Published on May 13, 2005

Promises transparency and good governance

While insisting the economy will grow 5 per cent this year, Prime Minister Thaksin Shinawatra yesterday assured business leaders that his government would promote good governance and create transparency in all state projects.

“We will be introducing e-auctions for all government projects to make the bidding transparent,” he told the gathering in Bangkok.

It was the first time that Thaksin had met with businesses since leading the Thai Rak Thai Party to another landslide general-election three months ago. He had invited more than 100 executives to Government House amid growing concerns that the economy is sagging.

Climbing oil prices, a global economic slowdown, higher inflation, rising interest rates and the southern unrest are all weighing down domestic growth.

Moreover, Thailand has witnessed twin trade- and current-account deficits for the first time since the 1997 financial crisis.

Adding to the concerns is the corruption scandal surrounding the procurement of the explosives-detection machines for Suvarnabhumi International Airport, which has rocked the credibility of the Thaksin government.

Thaksin wanted business leaders to know that he is still in charge and that foreign investors and analysts, such as Fitch Ratings, have a more positive view on the economy’s growth potential than the public.

Ampon Kittiampon, secretary-general of the National Economic and Social Development Board, said the prime minister assured business leaders that the economy would grow 5 per cent this year, boosted in part by a supplementary budget worth Bt50 billion.

According to Ampon, Thaksin told the gathering that the residual budget from the previous fiscal year would also be put to use.

As a result, Thaksin said the government would have around Bt100 billion in additional funds to spend in the next seven to eight months, he said.

Ampon said the prime minister also told the gathering that the supplementary budget would be injected into micro-investment projects at the regional level.

“Household consumption may slow down. However, exports and foreign investment through the Board of Investment have increased. Therefore, there is momentum to keep the economy growing,” Ampon quoted Thaksin as saying.

Virabongsa Ramangkura, a well-known economist, told the assembled business leaders that Thailand has no problem with its macro-economic stability.

The problem, he said, was that nobody has come out to explain to the public when some economic indicators looked suspicious.

He said the current-account deficit in the first quarter should not be a cause for alarm, because it is small compared to Thailand’s strong international reserves and would actually help finance future growth.

“The government must also explain clearly to the public its plan for mega-infrastructure projects,’’ he said. “The public must understand how the government is going to finance the projects.”

Both the prime minister and Somkid Jatusripitak, deputy prime minister and finance minister, said that by early next month the government would come up with details on how to finance the huge projects.

The projects would need an investment of Bt1.5 trillion to Bt1.6 trillion over the next four to five years.

MR Pridiyathorn Devakula, governor of the Bank of Thailand, also told the meeting that there was no need to panic over the current-account deficit.

He said that if the deficit is kept at no more than 2 per cent of gross domestic product, it would not cause the economy any problems.

Pridiyathorn said financing the infrastructure projects should not be a problem. State-enterprise proceeds handed over to the Finance Ministry, the budget and foreign borrowing should be enough to cover the costs.

The central bank boss said the economy should grow at no less than 5 per cent this year due to several favourable indicators, such as bank-lending growth of 8.5 per cent in the first quarter.

“Moreover, several companies have also been issuing bonds to raise money for further business expansions,’’ he said. “The private sector has been rather happy with our monetary policy and foreign-exchange policy.”

Prasarn Trairatvorakul, president of Kasikornbank, said commercial banks are still sanguine about the economy, evidenced by the high credit growth of 8.5 per cent in the first quarter.

Last year, bank-lending growth reached a net of 6-7 per cent after excluding client debt restructuring.

Including debt restructuring, the lending growth would have been more than 10 per cent.

Prasarn said the mega-projects should not affect interest rates in the next one or two years, because on average only Bt350 billion would be spent annually.

Banks also have sufficient liquidity, with Bt500 billion available.

Chaiyan Chakornkul of Lalin Property Plc, told the gathering that the housing sector was still doing well.

“Don’t believe those who say that it is bad, because they’re mostly companies that are losing money or have not positioned themselves well in the market,” he said. “There is still demand in the middle-income market, such as for town houses.”

Dhanin Cheravanont, chairman of the Charoen Pokphand Group, expressed optimism over the economy.

“After having listened to what the prime minister said, I have 100-per-cent confidence that the economy will continue to grow,’’ he said. “CP will continue to increase our investments at full steam.”

Wichit Na Ranong, president of the Tourism Council of Thailand, said the tourism industry would like the government to adjust its tourism-promotion strategy so that it focuses more on quality instead of the number of arrivals.

“Thailand needs quality tourists at the moment. In the next three years, Thailand will receive Bt700 billion in foreign exchange from inbound foreign tourists, which translates to 20 million tourists,” he said. “Therefore, the strategy should be changed in cooperation with both the public and private sector.”

Wichit said one person should be in charge of tourism promotions.

Business Reporters

The Nation

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