• 
• 

The respected economist from the Thailand Development Research Institute (TDRI) said he wanted a better process.

"The finance minister's power of appointing and removing the central bank's governor is acceptable, but I want the selection process to be better," Ammar said at a meeting of BOT executives and 20 academics last week to discuss the central bank's future.

The method of appointment and removal of the governor was one of the most controversial topics raised in the four-hour discussion, with some economists supporting a free hand for the minister and others disagreeing.

Ammar said the governor's absolute powers should be curbed with the setting up of four committees in charge of four specific areas, as proposed in a revision of the BOT Act.

He declined to say whether he would lobby for his views in the NLA, saying simply that the finance minister and BOT governor had already expressed their views.

However, Pakorn Vichyanond, research director of TDRI's Macroeconomics Policy Programme, said he agreed with the finance minister selecting and dismissing the BOT governor because this would ensure consistency between fiscal and monetary policies. If the governor does not get along well with the minister, policy conflicts could arise, he said.

"Policy consistency comes with personal harmony, whereas personal conflicts will cause policy conflicts," he said.

The Council of State has vetted and returned the draft of the revised BOT Act to the Finance Ministry, which will soon propose it to the Cabinet to be put before the NLA.

Pakorn was among several economists at the meeting who felt that the BOT's current inflation-targeting policy was wrong for a small country like Thailand. They said the country should play the role of follower to better ensure economic stability.

Pakorn said the BOT should adopt a policy of targeting overall economic stability instead of focusing on inflation, which was not a problem all the time. As a small country, Thailand cannot control economic direction but has to strive for balance as far as possible, he said. For example, if the unemployment rate surged to 20 per cent while the inflation rate was only 1 per cent, the BOT should focus on the former rather than the latter.

Pakorn also said the BOT should not target a particular foreign-exchange level for the baht, which would be tantamount to a fixed exchange rate.

BOT governor Tarisa Watanagase said inflation-targeting required the bank to set certain policy targets in a cautious approach to ensuring economic stability. The business sector would be able to read the signals from the policy targets set by the central bank and react accordingly, she said.

"They could react to the signal before we actually did anything. [Inflation] targeting allows them to better cope with volatility," she said.

Anoma Srisukkasem

The Nation