The art of persuasion versus crude political threat
Finance Minister Kittirat na Ranong is supposed to have written a special letter to the chairman of the board of the Bank of Thailand, Dr Virabongsa Ramangkura, who was asked to read it aloud to the board members at the January 31 regular meeting.The letter was supposed to be confidential but, because walls have ears, reports have leaked to the effect that Virabongsa did follow the minister's request.
One informed source said the finance minister was particularly interested in having the central bank's board chairman read the note to the governor, Dr Prasarn Trairatvorakul. That's clearly because Kittirat wanted to relay a specific message to Prasarn: bring down interest rates to stop fund flows from abroad.
Prasarn has persisted in his public statements that his personal view is that the current 2.75 per cent policy interest rate is just right for the prevailing economic conditions - and any reduction could trigger bubbles in both the stock and property markets. He is also emphatic that the surge of foreign money into the country isn't caused solely by the gap between the local and foreign interest rates. Other, perhaps more valid factors, are in fact behind the rapid fund inflow.
But if you think the conflict is between the finance minister and the central banker, you might be looking at things too superficially.
The central bank governor, under the current rules of the game, can't decide the interest rate. That has to be decided by the Monetary Policy Committee as a collective body. Dr Prasarn may have his own opinion on the issue. His staff may provide the background and analyses to the committee. But the final call is made by the majority of the committee members, who represent a wide range of government agencies with diverse backgrounds.
Of course, both Kittirat and Prasarn can try to win over the committee members through persuasion. But the finance minister would have to be very careful not to appear to be exercising his political influence over the decision-making process. After all, the "proper distance" rule between the person who runs the finance ministry and the one managing the central bank was laid down to specifically prevent politics from swaying professional decisions that have wide-ranging consequences for the country's economy.
Kittirat didn't have to convince Dr Virabongsa. They were supposed to be on the same page on this issue. In fact, the joke making the rounds is that the central bank board chairman might have suggested to the finance minister that he send him the note so that he could read it out loud in the board meeting instead of him having to make the point himself.
One cynic in the corridors of the central bank even suggested, half in jest, that Virabongsa might have drafted the letter himself and asked Kittirat to sign it, just to make things look a bit more natural.
But whoever was behind the wording of the note is clearly not well versed in the art of persuasion. Or perhaps it wasn't supposed to be diplomatic in the first place. According to the leaked report, the finance minister was supposed to have made it clear in the letter that if the central bank refused to lower interest rates as suggested by the government, then "the central bank's board will have to bear the responsibility if the country's economy suffers as a result".
Now, the Kittirat that I have known all along was a very soft-spoken, diplomatic person. It was, in fact, Virabongsa who might have resorted to that kind of direct language. But since the letter came from the finance ministry, the ownership of that sentence couldn't be easily transferred.
One would have assumed that the country's top finance man and the central bank's board members, in their official mode of communication, would engage in some subtle persuasion instead of issuing what could be interpreted as threatening language.
It is thus highly significant that either Kittirat or Virabongsa should make public the content of the controversial note. It obviously does nobody any good if the little note from the finance minister to the central bank is seen as a "threat" to central bankers' professionalism.
Worse still is the likely interpretation in certain quarters that this could represent political interference in the highly valued independence - in the conduct of duty - of the country's best and brightest at the central bank.