He also looks upon himself as a mediator between the Finance Ministry and the Bank of Thailand (BOT), and it is about time these organisations stopped their bickering and shared equally the burden of trying to turn Thailand around.

Already, the Thai economy is growing at the slowest rate in the region. While it is growing at-5 per cent, the rest of the region is experiencing average growth of 7 per cent.

The Finance Ministry will have to make sure it can accelerate budget disbursement, while the central bank will need to cut interest rates to kick-start the economy.

The key to turning Thailand around is restoring confidence, because the economy is getting weak. People at the grass-roots level have no money in their pockets; Thai consumers have less purchasing power. Most consumers are also deferring spending while waiting for further cuts in interest rates before deciding to buy new cars or homes. Small- and medium-sized enterprises are having difficulty selling their goods, and government projects introduced by the Thaksin administration have folded for political and financial reasons.

Faced with these challenges, Chalongphob hopes to rely on his first-rate academic credentials to tackle Thailand's problems.

He is a rather liberal and pro-market thinker. Reviving confidence can only succeed with a comprehensive package that involves the whole government. However, he plays down the importance of his portfolio by saying it represents only one voice in the Cabinet.

Chalongphob had met Prime Minister Surayud Chulanont only twice before his appointment. While attending a conference in Spain last month, he was following the news in Thailand by visiting www.bangkokbiznews.com. He was surprised to learn then-finance minister MR Pridiyathorn Devakula had resigned.

"What kind of country is this?" he asked himself.

At the conference, Chalongphob met Supachai Panitchpakdi, director-general of the United Nations Conference on Trade and Development, and joked with him that Supachai should prepare to fly home to become finance minister.

As it turned out, Chalongphob himself got a call from Prime Minister Surayud.

The prime minister was desperate and in a crisis following Pridiyathorn's resignation. He could not find anyone suitable to take over as finance minister, and he asked whether Chalongphob would help him.

It took Chalongphob, then president of the Thailand Development Research Institute (TDRI), just a few seconds to say, "Okay".

The financial markets welcomed Chalongphob's arrival cautiously, because he had spent most of his career in an academic "ivory tower". He had conducted countless research studies on all aspects of the economy, from income distribution and free trade to financial liberalisation, but he had yet to face the real world of decision-making.

Already, the Assets Examination Committee has urged Chalongphob, as finance minister, to prepare a lawsuit against the Thaksin Cabinet over its alleged violation of the law when it introduced the two- and three-digit online lotteries. Failure to do so might result in Chalongphob being charged with malfeasance.

Well, that's Thai politics.

But Chalongphob's immediate concern is the worrying trend of the baht's appreciation. He has been careful not to impose his views or his political muscle over the BOT, although he does not agree with its tough 30-per-cent reserve-requirement medicine. Nor does he agree with the Commerce Ministry's draft amendment of the Foreign Business Act.

Chalongphob believes the 30-per-cent reserve requirement is too broad and has detrimental side effects. He also believes the draft amendment of the Foreign Business Act, which is now awaiting deliberation by the National Legislative Assembly, goes way beyond its mandate to regulate foreign businesses.

"If we are really uncomfortable with the Temasek-Shin Corp deal, why don't we move to revise the telecom law alone?" he said.

On the foreign-exchange issue, there have been close consultations between Chalongphob and BOT Governor Tarisa Watanagase. He has given Tarisa a free hand in running the foreign-exchange and interest-rate policies.

While at the TDRI, he agreed the central bank must be equipped with enough tools to look after baht stability. But Chalongphob is not quite sure whether the central bank resorted to all the tools it had on hand before introducing the 30-per-cent reserve requirement last December to stem the rising strength of the baht. One of the tools at the central bank's disposal is the power to cut interest rates, and lower rates would have made it less attractive for investors to hold onto the baht.

The baht's appreciation - from 40 to the US dollar early last year to 34-35 now - is not the work of domestic forces. Apart from trade and current-account surpluses, which bring in the dollars, Thai companies and banks have been selling dollars for baht and in the process driving up the value of the Thai currency.

Still, the 30-per-cent reserve requirement has been watered down until it has become almost meaningless. The Thai central bank instead requires investors bringing dollars into the country to do a three-month swap transaction, which neutralises the foreign-exchange rate. This measure is likely to help stabilise the baht for the moment.

The strong baht has hurt Thai exports by pricing Thai goods out of the market. Although exports still register a comfortable growth rate, only multinational companies are doing well, Chalongphob said.

He believes labour-intensive exporters are having a difficult time, with Vietnam and China catching up as major competitors.

"We need to upgrade the competitiveness of our industries. We can hang on like this for only three or four years. After that, if we do not change, we'll be in trouble," he said.

Thanong Khanthong

The Nation