Bt180-bn spending boost

Newly appointed Finance Minister Korn Chatikavanij yesterday vowed to boost public spending to a total of Bt180 billion, up 80 per cent from the previous government's plan.

"We will spend at least Bt100 billion more under the supplementary state budget," Korn said yesterday after meeting senior officials at the Finance Ministry.

In addition, another Bt80 billion will be added

by the new government to stimulate the economy,

which has been hit hard by an export slowdown and severely damaged tourism industry.

Korn said the government could spend the extra money via the state budget or other channels, adding that he would consult with Deputy Prime Minister Korbsak Sabhavasu on details.

The supplementary bud-get for fiscal 2009 plus the current Bt1.8-trillion budget will go to Parliament for approval next month.

The extra public spending would be used to create new job prospects, he said.

However, Korn, a former investment banker, said the government might have to review some mega-investment schemes, due to global and domestic economic conditions.

For example, it would not be possible to implement all 10 mass-transit routes planned by the Samak Sundaravej government for Bangkok.

Yet projects that had gone through the bidding process or received foreign-government loans would go ahead.

Currently, the Purple Line from Bang Yai to Bang Sue is at the most advanced stage, because it already has an initial Bt19-billion loan from the Japanese government. It is followed by the Red and Blue lines from Taling Chan to Bang Sue and from Tha Phra to Bang Sue.

Korn said the cost of funds had risen due to the global slowdown, making it hard for the government to finance growing budget deficits.

Also, government revenue collection could be 10 per cent below the target for fiscal 2009.

The new government will retain most of the previous government's measures to help the poor, such as free public buses on selected routes and free tap water and electricity for low-income groups.

However, the government will not extend a tax cut on oil when this measure expires next month, because oil prices are low at present.

On the proposed corporate income tax cut, he said government spending was a more effective way to stimulate the economy than cutting the tax rate.

The government will also consider capital increases for state-owned banks.

Aekkachai Nitta-yagasetwat, dean of the Nida Business School, agreed that the government should spend more to stimulate the economy, as there were fears it might contract 0.4 per cent next year.

Aekkachai said if fiscal deficits were raised from Bt350 billion, including the supplementary Bt100 billion, to Bt600 billion, the economy could grow 2 per cent next year.

He noted that a severe impact from the global slowdown could force two-thirds of 700,000 small and medium-sized manufacturers out of business.

He urged the Bank of Thailand to cut its policy rate further, to boost consumption and investment. If consumption and investment grew 7 per cent, economic growth could be 3 per cent, he said.

Nipon Surapongruk-chareon, vice chairman of the Federation of Thai Industries, said export orders for industrial goods fell 70 per cent last month following the shutdown of Bangkok's two airports.

"Until now, orders have not yet returned to normal. Therefore, small manufacturers in industries that mostly depend on foreign markets, such as textiles and furniture, must be careful and concentrate on enhancing their efficiency," he said.