|
Thailand Is Turning Japanese; a Good Thing? |
Author: William Pesek
Date:
8 Feb 2548 17:49
Thailand Is Turning Japanese; a Good Thing?: William Pesek Jr. Listen
Feb. 7 (Bloomberg) -- Thaksin Shinawatra has a lot of currency -- literally. Thailand's businessman turned prime minister is a billionaire, after all. Forbes magazine ranks his family as this nation's second richest.
Now Thaksin has another kind of currency: political. Exit polls, as expected, show the 55-year-old was reelected in a landslide yesterday and his Thai Rak Thai party did so well that the opposition may as well shut up and go away.
The results offered few immediate clues for investors wondering what Thaksin's strengthened position means for Southeast Asia's second-biggest economy. Yet they're part of a troubling trend pundits have yet to recognize: Thailand is becoming Japanese.
On the surface, that may sound grand. Japan is an unusually wealthy and secure nation, one that's about as egalitarian as they come. Given Thailand's history of economic instability, it would seem this nation of 63 million could do far worse than follow that model.
Japan also is a model of political inefficiency, excessive debt accumulation and largess rarely seen in modern history. For better or worse, Thaksin is doing some Japanesque things investors may not appreciate over time. Here are four examples.
CEO Style
One: Thailand is becoming a one-party state. Now that his party holds an unprecedented number of parliament seats, Thaksin is free to take his ``CEO style'' of governing to the next level.
Thaksin's philosophy, after all, is that democracy is but a means to an end. ``To us that is quite alarming because if one were to view democracy as a means to achieve power then there can be no safeguard as to how that power is used and who that power is used for or against,'' says Buranaj Smutharaks, a member of parliament for the opposition Democrat Party.
Investors have reason to worry that one of Asia's most vibrant economies will regress. Rather than embrace greater transparency, accountability and the rule of law, Thailand is going the authoritarian route.
Thaksin's history -- self-made, larger-than-life billionaire -- makes him Asia's answer to Silvio Berlusconi, a tycoon who leveraged his business success to become prime minister of Italy. Thaksin, like Berlusconi, also has been accused of using public office to advance his private business interests.
Cronyism
Of course, investors may argue that such an outcome isn't as disastrous as it seems. Just look at the success of economies like Malaysia and Singapore, they'll say. Still, Thailand has the potential to be beacon of democracy in Southeast Asia, and yesterday's election was a setback.
``The Thaksin administration is particularly vulnerable to allegations of cronyism partly because the cabinet includes a high number of people with business interests or connections,'' the Economist Intelligence Unit Ltd. said in a recent report.
Two: Today's economic policies are increasing debt. Thaksin's strategy of boosting growth, or ``Thaksinomics,'' is little more than old-fashioned, debt-financed pump priming dressed up as something new and revolutionary. While Thailand's debt is nothing like Japan's, Bangkok's moves to lean on banks to extend credit have led to high levels of household debt and left the financial system vulnerable.
``The government's penchant for using government-owned banks to implement off-budget measures in boosting economic growth could eventually affect its budgetary position,'' according to Standard & Poor's analyst Chih Wai Liew.
Mixed Signals
Three: Ambiguity about foreign direct investment. Just as Japan claims it wants to attract more foreign capital and does little to do it, Thailand is sending mixed signals. The government has promoted Thai self-reliance to a fault, even going so far as limiting foreign involvement in privatization efforts.
Thaksin's heavy-handed approach to quelling drug use and an upsurge in violence in Thailand's Muslim-majority southern provinces also has turned off some investors. Foreign investment in Thailand fell 97 percent to $133 million in the first three quarters of 2004.
Thailand's 6 percent growth and Thaksin's hands-on response to the Dec. 26 tsunami helped Thai stocks recover from last year's 13 percent decline. The California Public Employees' Retirement System, or Calpers, also may resume investment in Thai stocks after a three-year lapse. Still, Thailand is getting far less long- term investment than it needs.
Central Bank
Four: Taking the central bank for granted. Debt-addicted Japan uses its central bank as little more than a monetary drug dealer; politicians lean on it to print yen so they don't have to make tough decisions. It's a key reason Japan has yet to modernize its economy.
Here in Bangkok, speculation is rife that Bank of Thailand Governor Pridiyathorn Devakula will be shown the door now that Thaksin has won a powerful mandate. While Thaksin denies he's going to sack Pridiyathorn, the men bumped heads over who should be allowed to run Krung Thai Bank Plc, a bank intimately involved in his lending programs.
Trouble is, Pridiyathorn is highly respected for making politically unpopular decisions. Case in point: He raised interest rates 75 basis points between August and December to slow inflation. The moves may not have pleased Thaksin at a time when he's trying to boost consumer spending.
The Nation newspaper was absolutely right the other day to warn that ``Thailand stands at a crossroads'' and that voters should be wary of giving Thaksin a ``blank check'' to run the economy for another four years. Now that Thaksin has that check in hand, investors should tread carefully.
To contact the writer of this column:
William Pesek Jr. in Bangkok through the Tokyo newsroom at wpesek@bloomberg.net |
|
|
|
