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Published on August 16, 2007

"If China, India and Asean are not suffering from this fiasco, I don't understand why Thailand would be the only one to fall to this problem," he said.

Fears of fallout from the credit crunch gripping major financial markets have dragged down the Stock Exchange of Thailand's index for about two weeks, as foreign investors continue their pullout despite the Bank of Thailand declaring that local banks's exposure to subprime loans was only Bt20 billion.

Kosit also dismissed further action to stem the baht's rise, saying the unit was not under speculative attack, just buoyed by heavy capital inflows.

"It's unlikely and unnecessary for additional measures as market mechanisms have been improved," he said.

"We have to admit that we're not always successful at maintaining stability, due to external factors such as the sub-prime lending fiasco in the US," he said.

"Our goal is rather to let our currency move in line with those of neighbouring countries and our competitors.

"We are against rapid appreciation," he told a dinner talk hosted by the Metropolitan Electricity Authority.

The wide gap between onshore and offshore baht levels also did not call for further steps by the authorities, he said, adding the situation now is not like in 1997 when the baht was battered by hedge funds and had to be allowed to depreciate.

Maintaining baht stability to raise investor and consumer confidence was one of the three issues that Kosit said the government would key in on in the last three months of its term.

The other two were strengthening economic fundamentals and promoting adjustments in the private sector.

The government has sped up its budget disbursement and boosted investment, he said. Foreign direct investment is higher than last year. New capital of about Bt500 billion is also expected for projects in Rayong's Map Ta Phut, following the measures to tackle pollution problems in the industrial zone.

He admitted the government has had little luck in boosting consumption, as people are still worried about the economic and political outlook. But he was quick to point out that personal spending is weak also because of huge buying sprees in the past few years and that low consumption does not mean the economy is weak.

"If economic growth is below 4 per cent this year but the economy is stable, we should be happy," he said.

On upgrading corporate competitiveness, he would promote cooperation with the private sector in terms of innovation, productivity and quality.

"The government cannot do it for the private sector but we're delighted to help."

Chalida Ekvitthayavechnukul

The Nation