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Published on February 14, 2008

On February 18, Prime Minister Samak Sundaravej will deliver the government's policy statement before Parliament. As expected, Samak will breathe life back into all the populist policies of ousted PM Thaksin Shinawatra. The government cites the principle of sufficiency economy, which it will follow in accordance with the Constitution, but in practice it is ready to dig into someone else's pocket and borrow huge sums to bankroll a whole range of populist policies. Samak will discuss urgent tasks that his government would like to accomplish in the first year of office such as national reconciliation, tackling the southern unrest and eliminating drug abuse. But overall, we are about to witness a return of economic populism. Of particular concern are the 10 urgent measures to boost people's income such as revival and expansion of the Bt70-billion village fund; the people's bank (micro-loans for poor people); debt restructuring for farmers and the poor; the SME Bank; and the Otop (One Tambon, One Product) programme.

The income-contingent loan will be revived, as will the SML financing scheme, low-cost housing, free or heavily-subsidised buffaloes, notebook computers and loans for people who want to apply for jobs overseas. Each village will receive Bt300,000 to Bt700,000 to finance investment needs without having to go through normal budget procedures. Apparently the government wants to pay back its voters, most of whom live in the North and Northeast. These programmes were highly popular during the Thaksin years because they represented quick hand-outs. They also provided liquidity for rural folks who were saddled with debt. They have been hoping that the government would eventually bail them out.

The Surayud government attempted to pump money into the rural economy through some populist programmes, but the money got stuck somewhere in the system, and people went without. Initial support for the coup quickly turned into disappointment and disillusion, and the Samak government was elected because of its promise to re-introduce the populist policies. On the surface these policies look promising, but they could pose a serious threat to Thailand's long-term economic health. There is no free lunch. All these policies have to be supported by the central budget, which comes from tax revenue. Most populist projects have the short-term effect of stimulating consumption, but they do not create long-term jobs or investment.

Some of the projects look good on paper. Cheap housing for the poor is honourable, but when it comes to implementation there are lots of nominees involved in the purchase of land, the hiring of contractors and the financing - which ends up as a waste of taxpayers' money. Student loans are another seemingly excellent project for low-income families but in the end, most of these loans turn sour because few graduates are willing or able to repay what they borrowed.

Much worse, the state-owned banks and specialised financial institutions have also been brought in to provide loans to support these pet projects. Ultimately they will turn out to be non-performing loans. But we have already heard that several banks are jumping gleefully at the prospect of another opportunity to ask for government funding to increase their capital so they can resume their credit spree. The lesson of the bad credit situation during the Thaksin years has evidently not been learnt. Last year MR Pridiyathorn Devakula, the former finance minister, pointed out that the populist programmes created during the Thaksin years resulted in a Bt150-billion debt burden for Thailand. If these populist programmes were allowed to continue, they would eventually bankrupt the country, he pointed out.

The government will try to boost the economy and draw new investment by implementing nine rail transport projects for Bangkok, as well as lay double tracks on existing single rail lines upcountry. There will also be related transport schemes in the provinces. In addition, the government will begin large-scale irrigation and water management schemes, plus tourism promotion projects to boost the investment sector. Some of these mega-projects will be of undoubted benefit. But again, when it comes to implementation, we would like the Samak government to heed the advice of His Majesty the King: the Cabinet must exercise its power with honour and responsibility as entrusted to it by the Thai people.

The Nation