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Thu, March 1, 2007 : Last updated 22:05 pm (Thai local time)

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Home > Business > Concern over stability of govt

Concern over stability of govt

Little impact if good successor is named soon: businessmen

 Business people were shocked by the abrupt resignation of MR Pridiyathorn Devakula as deputy prime minister and finance minister yesterday, expressing their worries about the stability of Prime Minister Surayud Chulanont's government and calling for a capable person to succeed Pridiyathorn as quickly as possible.

Although most people interviewed by The Nation said they understood that, given the interim nature of the government, Pridiyathorn's resignation should not have a serious impact on economic policy, they were more concerned with the cause of his resignation, which reflects severe divisions within the military-installed government.

"We are shocked that the top person overseeing the economy has quit so suddenly," said Santi Vilassakdanont, chairman of the Federation of Thai Industries. "This raises many questions, mainly about the stability of the government after the resignation and what possible policy changes could be in store," Santi said.

Thanawat Phonwichai, director of the Economics and Business Forecasting Centre, University of the Thai Chamber of Commerce, said: "Shocking news - it will certainly have a negative psychological impact. It shows that the government does not have unity." He added than an immediate replacement, within a week, was essential.

The resignation has increased the chances that economic growth this year may be below 4 per cent, he said, adding, "The odds rise to 50:50 now."

Pridiyathorn yesterday made a surprise announcement that he would quit all positions with the government, citing the recent aborted appointment of Somkid Jatusripitak, former close aide to deposed prime minister Thaksin Shinawatra, as an example of a "hidden agenda" in the government. He also accused some ministers of acting in favour of a certain media group, which could have breached the law.

Pridiyathorn quit his position as the governor at the Bank of Thailand to join the military-installed government after the coup on September 19 last year.

"The reasons he gave [for resigning] were quite strange," said Pornsilp Patcharinpanakul, deputy secretary-general of Board of Trade, adding that he was also shocked. "Personally, I think it's a pity Pridiyathorn left the government."

He also said the resignation should not, however, affect economic policy. "We just hope that other ministers do not resign."

Dej Pathanasethpong, president of the Thai Garment Manufacturers Association, said the export market should not be affected. "I don't think it will affect the planned free-trade agreement with Japan," he said.

Dej also said an immediate replacement was necessary. "The prime minister must find a replacement within three days. If it takes longer than that, it will affect Surayud in terms of his leadership."

Poj Aramwattananont, president of the Thai Frozen Food Association, said: "The reasons Pridiyathorn gave are quite strange. It reflects the internal conflicts within the government."

Chookiat Ophaswongse, president of the Rice Exporters Association, said: "I am now praying that nobody else will resign. Otherwise, the economy will slow further. Added resignations, if any, will affect the country's image even more in the eyes of foreign investors."

Although some of the government's economic policies - such as the capital-control requirement and the amended foreign business law - have been criticised by the business sector, most bankers did not expect Pridiyathorn to go so suddenly.

"He's one of the best. He's well-rounded about the money market and the financial market. However, hopefully the government will find a suitable person to replace him soon," said Siam Commercial Bank president and CEO Khunying Jada Wattanasiritham.

"The resignation should not affect business confidence. Ministers come and go - it's normal as long as there's continuity in the policy," said Chatri Sophonpanich, chairman of Bangkok Bank.

"It's a pity though, because he's capable person. He was in the central bank for many years so there might be many things that he wanted to tackle within a short period of time, but people didn't understand that," Chatri added.

Vichit Surapongchai, chairman of Siam Commercial Bank, said he thought there would be no impact on the economy. "Politics is politics. Business people should understand and not panic."

Chakramon Phasukavanich, permanent secretary at the Industry Ministry, said if a new finance minister came along with a change of economic policies, it would affect investor confidence.

Marco Sucharitkul, president of JP Morgan, said Pridiyathorn's resignation would affect market confidence. However, the market is now waiting to see who will be his replacement. He said if Pridiyathorn were replaced by MR Chatu Mongkol Sonakul, another former central bank governor, the market should welcome the news.

"It's a pity. He has both ability and knowledge of what the market needs. This government has worked for quite a short period so far. Pridiyathorn's resignation may have some short-term impact, but in principle, this government must ensure the general election takes place according to schedule," said Pattera Dilokrungthirapop, chief executive officer of DBS Vickers Securities (Thailand).

Wiwan Tharahirunchote, managing director of Kasikorn Asset Management, said: "What worries me is the change of attitude in Thai society. The good people have lost their spirit to continue to do good deeds. I'm concerned that Thai society will transform into a hot-tempered society. No one wants to be patient any more."

Robert Samuel Penaloza, chief executive officer of Aberdeen Asset Management, said: "Pridiyathorn's resignation may affect foreign investor confidence in the short term. Nothing is to be seen now. We have to wait and see who will replace him and what the direction will be. However, from the point of view of foreigners, we don't expect much from the interim government in terms of economic policy. We're more concerned about when the election will take place."

Somchai Jitsuchon, an economist at the Thailand Development Research Institute, described the resignation as "a big blow to the government". "How could they run the country?" he said.

Somchai predicted that Deputy Prime Minister and Industry Minister Kosit Panpiemras had a strong chance of being appointed as the new finance minister, but if the government approaches Virabongsa Ramangkura, a noted economist, to replace Pridiyathorn, the government will face fierce protests from anti-Thaksin groups.

Virabongsa was adviser to former finance minister Thanong Bidaya in the Thaksin government.

Pairoj Vongvipanond, an economics lecturer at Dhurakij Pundit University, had a similar view to Somchai, saying that Pridiyathorn had given up too easily.

Pridiyathorn might find himself uncomfortable with politics in this government. He added that Pridiyathorn had several confrontations with other groups, such as in his efforts to amend the Government Lottery Act and the Foreign Business Act.

He might also be affected by a "boomerang effect" after the Assets Examination Committee launched legal action against Khunying Pojaman Shinawatra and Thaksin, accusing them of abuse of power in buying land owned by the Financial Institutions Development Fund, he added.

Patareeya Benjapolchai, president of the Stock Exchange of Thailand, said: "It's a pity. Pridiyathorn has been supporting the capital market very well. He's good at what he has been doing and he understands the market. His resignation may result in some effects in the short term. If his successor continues what he started, such as the mega-projects, things will be alright."

Sara Lamsam, managing director of Muang Thai Insurance, said the short-term outcome may be one of panic, especially in the capital market. "For now, it is understood that this is the way of politics. The priority now is to reinstall confidence, with a capable person who can work with the government."

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