Bangkok should think first, act later

The Straits Times, February 24, 2007

By Jonathan Eyal



TO REGAIN public confidence, the Thai government should 'thoroughly reconsider any issue with more discussion before announcing decisions to the public', according to the president of the country's Garment Manufacturers Association, Mr Dej Pathanasethpong, this week.

It was a sensible bit of advice which, although delivered with classic Thai understatement, betrayed a growing national sense of frustration. For Thailand's current leaders have all too often shown an inclination to act first, and think later.

At the end of last year, the government of Premier Surayud Chulanont introduced a 30 per cent capital reserve requirement. It meant a foreign investor planning to invest US$100 (S$150) in Thai assets would have had to bring in US$130, of which US$30 had to be deposited with the central bank for zero returns for one year.

The decision spooked investors, causing the stock exchange to nosedive, before it was hastily rewritten.

The government then accused people close to ousted prime minister Thaksin Shinawatra for a series of bombings in Bangkok over the New Year, only to admit a bit later that Muslim separatists may, after all, have been the real culprits.

It published a draft law legalising some dubious lottery games, and then quickly withdrew it. And it closed Don Muang international airport, then announced it would be reopened, but backtracked on the plan after some airlines threatened to cut off services to Thailand if they were forced to move from the new Suvarnabhumi Airport.

But even against this reputation of pendulum-like oscillations, this week's events set new records. Aware that investors and financial analysts are beginning to worry about Thailand's new 'sufficiency economics' policy - a nebulous idea which could be interpreted as being hostile to open markets - the Thai government appointed Dr Somkid Jatusripitak as its special economic envoy.

The move seemed inspired. Dr Somkid, a previous finance minister and deputy prime minister, was widely credited with formulating the economic policies which became known as 'Thaksinomics' - a strategy which focused on boosting growth by encouraging foreign direct investment, raising expenditure on infrastructure and making credit cheap and easily available.

Investors were enthusiastic, mainly because they interpreted Dr Somkid's reappearance as a sign that Thailand will remain an open economy. And everyone assumed that Dr Somkid's appointment was a calculated and carefully prepared move.

But it was not. The opposition People's Alliance for Democracy, led by a media activist and a former general, objected. Dr Somkid promptly resigned. And, true to his record, PM Surayud, who only earlier this week said that the appointment of a special economic envoy was 'of utmost importance', suddenly decided that no such person was required and that no one would replace the hapless Mr Somkid.

The same policy of 'now you see it, now you don't' is also applied to the running saga over the Shin Satellite company. The Thai military alleged that the company's foreign shareholders may be 'spying' on national communications. No evidence was provided. Meanwhile, the country's ministers claim one day that they wish to 'buy back' the foreign investors' stake, while threatening the next day to revoke the company's operating licence. Nobody seems to care about the legal basis for either action.

This week, Thai Information and Communications Minister Sitthichai Pookaiyaudom hit upon a novel idea: He proposed to conduct an opinion poll to see if the public favours buying back the Shin Satellite company's stake.

One can only wonder if the participants in this opinion poll would ever be told the entire truth: That the company has always been in Thai hands - Temasek's stake is only about 41 per cent - that it has an envious technology lead and that it has had a solid track record of returning value to its shareholders of a kind which few other Thai companies can boast.

Either way, international investors are unlikely to be impressed by this curious Thai approach of 'direct democracy' in running economic affairs.

Overshadowing all these jarring noises is a growing terrorist threat, which came to the fore on Sunday with 29 bomb attacks in the south, now aimed at the Thai Chinese business community. The government has tried talking to separatist leaders and to neighbouring Malaysia. And it has apologised for previous mistakes. All very courageous, but still no substitute for an effective strategy.

PM Surayud and his government are now discovering an old rule of politics: That it takes years to build up a reputation, but only minutes to lose it.