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Published on March 27, 2008

Besides this, low-income earners will receive loans at special rates as part of the government plan to improve the domestic economy. Of course, the plan was welcomed by low-income earners. But many economists disagree. After all, there were questions over the effectiveness of the populist policies, especially money handouts, under deposed prime minister Thaksin Shinawatra.

The People Power-led government also plans to continue the debt moratorium programme, even though the previous moratorium created moral hazards for farmers. The farmers received the moratorium while the government didn't create jobs for them. Some of them began to borrow again, waiting for the next subsidy.

The government may claim the handout is essential to jump-start the economy by injecting cash into rural areas. But the question is the sustainability of the programme, especially when the government lacks a proper mechanism to ensure the effective use of the money.

The main concern is the micro-credit project. The Finance Ministry will ask the Government Savings Bank to lend up to Bt5 billion for the micro-finance scheme, known as the People's Bank, with low interest rates. The ministry claims that it has followed the concept of Nobel Prize winner Muhammad Yunus and the Grameen Bank, which developed micro-credit into an instrument to help low-income earners create their own businesses. But while Grameen Bank has an effective system to ensure money is well spent and enable borrowers to stand on their own, the Thai government does not have a supervision plan that will ensure the money is not spent on new mobile phones or electrical appliances. Without supervision, the micro-credit project will not serve its purpose: to boost the steady growth of consumption and create small entrepreneurs.

The government may claim it has to be decisive and react promptly. But without effective supervision, the programme may be comparable to dropping banknotes from helicopters. If the government fails to ensure effective spending of the money, it can be seen as spending for short-term political benefit. And people will not be happy to see their tax money spent for the wrong purpose.

The Nation