Abhisit 'faces tougher job than Chuan in 1997'

Abhisit, who won a vote for the premiership in Parliament yesterday against Pracha Promnok of the Puea Pandin Party, has already announced he will serve as head of an economic team and focus on restoring confidence in Thailand and bridging the political and social divide.

A high-level Democrat Party MP yesterday said the present problems were more complex than in 1997, when Thailand faced a foreign-exchange crisis and a collapse of the corporate and banking sectors and the Bank of Thailand having blown its entire foreign reserves.

"Now we cannot just tackle the economic problems alone without curing the social and political ills in parallel," the MP said.

After painful financial restructuring, the export sector led the Thai economic recovery on the back of devaluation of the baht. The sound global economic environment also helped boost exports, which spurred a timely Thai recovery.

But now the world is threatened with recession, with financial crises in the US and Europe, which are important trading partners. Thai economic growth is set to decline, probably to 1-2 per cent at most next year. If exports were to rise 5 per cent next year, after 20-per-cent growth this year, it would be a blessing.

"It will be more difficult for the Democrats to achieve fast results in tackling the economic problems now than in 1997," said Ekamol Khiriwat, a former secretary-general of the Securities and Exchange Commission and former Democrat member.

"Then, our financial institutions were collapsing. Now, everything is kind of slowing down. Consumption is bad. Exports are bad. Unemployment is also going to be bad. It will be tough to achieve fast results in tackling these economic problems."

Ekamol suggested several remedies to boost the economy:

First, the government must make sure interest rates are kept low in real terms.

Second, bank credit must flow to the needy corporate sector in the broader economy. Banks are now fearful about the weaker economic environment, which could make repayment of loans difficult. So state-owned banks must take the lead in pushing out credit to keep the economy humming.

Third, the government must help the private sector push for exports. Measures to assist exporters to boost exports and find new markets must be implemented quickly.

Fourth, investment, both public and private, must be stimulated in order to lift domestic consumption.

Fifth, allow the exchange rate to stay down if the baht becomes weaker. In the present environment, Thai exports need to be competitive against products from other countries.

Kiat Sitthi-amorn, a Democrat candidate for the commerce portfolio, said a priority of the new government would be employment, as the Federation of Thai Industries expected up to a million out of work next year.

He said the new administration must come up with innovative measures to create jobs, both permanent and temporary, in order to help reduce socio-economic impacts from rising unemployment, especially among the low skilled.

The new government will also have to revive tourism and other sectors hit hard by the recent closure of Bangkok's two airports by anti-government protesters, as well as boost the farm sector.