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Published on March 20, 2008

Somchai Jitsuchon, director of the Thailand Development Research Institute (TDRI), said the government should run a budget deficit only when one was really needed and only for good reasons, not just because it has more room to do so.

The government's stimulus package, which helps high-income earners, was possibly aimed at wooing Bangkok voters - who are not pro-government - rather than at encouraging spending by the pro-government grass-roots people, he said.

"I don't understand why the Finance Ministry has to run a huge budget deficit if it believes the country can decouple from the US economy," he said.

The Cabinet on Tuesday approved a Bt1.84-trillion budget for fiscal 2008 with a revenue shortfall of Bt249.5 billion.

He said the government was not clear on the details of the mega-projects even though their overall feasibility seemed acceptable. For example, it went ahead and conducted a feasibility study for the mass-transit system before drawing up concrete investment plans for each line.

The Mekong River water diversion project for the Northeast should also be designed to address the real problem.

Speaking at the seminar entitled "Thailand: Global Slowdown versus Pro-growth Government", Charl Kengchon of Kasikorn Research Centre asked how the mega-projects would help improve the country's competitiveness. He said the government was targeting a political agenda rather than real objectives.

"The government doesn't analyse what the country will get from the high-cost investment. If the projects can't contribute to the economy, they will cause further problems to be corrected over the next decade," he said.

Somchai said that aside from the mega-projects, the government should introduce legal and knowledge infrastructure and provide social welfare for people, in accordance with the new Constitution.

It could also boost domestic demand in many ways without pursuing a budget deficit, such as refining the Foreign Business Act and Retail Act, which would buoy the sentiment of private investors.

Kobsak Pootrakool, executive director of the SET Research Institute, said private investment was the biggest engine driving the economy this year, as private consumption is under threat from oil prices.

"The problem is not whether the interest rate is already low or not. Investors are ready to invest but they get stuck with micro problems such as laws and environmental conditions," he said.

Somchai said the oil price would be the main problem the country would have to deal with this year, not the impact from US economic problems.

Global demand continues to surge from high-growth countries like China, Russia and India. But the supply-side response could not match such high demand because of low exploration for fuel.

"I'm worried about structural shortage from traditional energy, which won't allow the oil price to come down. It could be lower if there was any recession," he said.

Kobsak believes that Thailand could survive the US crisis because the economy was not fragile like those of China, India and Vietnam.

Anoma Srisukkasem

The Nation