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CNBC interview with Thai PM Abhisit Vejjajiva

Thai Prime Minister Abhisit Vejjajiva talks to CNBC Martin Soong on Thai political and economic situations. The following is the




CNBC:  By the time viewers watch this it would have been almost exactly 2 months to the day that you assumed power.  Since then it's been quite apparent that there is more stability in Thailand. We flew in, Suvarnabhumi was fine, no problem. Streets are much quieter, government house where we are now is a lot calmer as well. You have a new government led by yourself. The cabinet positions much more, more technocrats included. Foreign investors like that a lot. But the big question that they're still left wondering is, and bluntly I have to ask - are you really in charge? Because there are perceptions that you owe for example the military, the invisible hand, the power brokers behind this. That you owe the opposition because key factions switched to allow you to gain a majority. And this is important because people are left wondering especially foreign investors - the policies you come up with, are they yours, are they watered down compromises, and are they the right policies?

THAI PM: I think the first thing is that you're right. Stability is the first thing we have to aim at, without which obviously nothing can proceed. And we can't make any progress. And over  the last month and a half, or 2 months I think we have made great progress. Helped particularly by the by-election results in early January. So if you're talking about that, I owe most to the electorate for voting in a sense of confidence in the government and sending a very strong signal that the Thai people want the country to move ahead, to move beyond the divisions and conflict that we've seen last year. The policies, there are a number of issues and people forever debate about whether they're the right policies. I think all the governments are now facing that. But they are definitely asked. And am I getting things done? Well I think I've set clear agenda right at the start - apart from achieving greater political stability, I mentioned 2 things. The first is that we have to move very swiftly with the economic stimulus package and second we have to carry out our commitments as chair of asean. Well the last month we've pushed through the economic package approved by the cabinet and more significantly now the mid-year budget has passed the lower house, expected to pass the senate next week. And also all the agreements concerning Asean have also been approved by joint seating of parliament. So you know we've set our agenda, we're on target. We've achieved what we've set out to do in the first couple of months.

CNBC: Let's talk about the economy. Because saving the economy, a lot of outside observers believe is your job. Number one this will make or break your administration. if growth goes below or sinks to 1% that could be it. This is what I'm hearing at least. But the problem is, this is a global crisis, 65% of Thailand's economy is exports. How much can you really do?

THAI PM: I think there is fairly good understanding among the Thai people. They know that this problem is a direct result of the financial crisis that's happening elsewhere. So in that sense I think they are willing to assess the government's performance with that in mind. Obviously they know that the export sector, the tourism sector is badly hit. And we've seen the numbers in the last quarter of last year and it's clear that there's been a strong contraction in those sectors. Which meant of course that GDP for the last quarter of last year is around minus 3%.

CNBC: Is it going to be negative first quarter of this year as well? 

THAI PM: I believe that that is a very good chance, that in the first quarter you will continue to see that effect

CNBC: And Thailand will technically be in recession then?

THAI PM: That's right. That is why we have to move very swiftly with the stimulus package in the hope that the money gets disbursed from March onwards so that we begin to turn things around from second quarter onwards. I think, I think people understand that. In the sense that they are more understanding of the problems that it's not exactly something we can totally control.  Having said that there is a lot we can do, domestically of course in terms of keeping up demand and also playing our role as far as the international economic order is concerned. And I've been active not just pushing through all the packages here but also doing my bit abroad.

CNBC: You've been here before, when the last democratic administration was in power in 01 you also inherited a pretty awful economy. On top of that now you've got the chaos. 08 19 19 there's a little bit of irony here - because the democrats lost those elections to former prime minister thaksin's populist policies. Now you appear to be doing something very very similar, pump priming, fiscal spending, handing out money 58 U-S dollars to each deserving individual?

THAI PM:  This is just a very old style, Keynesian policy which everybody is doing. I don't know of any country that is not pursuing this line. I don't know any school of thought that says we could be doing otherwise. all governments now need to pour public money in, to make sure there is job creation, to make sure that demand is kept up. Now obviously there are differences in the details as to how that money's spent. And our target is clear. We want the money out as quickly as possible with as little leakage as possible. And also aimed at the most deserving people. So that's what we're doing. It's, I don't see it in terms of populism at all

CNBC: We've talked about, you've talked about the stimulus package, I know there're also some tax tweaks as well. What else, what more can or should be done what is in the works. What about privatization?

THAI PM: Well actually we have first of all plan b - our annual budget cycle begins in October. And what we've done in terms of mid-year budget has to be within the constraints of the law concerning how much, how big a deficit we can run. So if there is, if there are remaining problems, you know as we head into the maybe the third or fourth quarter this year, we are also negotiating for some external financing of some infrastructure or development projects as well. So that should there is a need, should there be a need for more stimulus, we could do that without actually breaching the legal limit concerning internal or domestic borrowing. But looking beyond that you mentioned privatization. Perhaps the market conditions and also the remaining state enterprises that we see in the hands of the government - there may be little room for that. But what is certainly possible and should be pursued are a number of public, private partnerships in terms of some key infrastructure projects and actually within this month we will be taking a look at that in a systematic way. Concerning our need to upgrade infrastructure anyway, in terms of the railways, in terms of telecommunications, and also water distribution projects to help the agricultural sector.

CNBC: Is it, is the focus more on so-called PPPs as opposed to state companies, privatizing them? Because there is the fear that in the downturn this is not a good time to do something like that, because of the potential job losses involved at a time when unemployment is rising and there is unrest outside and under the ppp-led government,  state unions I think were very very against private, Thaksin's privatization plans.

THAI PM: Well I think the problem with previous privatization plans is that they hadn't really thought through the impact on public services as a whole. Too often the emphasis has been on the incoming revenues and also the financial conditions rather than looking at the sector of public service in general. And the reason why I think privatization needs to be pursued in a more careful manner is that you need a regulatory, a good regulatory framework in place which means of course amending the laws and so on. Which is why I think at the moment the sensible route is to look for possible partnerships with the private sector on a project to project basis.

CNBC: How real a concern is it for you, that there could be a what's been described as a coming storm there's a fellow named Walden bellow who's been around for a long time, a political economist who thinks that with this downturn, this recession there's going to be more not just unrest, protests but possibly even revolution? For Thailand I mean the unemployment numbers are going up. Is, could this feed more political instability?

THAI PM: It's one of the main points I that I made when I made my trip to the world economic forum, that the developed countries -  I know they have their own financial problems to deal with and that's the top of their mind. But it's important to recognize that a lot of developing and emerging economies, through no fault of their own are now being affected rather badly especially those very open economies. And what's important is that you don't forget - that unless there are corrections made in terms of making sure that capital, finance, continue to flow. And also that trade flows and investment flows are sustained. There is a real possibility of unrest because of social impact of such a crisis. I think we've been fortunate, and we continue to be fortunate in that I think the most threatening factor would be food shortage. But that's where Thailand is fortunate because we have been a food exporting country and we'll continue to be a food exporting country.

CNBC: I understand that some unemployment benefits to people are conditioned on them returning to their provinces, to their villages. Meaning you get the money only if you go home as opposed to stay in the urban areas in the city?

THAI PM: We have a fairly diverse scheme. What we want to make sure is  that when people become  unemployed and governments try to run training programmes, we don't want sort of  generic training programs after which you know these people cannot find jobs. So what we want to do is to make sure that the training actually provides the skills and already has clear targets about what people can do with these skills once they leave the training program. And one of the possibilities clearly is that we could use this as an opportunity to restructure our own economy rather than having big concentration in urban areas.

CNBC: Let's talk about Thailand now in a post-Bush the new Obama world. His secretary of state Hillary Clinton is on the way to Asia. Conspicuously to some people Thailand is not among the stops. There's a sense that because the itinerary included Indonesia, most populous Muslim nation in the world, at a time when u-s wants to reshape its own image in the Muslim world. There's a sense that places like that will take precedent, precedence over places like let's say Thailand where there is the perception there is military influence in government, that there is a too harsh a censorship to try and protect the monarchy.

THAI PM: I think we have to separate the issues. As far as the u-s is concerned, I think our bilateral relations have been very strong throughout and continue to be very strong. Close and cordial. And  I'm sure there'll be appropriate occasions where we  could strengthen those ties in terms of exchanges of visits. I believe that as chair of Asean and throughout the year there'll be many more multi-lateral meetings and some of which the u-s will be involved. I think Indonesia is a major economy, it's part of the g20 so clearly there has to be engagement from the economies like the u-s. I don't think that the issue of the military or the laws to protect the monarchy is part of this equation concerning how much the u-s will engage us. I certainly  believe that we are still one of the more liberal regimes in the region. And I think I've made very clear and I've proved the last couple of months that those concerns about the  military influence or any reactionary trends are now actually being dealt with. And I think that certainly by the middle of the year this will be even clearer.

CNBC:  You mentioned very close to cordial ties but the fact is a lot of analysts think that at least your economic ties are at a low, the u-s t-r the u-s trade representative has put Taiwan on its most watched list because of alleged intellectual property rights violations. This was after  Thailand of course started making generic drugs that big u-s pharmaceuticals make including drugs for cancer, for HIV, for aids. This seems to have pitched both sides head to head, and then there's the FTA which has not been resolved.

THAI PM: Well the intellectual property rights issue is being tackled. I now chair a special committee which is recently set up in my government to enforce the law concerning intellectual property rights violation and actually had a very good  dialogue with the American chamber of commerce. Actually linking back to the u-s chamber of commerce via video-conferencing. So I don't think that there are tensions of any kind in terms of our economic relations. Now obviously throughout the year, throughout the years Thailand has diversified our markets considerably. So in that sense yes, the u-s now accounts for much less in terms of our exports than previously. As far as the FTA is concerned, the ball is back in their court because they need to renew the special authorities that the president would have. I mean we stand ready to continue negotiations if they so wish.

CNBC:  Let's move on and talk about the military, as it relates to the business and the economy. Countries like Indonesia  for example have been struggling with this issue for many many years. Thailand's case - the last democratic administration khun chuan he rolled back I think the influence of the military considerably, getting them out of business, cutting budgets etcetera. Since the 2006 coup though it seems as though the military has been back on the ascendant. The military budgets are booming again, we see a lot more generals back on the boards of big companies in Thailand. I guess the question is, in terms of economic efficiency - guns and butter may not mix very well. Where do you stand on this?

THAI PM: My policy is the same as previous democrat administrations. We'd like to see professional armed forces and we recognize the problems that we've seen over the last 7 or 8 years. Obviously the coup happened as a reaction to a number of abuses that had taken place before and somehow the military obviously felt that the rule of law is breaking down. Obviously we have different views on that as a democratic politician I don't accept that as an excuse, but clearly the coup was a result of a number of developments. Rather negative developments concerning our political system. And as with all coups, once they happen there are a number of trends in terms of military influence. In business and also in government. But I think over the last after democratic elections there had also been a reversal of that trend. And the military I think have been very careful despite the big conflicts and tensions and problems in politics over the last year, not to overstep the limits of its role.

CNBC:  They've been making headlines though with the rohingyas, with lese majeste as well and you've been quick to defend the military.

THAI PM: No, I need, I need to be fair to all sides. We have to enforce our law and at the same time I think the military has accepted my policy, that if there are any abuses of rights their people would have to be brought to account. They've made that an open policy so I think that clearly shows the acceptance of democratic values. For the budget I think you need to be fair. We've had less increase over the last decade than a lot of our neighbors concerning the military budget in absolute terms and also as proportion of gdp. And yet you don't seem to be saying that our neighboring countries are allowing military influence in politics.

CNBC: Let's talk a little bit more about neighboring countries then. Asean the summit, originally Bangkok then moved to chiangmai and now in hua hin at the end of this month. The key point here is there's finally the Asean charter the so called constitution which gives it I guess a legal identity. Probably more importantly is this whole plan to create a European style economic bloc, integration, level playing field all across. At a time like this, downturn and recession is this idea likely to lose momentum? Because the perception is during times of hardship countries tend to pull back, to be protectionist. At least that's the worry.

THAI PM: Well one of the messages that I hope that Asean will send out after the summit is that that will not happen. That we recognize that when there are economic difficulties and there is always temptation to close in or resort to protectionism. In the end that kind of response can only hurt everybody. And one of the commitments I would like to see certainly after the summit is that for our Asean region that will not happen. We will keep trade flows open and we'll push ahead with a number of co-operation. You know not in terms of just trade liberalization but we'll be tackling the issue of food and energy security together.

CNBC: You're a trained economist. How do you get over this fundamental problem though - the Asean 10 hugely despaired levels of economic development, one.

And varying - would probably be the most diplomatic way of putting it -  political systems as well and you expect them to come together. It's uh, sounds like it would be a much greater challenge then what we've seen happen in Europe.

THAI PM: It is, and I think the trick is to identify common interests. And I'm sure that all the countries whatever the economic and political differences all aspire to have peace and prosperity. We should identify areas where there are win-win situations and that's what we do. While at the same time recognize our differences. And also have mechanisms to reduce those differences. In Asean for instance, there is this integration program where we will help those members who perhaps are less ready to integrate their economies through a systems and co-operation programs.

CNBC: Very quickly, we're almost out of time here. This is also the question on everybody's minds - what's going on with the next elections?

THAI PM: At the moment the priority for us is to bring stability back to politics and also to make sure that our people can get thru this very difficult economic times. We need to have a stimulus package to create jobs and to be prepared for the worst as far as the global financial crisis is concerned. Taking the country to the ballot box now will probably disrupt all that not to mention the commitments we have as Asean chair. So I think the priorities are clear and I think the by-election results also says that this is the path that the people want us to take. For the future, I can't tell you. But as a politician in a parliamentary system you know early elections are possible but not for now. The priority is for our people to get through these difficult economic times.


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