The new government needs to brace for hurdles in carrying out several key policies which will affect the economy in the medium term, the Business Desk reports. No one believes that yesterday's election will resolve every problem that Thailand faces. As the Thai Rak Thai Party is likely to form the new government, street demonstrations are expected to continue amid a flurry of legal challenges against the decision to convene the House of Representatives, despite electoral deadlock in some constituencies.

Amid this environment, it will be difficult for the new government to launch any key economic policies, without being criticised by discontented minorities who are ready to stage rallies to show their displeasure. The unfortunate result is policy stagnation.

"The election merely opens the door to a new set of scenarios, none of which is likely to be resolved within nine to 12 months. We believe the name of the game in Thailand will be policy stagnation, with only a small probability of a violent meltdown, as political reform will take priority," said JP Morgan Securities.

UBS Securities added that even if Thaksin Shinawatra were to gain a new mandate, it is questionable whether it would be sufficiently strong to push through his administration's policies.

"In the worst case, we could expect some of Thaksin's policies to be rescinded, creating prolonged policy confusion," said the Singapore-based securities house.

Amid this confusion, The Nation has highlighted five main issues on which the new government must be clear, due to their immense consequences for the economy in the medium and long term: privatisation; good governance; free-trade agreements; infrastructure development; and populist policies.

It is likely that a Thaksin government would proceed with the sale of several state enterprises, particularly the Electricity Generating Authority of Thailand (Egat) and other energy-related enterprises. But the Supreme Administrative Court's ruling has set a new benchmark for the government to follow.

To avoid public dissent, the government should ensure that privatisation achieves three main objectives: a lower state budget burden; drawing in private investment, which should boost efficiency; and creating more competition in the market after the privatisation.

In privatising the Petroleum Authority of Thailand, the government has indeed lowered the budget. Still, since privatisation, PTT Plc is considered to be holding on to monopolistic powers. It is the sole distributor of natural gas, the owner of the natural gas pipelines and the biggest oil retailer (while other retailers have to scale down their operations in Thailand).

As PTT's profits rise on an upward cycle of oil industry wealth, people have been convinced that privatisation is profitable but it is unwise to use the same practice with other state enterprises and improvements to efficiency must remain a priority.

Piyasvasti Amranand, a former secretary-general of the National Energy Policy Office, urged the government to restructure Egat's business and appoint an independent regulatory board.

"This is normal practice around the world. They restructure the state enterprises first and wait for the formation of an independent regulator, then parts of the state agencies are sold. Here, the government just rushed to the stock market," he said at a seminar last week.

Aside from putting the brake on Egat's unscrupulous sale, the court's ruling also set a crucial benchmark in terms of good governance, while Thai society is embroiled in severe conflicts of interest.

Under the ruling, Olarn Chaipravat was highlighted as the symbol of conflicts of interest. As a director of PTT and chairman of Shinawatra University, he was considered to be insufficiently neutral to play a role in Egat's transformation, for the transformation would benefit PTT and could also benefit Shin Corp, which was until recently majority-owned by Thaksin's family.

If anything, while the corporations should be concerned and avoid a possible conflict-of-interest lawsuit from shareholders, the new government should also make sure that its moves do not stir a similar mishap.

Conflicts of interest also played a large part in reducing the public's enthusiasm for free-trade agreements (FTAs) with several countries, because of a fear that the hidden deals could involve kickbacks to politicians in return for opening the country to foreign products and investment.

A number of free-trade talks, championed by the Thaksin government, could be put on hold by the next government because of the controversy stemming from the lack of transparency in the FTA process.

Although the agreements can benefit Thai exporters by removing trade barriers, the public has often taken a dim view of such pacts, largely because of the controversial Thai-US talks.

And the new government may decide it is too politically risky to reopen the issue.

Abhiradi Tantraporn, director-general of Foreign Trade Negotiations Department, said it was up to the next government to decide whether to pick up free-trade talks with various countries, although the delay would have few immediate effects on the economy.

However, delays in infrastructure development could have a huge impact. These schemes, which are expected to drive the economy, could grind to a halt if foreign investment is diverted to neighbouring countries and domestic investment slows on declining confidence.

The projects that could be in peril are expected to consume Bt1.8 billion over a five-year period starting from 2005 and about Bt255 billion in 2006, with a quarter of the total going to transport schemes.

UBS Securities expects the infrastructure programme to be put on hold, despite predictions that they could add up to 1.7 per cent to headline gross domestic product. As a result, the securities house slashed its 2006 economic-growth forecast from 5.4 per cent to 4.8 per cent.

The Nation believes it is good to wait, but the public is crying out for new rail routes to ease traffic congestion and the government needs to be clear about how to proceed with the investment. The terms of reference of the bidding are not yet completed, although the bid submission deadline is set for the end of May.

To an official at the firm operating the Bangkok subway system, who asked not to be named, the concept of having the bidders suggest the financing options, as well as the possibility of network re-routing, is shocking.

"Elsewhere, the government must be clear what they want before they put that on the bidding, to get the ones that offer the best price."

Another point concerns network supervision. So far, the Mass Rapid Transit Authority of Thailand (MRTA) has been in charge, but it apparently lacks independence. Transport ministers are often overheard commenting on fares, not the MRTA.

Another tough hurdle the new government must jump concerns the populist policies, which have been condemned by the tax-paying, middle classes but greatly welcomed by many people with meagre incomes.

How will the government find long-term funding for policies like the Bt30 health scheme and the lending projects to villagers?

The Village Fund has consumed Bt80 billion and its replacement, the Small and Medium-Sized Loan (SML), should cost more or less the same. The People's Bank scheme was also financed off-budget by the Government Savings Bank.

Aat Pisanwanich, economics lecturer at the University of the Thai Chamber of Commerce, praised the government for the health programme but as the costs rose fast, he said the government should adopt a universal health scheme where private hospitals participate. People should also be urged to buy insurance policies, he said.

He labelled other populist policies as "the government simply spending without considering the need for efficiency when dealing with limited financial resources".

Teerana Bhongmakapat, an economist at Chulalongkorn University, added that over-lending to small and medium-sized enterprises and the One Tambon One Product scheme, which is estimated to amount to Bt300 billion-Bt400 billion, had led to overproduction.

"Instead of giving easy credit, the government should focus on increasing technology, improving education and cost-efficiency," he said.

The new government must be clear on how it will address these policies, or fresh discontent will erupt, regardless of whether Thaksin remains prime minister.