is­ter and fi­nance min­is­ter in the gov­ern­ment of for­mer premier Thaksin Shi­nawa­tra. But it's hard to see how he could do that given that the coup was aimed at run­ning Thaksin and his sis­ter, for­mer Prime Min­is­ter Yingluck Shi­nawa­tra, out of pol­i­tics for­ever.

Prayuth's first step should be to ac­cel­er­ate the gov­ern­ment's $54 bil­lion spend­ing plans for roads, mass transit and other projects. Ab­sent those im­prove­ments in in­fra­struc­ture, Thai­land won't be able to keep for­eign au­to­mo­bile man­u­fac­tur­ers in the coun­try, and thus re­tain its rep­u­ta­tion as the "Detroit of Asia." And with the Philip­pines al­ready lob­by­ing Toy­ota and other auto giants to re­lo­cate their Thai fac­to­ries, Prayuth doesn't have any time to lose.

Prayuth also must set a clear timetable for re­lin­quish­ing power. That's a nec­es­sary first step to restor­ing con­fi­dence in the econ­omy; in­vestors tend to look askance at per­ma­nent mil­i­tary takeovers. Yet the junta hasn't even fi­nal­ized a new con­sti­tu­tion it says is re­quired to al­low Thais to cast bal­lots again. It is in­creas­ingly ap­par­ent that its talk of re­form be­fore elec­tions is just a de­lay­ing tac­tic. The public would be for­given for con­clud­ing the coup wasn't about im­prov­ing the lives of av­er­age Thais but grab­bing power for power's sake.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.