Ex-finance ministers warn about public debt

Concerned about a rising level of public debt, former finance ministers have urged the government to focus on fiscal discipline and stop its populist policies.

At a seminar on "Challenge for the Future of the Thai Economy in 2013" held by the Economic Reporters Association yesterday, former finance minister MR Pridiyathorn Devakula said two challenges were how to grow the Thai economy and how to keep the economy stable. To achieve both of these, the government has to pay more attention to the public debt.

Pridiyathorn said the current government was less concerned about fiscal discipline than populist policies to ensure voter support, and that could result in damage to the nation's finances.

Before introduction of the rice-pledging programme, the public debt stood at Bt8.6 trillion. If the scheme is continued, the debt could reach Bt10.3 trillion, or 63.7 per cent of gross domestic product, by the end of September 2019, he predicted.

Before 1957, Thailand's economic growth was supported by agriculture, export of agricultural products and ores, and domestic trade. That year, GDP expanded by less than 5 per cent.

From that year through 1982, when Thailand was more liberal, foreign investment came in, with domestic industries replacing imports. The country exported processed agricultural products and other items. The economy during that period grew by 6-7 per cent per year.

From 1982 to 2007, Thailand had a full industrial supply chain serving the region and the world with exports of various products. The economy expanded by 8-10 per cent per year.

After 2007, GDP growth slowed to 4-5 per cent because of labour shortages and limited space for investment.

Pridiyathorn said he was concerned that Thailand was in a "democracy trap", using the government budget as an election campaign like some European countries did.

Korn Chatikavanij, another former minister of finance speaking at the seminar, said the Thai economy had the opportunity to do well in the future thanks to sound fundamentals. Thailand's administrative and economic systems and legal infrastructure also supported trade and investment. He said he believed that the duty of the state was to facilitate the private sector with infrastructure and help keep it competitive. The government should also support the private sector with joint investments.

It is important to maintain fiscal discipline, Korn said, adding that the current government had failed in this matter as shown by fast-growing public debt.

Tirachai Puvanadnaranuban, who is also a former finance minister, said the government had to find a way to deal with strong capital flows, and one solution was to tone down its stimulus measures in an effort to avert an economic bubble.

In the opening speech at the seminar, current Finance Minister Kittiratt Na-Ranong said the government was focused on driving the economy through employment, stability and income distribution, driven by domestic purchasing power, government spending and private investment. If there is a positive political environment, production will expand and that will attract investors and lead to exports.

He said the Bt2-trillion infrastructure programme would entail investment by both the public and private sectors, and despite the heavy borrowing that would be required, this debt would be complemented by the nation's assets.

He added that the current challenge was to keep the economy stable amid lowering global purchasing power and appreciation of the baht.

"In 2013, Thailand's purchasing power will improve, and it is the year for public and private investment to help the economic system to expand with stability."