NEW ECONOMIC DIRECTION
Call for definition of self-sufficiency
Business wonders how concept will blend with market system
Thailand's business sector and many of the country's foreign investors are waiting to see how the interim government will integrate the apparently moderate economic theory of self-sufficiency with the market system that the country has been pursuing over recent decades.
The bated-breath atmosphere follows the statement by newly appointed Prime Minister General Surayud Chulanont that he will shift towards self-sufficiency.
Despite some scepticism, business leaders have nevertheless expressed the view that self-sufficiency may be an answer to promoting the economy - a departure from the overspending and populist policies championed by ousted prime minister Thaksin Shinawatra.
Board of Trade chairman Pramon Sutivong said: "A self-sufficient economy does not conflict with economic growth. Rather, it makes the growth commensurable with the country's capacity and creates immunity against the risks of unstable growth. Thailand's gross domestic product can grow 7-8 per cent if the growth is based on stability."
Thai Bankers' Association chairman Jada Wattanasiritham welcomed the idea, saying a self-sufficient economy should help narrow the social and economic gaps in society. "For instance, there may be revisions of some mega-projects," she said. "There were too many mass-transit routes under the original plan. We may have to review the priority of each route."
Kasikornbank president Prasarn Trairatvorakul said the self-sufficiency theory would prevent a repetition of excessive spending, one of the causes of the 1997 financial crisis. He said the idea was not opposed to economic growth, but rather taught us: "We should not overdo our capacity."
The new interim prime minister said he would not focus on stimulating economic figures, but rather on promoting self-sufficiency and happiness. Surayud has yet to give any details of how he intends to achieve his plan.
Upon his appointment, the main Stock Exchange of Thailand index fell 0.33 per cent to 683.84 yesterday, as both domestic and foreign investors adopted a wait-and-see attitude pending clearer economic policies from the new government before making investment decisions.
The source said the new economic team was expected to be largely different from that of the Thaksin administration and reflect the expectation that economic growth over the next year would not be very dramatic. Some long-term public-works projects are expected "to be prolonged".
The source added that the postponement of the share-sale deal between the GE Group in the US and Bank of Ayudhya reflected the fact that foreign investors were still concerned about the situation.
Some foreigners are openly sceptical of the new prime minister's idea.
"The Thai economic structure depends on exports. In order [for it] to become [one of] self-sufficiency will require a radical restructuring of the economy, which may jeopardise many jobs. I am just sceptical," one Western official said.
However, the official noted that what Surayud said may be taken as a "general message" to urge Thais not to be overly materialistic and to pursue a moderate path, in accordance with the principles of Buddhism.
Thai Rice Exporters Association president Chookiat Ophawongse said he was not sure what the new prime minister meant by self-sufficiency and that it remained to be seen how the principle would be applied to the market economy.
Thai Auto Parts Manufacturers' Association director Samart Deebhijarn said the new government might be unable to apply a self-sufficiency policy to all business sectors, particularly the industrial sector. The idea may be adaptable to the agricultural sector, but industries must focus on economies of scale for saving costs of production and gaining maximum benefits.
Ekniti Nitithanprapas, director of the Fiscal Policy Office's Macroeconomic Analysis Group, said there might be different interpretations of the sufficiency-economy approach.
"A sufficiency economy does not mean we should not make any new investments, but the model suggests we should discipline our investment," said Ekniti.
Finance Ministry spokesman Somchai Sujjapongse said the ministry might need to get a better understanding of a sufficiency economy before turning the guideline into fiscal measures. He thinks the government will focus on quality of growth. If so, expenditures will be diverted to education, public healthcare and poverty eradication.
Somchai said Thailand's potential economic growth was about 5 per cent and that the country needed a budget deficit to achieve it. But he said: "A sufficiency economy does not mean we must have a fiscal balance."
National Institute of Development Administration University economist Wichai Turongpun said the model might lead to a review of risky policies implemented by Thaksin, including easy credit and free-trade deals.
Finansa Securities predicted that if MR Pridiyathorn Devakula were appointed head of the new government's economic team, the market would respond positively.
Siam City Securities said it expected the new government's economic policies, based on self-sufficiency, would limit growth next year.
M&C Saatchi (Thailand) managing director Amornpimol Thanakitamnuay said the new interim prime minister's idea of putting GNH (gross national happiness) ahead of GDP during his one year in power could be a good one, because it would allow Thais to recover mentally. The previous government concentrated too much on GDP, which led to an overall deterioration of happiness.