The Thai Rak Thai Party's much-heralded dual-track economic policy is not suitable for Thailand, according to economic guru Kosit Panpiemras, who is urging the next government to refocus on export-oriented policies to raise Thailand's productivity.

Speaking at the Fiscal Policy Office-sponsored annual seminar, Kosit said the dual-track policy has failed to deliver sustainable economic growth.

"Boosting domestic consumption might help in the short run but its limitation is an increase in household debts," said Kosit, executive chairman of Bangkok Bank and a former secretary-general of the National Economic and Social Development Board.

"It is clear that after five years, the export sector still plays an important role in propelling the Thai economy."

The dual-track economic policy has been a centre point of caretaker Prime Minister Thaksin Shinawatra's economic policy designed on the belief that Thailand's economy should be boosted by both exports and domestic consumption. The policy was put into practice when Thai Rak Thai came to power in 2001. In the last five years various measures have been implemented aimed at increasing domestic income and therefore encouraging spending.

Thaksin often claims his dual-track initiative has boosted economic growth during his administration.

However, Kosit argued that household consumption this year was slowing, while household debts are on the rise. Critics are worried about the rising levels of individual debt partly caused by the government's easy credit policy.

Kosit said the conventional wisdom of export-led growth was suitable for developing countries, while developed countries like the United States could turn to domestic consumption to boost growth.

"But even the US cannot depend on domestic consumption because it can lead to a bubble economy," he said.

Domestic consumption can also lead to an increase in public debts, budget deficits, current account deficits and exchange-rate volatility, he added.

Kosit called on the next government to focus on measures to increase productivity in the economy. He said authorities such as the NESDB, the government's think tank, do not raise awareness of the importance of productivity.

"We do not have adequate information about productivity. The NESDB has only paid attention to the rate of GDP [gross domestic product] growth," he said.

However, Kosit welcomed the 10th national plan formulated by the NESDB, which gives more attention to education, research and development, and focuses less on annual GDP growth.

Kosit also expressed his concerns about the government's off-budget spending and urged more transparency in off-budget management. He said the quasi-fiscal tool should not distort the market and the government make clear the line between public finance and private finance in order to avoid conflicts of interest.

Wichit Chaitrong

The Nation