ASIA HAND In Thailand, a return
to 'sufficiency' By Shawn W
Crispin
BANGKOK - Is Thailand's new
military-appointed interim government headed down
the path of more economic nationalism? That's
the signal interim Prime Minister Surayud
Chulanont gave many foreigners when he announced
he would pursue gross national happiness over
gross domestic product (GDP), and that his
economics would be guided by the inward-looking
ideals of His Majesty King Bhumibol Adulyadej's
self-sufficiency economic
philosophy. The
sufficiency model also figures prominently in the
preamble of the new interim charter.
Surayud, a career soldier, is widely
expected to hand economic
management responsibilities to
a team of technocrats, most likely to be headed by
market-friendly Bank of Thailand governor
Pridiyathorn Devakula. But Surayud's new economic
lieutenants will also be under strict marching
orders to implement more fully aspects of
Bhumibol's contrarian Buddhist self-sufficiency
economic philosophy, which, counter to neo-liberal
prescriptions, stresses moderation over
maximization. [1]
The monarch's
self-sufficiency-economy concept gained currency
in the aftermath of the 1997-98 Asian financial
crisis. In a now-famous 1997 speech, Bhumibol
called on the Thai population to scale back its
reliance on exports and shift toward a more
self-sufficient, localized economic system, where
25% of the economy would be geared toward local
production for individual needs. "A careful step
backward must be taken; a return to less
sophisticated methods must be made with less
advanced instruments," the highly respected
monarch said.
Bhumibol's back-to-basics
message ran counter to the orthodox prescriptions
offered by the World Bank and International
Monetary Fund, which called for more, not less,
openness to restore economic growth and financial
stability. Then, Bhumibol's message presented a
direct challenge to the country's traditional
pro-globalization stance but resonated deeply with
many Thais who had lost their factory jobs and
were forced to reintegrate into the lower-earning
rural sector.
Some of Thailand's most
neo-liberal economic thinkers embraced Bhumibol's
philosophy, which they construed broadly to
emphasize long-term optimal over short-term
maximum production and consumption - as most
liberal Western economies are geared. The King's
message helped Thailand weather the economic
storms of 1997 without the social unrest seen in
neighboring Malaysia and Indonesia.
Now,
the country's new military leaders are invoking
the monarch's message to help reconcile the
political damage and economic distortions caused
by ousted prime minister Thaksin Shinawatra's five
years of divisive and some say morally corrupt
rule. Yet it's unclear exactly how much emphasis
the country's new leaders will place on the
contrarian philosophy, which sends an inherently
protectionist message.
Significantly,
Thaksin had co-opted and subsequently subverted
the monarch's message through his heavily touted
"dual-track" development strategy, which aimed to
pump up domestic, grassroots consumption alongside
export-led growth. Rather than encouraging
Buddhist moderation over market-driven
acquisitiveness, Thaksin's rural strategy aimed to
convert the country's poor peasantry into a new
class of export-oriented, profit-maximizing
capitalists.
Those policies - including a
revolving village-development fund, a scheme for
cheap universal health care and a debt moratorium
for cash-strapped farmers - effectively built up
Thaksin's strong rural support base, which he
later leveraged into overwhelming election
victories.
Debunking
Thaksinomics One of the new
military-appointed government's challenges will be
to erase Thaksin's strong economic legacy in rural
areas before calling for new democratic elections,
now scheduled for next October. Corruption
findings against Thaksin and his senior party
members will not have the same political punch in
the rural heartland than they would among
Bangkok's educated masses. The new government
clearly hopes to replace - and perhaps in places
re-brand - Thaksin's populism with the King's
sufficiency concept.
As Thailand's new
royally endorsed interim government angles to
distance and differentiate itself from Thaksin's
high-octane growth strategies, overemphasis of the
sufficiency concept risks alienating the foreign
investors that are still the primary driver of the
country's growth. With huge uncertainty on the
political front, sovereign analysts say it's
essential that the country's new interim leaders
avoid sending similarly confusing signals about
their economic intentions.
Standard &
Poor's Ping Chew says he left confused after a
Monday meeting with Ministry of Finance officials
that spoke about the need for more sufficiency.
"No one knows what [sufficiency economy] really
means," said Ping Chew, S&P's director of
sovereign ratings in Singapore. "What is clear is
that Thailand can't afford to stand still, and if
the government intends on becoming less
competitive, then that is a cause for concern."
There is a definite risk that Thai
bureaucrats may overplay the sufficiency concept
in expression of their loyalty and affection for
the monarch. There is a concurrent risk that the
royal philosophy will be twisted by less
scrupulous government officials as an opportunity
to abuse their authority for rent-seeking and
extortion, particularly among foreign-invested
concerns.
One enduring Thaksinomics myth,
frequently perpetuated by the mainstream Western
media, was its supposed emphasis on the grassroots
economy. From a budgetary standpoint, Thaksin's
populist policies targeting mainly rural ethnic
Thais were minuscule compared with his
government's massive state bailout of the
predominantly ethnic-Chinese urban-based corporate
sector.
Despite widespread fears of a
fiscal blowout, Thaksin's actual spending on
populist policies was always modest, never
amounting to more than 80 billion baht (US$2.1
billion) per year. In comparison, his government
earmarked nearly 900 billion baht for the
establishment of the Thailand Asset Management
Corp, a state-run, taxpayer-financed
corporate-rescue facility that generously bailed
out indebted Thai businessmen who had expressed
political loyalty to Thaksin's Thai Rak Thai
Party.
Those same favored, rehabilitated
tycoons were first in line to receive new credits
from state-owned banks - of which at least $1
billion was fingered by the Bank of Thailand to be
tainted with irregularities. Thaksin's
interventionist approach to economic favoritism
badly skewed the financial-incentive system and
returned Thailand to the crony capitalism that had
contributed to its 1997 demise. It also
contributed largely to his political demise.
Middle economic path There is no
doubt that Thailand's economy needs to return to
some sort of middle path after five years of
high-speed Thaksinomics. Economics will take a
back seat to politics as the new government aims
to set the country on a more stable democratic
course. Previous plans to splurge $38 billion on
new infrastructure spending will inevitably be
scaled back and planned free-trade agreements with
the United States and other large countries could
be reconsidered.
Significantly, the
anti-government demonstrations - a mixture of
anti-privatization trade unions,
anti-globalization non-governmental organizations
and anti-capitalist development groups - that
helped to topple Thaksin found common cause in
opposition to his liberal economic policies and in
promotion of Bhumibol's economic model.
The yellow-shirt-wearing movement built up
a strong royalist-nationalist political identity,
mostly by defining Thaksin and his
pro-globalization, capitalist regime as the enemy
of the nation, the Buddhist establishment and the
King. Thailand's new royally endorsed interim
government may feel obliged to some degree to
answer those nationalistic calls to consolidate
its delicate political position among Bangkok's
vocal progressive movement.
Notably,
Thaksin's and foreign investors' interests often
overlapped, most evidently in his family's $1.9
billion sale of its majority stake in the Shin
Corporation to Singapore's Temasek Holdings in
January. One investment-banker insider at the time
portrayed that strategic tie-up as Thaksin's
attempt to leverage foreign capital to mount an
unprecedented financial, perhaps final, assault on
the interests of the traditional landholding
aristocratic elites that at first opposed and
later protested his rule.
The new
sufficiency-guided government's stance on foreign
investment and privatization will be tested in its
dealing with small retail demands to curb the
expansion of foreign hypermarts, allegations that
the Shin-Temasek deal and 16 other major
foreign-invested concerns are in violation of the
Foreign Business Act through their use of local
nominees, and the ruling on whether to scrap the
partial privatization in 2001 of state energy
concern PTT.
The Bank of Thailand's
Pridiyathorn has already moved to reassure the
foreign community that sufficiency and
market-liberalization policies can co-exist
peacefully. He says the government's policies will
represent a hedge against over-investment and
industrial overcapacity, which may allay foreign
concerns but does not quite jibe with the
sufficiency philosophy's core inward-looking
message.
So far, Thailand's economic
performance has transcended its political woes,
growing 6.1% and 4.6% in the first and second
quarters respectively. Some would argue that's
exactly because the Thai economy has never in its
history been more externally oriented, where
exports contribute more than 63% of total GDP. In
August, exports and tourism were up respectively
17% and 13% year on year, resulting in a $813
million current-account surplus, the highest so
far this year.
While gross domestic
happiness may surge with Thaksin's ouster, GDP
growth is expected to slow to about 3% for the
remainder of this year. Importantly, few Thai
governments have historically been able to
maintain their political popularity coincident
with such a slow level of economic growth - which
could in the short term tempt economic managers to
emphasize sufficiency over export-led growth.
Sovereign analysts are concerned that the delay in
the 2007 budget's disbursement could reveal
problems hidden by Thaksin's off-balance-sheet
spending.
Yet a lurch toward more
protectionism could dry up flows of foreign
capital and put the sufficiency model to a sudden
drastic test. It's clear that Thailand's new
government, which strongly derives its political
legitimacy from the palace's overt endorsement,
wishes to honor King Bhumibol by more widely
implementing his philosophy. As the highly
respected monarch once suggested, Thailand has
often needed to take one step backward before
taking two steps ahead - that looks to be true,
both politically and economically.
Note 1. "A sufficiency
economy is not self-sufficiency. It is a
philosophy rather than a theory. But the
philosophy can be applied to every level of the
economy. Households should avoid overspending,
businesses should avoid over-expansion and the
government should concentrate on protecting
national resources." - Pridiyathorn at a forum
held by the Thai Chamber of Commerce in Bangkok on
Tuesday.
Shawn W Crispin is Asia
Times Online's Southeast Asia editor.
(Copyright 2006 Asia Times Online Ltd. All
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