The panellists at a Krungthep Turakij seminar entitled "The New Government and Economic Agenda" agreed Thailand could cope comfortably with lower economic growth in the next year or two while politicians work on political reforms to ensure an improved checks and balance system. With the reformed political system, populist policies would be harder to implement while clear economic strategies would inspire the private sector to resume investment and boost economic growth.

They said it was essential for the new government to look forward, even though Thailand might see further economic slowdown next year due to falling demand from major importers, particularly the United States, Europe and Japan.

Virathai Santipraphob, executive vice president in charge of Siam Commercial Bank's (SCB) Business Customers Strategy Group, urged the next government to look closely into income distribution and global competitiveness.

"If income distribution remains uneven for the next few years, we might not solve it at all. Then the scale of populist policies will intensify and taxpayers will feel taken advantage of and become less reasonable. This will cause social problems that will have immense impact on the economy," he said. "We know about the investment in the three subway routes, but have we learnt anything about the water distribution system in the provinces?"

Virathai suggested the government exploit tax policies, draw up long-term job-creation plans and solve people's debt problems.

The new government should also chart out Thailand's future to give businessmen an idea of what to invest in. They are currently holding back not only because of the political uncertainty but also because they do not know how competitive Thailand will be in the next five years and what industries will be highlighted in the next 10 years, he noted.

Banluesak Bhusarungsee, director of Bangkok Bank's Macroeconomic Analysis Centre, was of the same view. Besides income distribution and deteriorating competitiveness, the new government should also focus on the improvement of human resources in science and technology to boost competitiveness.

"When everything is geared towards populist policies, less money flows to the science and technology field," he said.

Kobsak Pootrakool, an academic at the Bank of Thailand, added that it was correct for the new government to first pay attention to reforms to increase political accountability. Without solid politics, the economy could be disrupted. However, the government should also set long-term economic objectives, not just short-term ones to please certain groups.

"The government must ask itself what Thailand should be geared towards. How we can balance market policy and the concept of a sufficiency economy, for example," he said.

Regarding competitiveness, Kobsak urged the government to implement a comprehensive programme to encourage innovation among Thais. The government might invest just Bt1 million for an innovation award, but that would encourage investment in education and draw the educated to think more.

For the medium term, he called for clarity on how the government would handle investment in mega projects, free trade agreements, privatisation, the social security system, as well as some essential laws.

"The deposit insurance law has been held up. Without it, Thailand could face another financial crisis," Kobsak said.

Pairoj Vongvipanond, an economist at Dhurakit Bundit University, said there should be more focus on the funding of education and the coverage of the social security system.

"Our education budget is about 3 per cent of gross domestic product, compared with 4 per cent in [South] Korea. Meanwhile, a section of the ageing population has not yet been covered by the social security system."

Somchai Jitsuchon, a director of Thailand Development Research Institute, said that more of the education budget should be allocated to schools, not universities, to improve standards. "Most university students are urban residents who can afford higher education. The money should be spent on the poorer people; that would be a cheaper investment and yield better results."

Somchai said once the economy got back on track, it would be less easy to entice the poor with populist policies. Moreover, with a proper checks and balance system in place, politicians would be more responsible for the consequences.

Ekniti Nitithanprapas of the Fiscal Policy Research Institute noted that though Thailand was suffering from political uncertainty, the crisis could be turned into opportunity.

"Investors are paying attention to transparency. If we have a good system, that should help [restore their confidence]. Whatever it may be, the private sector is most important in boosting the economy, not the government," he noted.

The new government should also go deeply into how to handle decentralisation. At present, 26 per cent of the national budget goes to local governments, though the government is committed to contribute 30 per cent. Ekniti urged the government to consider how much money should be allocated to local governments and how they should disburse the funds.

He said education policies should complement economic development. "If we are to expand, should we import labour? Without that, we have improve our own labour's productivity."

Ekniti noted that wherever the economy was headed, what was important in the short and long term was monetary and fiscal stability.

Achara Deboonme

The Nation