What you can't see may hurt you: shadow finance minister Korn Chatikavanijon on the hidden side of current Thai economic policy
Has the government responded adequately to
the global financial crisis?What are the shortcomings of current economic policy? What are the real issues?
Are there things that powerful people don't want me to see? That I should see?
Today's commentary by Korn Chatikavanij, shadow finance minister and deputy leader of the Democrat party, provides a critical insider perspective on economic policy (M.R. Pridiyathorn and Korn Chatikavanijon in photo on right).
Here is the commentary:
"...Over the past two weeks, I have been busy in both the policy and the scrutiny roles. The Thai economy is already suffering from the impact of the global financial crisis. Ours is such an "open" economy that the government's earlier claims that we're immune from any impact was always at best wishful thinking. The problem was that all their focus was on the potential financial impact, whilst the real problem for Thailand was always going to be the effect on the real economy."
Vocabulary:
responded adequately to Y - appropriate actions to solve problem Y
shortcomings - faults and weaknesses
a shadow finance minister - a member of the opposition in parliament who follows (shadows) the policies of the actual finance minister, critically analyzing these policies
a deputy - the second most powerful person in an organization
critical insider perspective - someone who is involved and knows what's happening pointing out problems
scrutiny - watching and checking carefully (for correctness, to prevent cheating)
a role - a position or function that a person has in a situation or organisation
an open economy - an economy that relies heavily on foreign trade (a high percentage of goods and services are imported or exported)
impact - effect
immune from a disease - cannot catch the disease
immune from any impact - cannot be affected by the problem
wishful thinking - avoiding the real problem (by thinking about )
the real economy - the part of the economy that produces goods and services (non-financial)
Agricultural price supports and subsidies
The government was thus caught off-guard by the impact on commodity prices, especially the prices of our key crops of rice, tapioca, rubber, palm oil and corn. More importantly, the decline in the prices of these products have a direct and immediate impact on our rural poor, a constituency already most vulnerable.an agricultural price support - a government program that guarantees a price for the crops grown by farmers
a guarantee - a promise that something will happen (See glossary)
a subsidy - when the government pays part of the cost of something
caught off guard - an unexpected event happened
a commodity - a uniform product bought in bulk, raw materials such as cotton, cocoa, silver or cooking oil (See Wikipedia)
indirect - A affects B affects C affects D (effect only comes through a chain of effects)
direct - A affects D
immediate - right now, with no delay
a direct and immediate impact -
a constituency - a section of society that gives political support to a political party or politician
So, while initial policy response concentrated on measures to (unsuccessfully) prop up the stock market, the government was - and still is - slow in responding to a more pressing need.
A walkout by MPs in Parliament was required to prompt a corn price guarantee scheme to be launched and the cabinet also endorsed a new rice price guarantee certain to cause further substantial losses. Actually, I do not have a principled objection to policy designed to subsidise income levels for farmers. The problem, however, is that the government refuses to acknowledge the subsidy for what it is. This means there is no provision made in the budget and it means the government ends up with a huge stockpile of products it dares not sell - for fear of registering losses.
a walkout - people walk out of a meeting to protest something
prompt - cause people to act
a corn price guarantee scheme -
endorsed - approved and supported
a principled objection - do not agree because of some general principle (for example, against executions (capital punishment) in every case because I believe in the "sanctity of all life")
subsidise - when the government pays part of the costs of an activity
subsidise income levels for farmers - the government pays part of the income of farmers, a government supplement to farmer income
a supplement - an additional amount (See glossary)
acknowledge - willing to say that something is true
refuses to acknowledge the subsidy for what it is - subsidises but unwilling to say that it subsidises
a provision - an arrangement
no provision made in the budget - the use of money is recorded in the budget so that everyone can see it and parliament can debate it, off-balance sheet item. hidden expenditure
registering losses - recording losses so that the public can see the loss
This means that on top of the 2.1 million tonnes they should have sold when the world price of rice reached US$1,000 a tonne earlier this year, they now have more than double that amount in stock, with much more to come from the new scheme recently implemented.
Meanwhile, Vietnam, sensing continued pricing pressure not least because of the eventual release of Thai stock, has recently off-loaded their rice for as low as US$350 per tonne.
Poorly planned subsidy programmes also lead to fraud on a grand scale. The fact that it is the middleman who benefits most from the high government price is well documented. Now there is concern that traders will be selling cheap non-Thai corn from across the border to the government at the much higher guaranteed price!
sensing continued pricing pressure - feel that over-supply will still push prices down
off-load - get rid of something you don't want anymore
off-loaded their rice - get rid of rice you don't want
fraud - the crime of making money by lieing or cheating
fraud on a grand scale - fraud involving very large amounts of money
a middleman - a buyer and reseller of goods between the factory and final consumer
Non-agricultural sectors of the economy
Away from agriculture, there is increasing concern on the industrial and commercial segments of the real economy. The Board of Industry warns that there could be more than 1 million lay-offs next year and SMEs are particularly vulnerable.lay-offs - when a company stops employing workers because there is no work (not the fault of the worker, "fire" means it was their fault)
SMEs - Small and Medium-Sized Enterprises (businesses), not large corporations
particularly vulnerable - very easily hurt
The government announced that they would seek to increase commercial bank lending by 400 billion baht next year. Sounds good - until one is reminded that current bank loans outstanding are almost 8 trillion baht, so this would amount to a mere 5% increase in bank assets. That is below existing commercial targets as it is.
Moreover, it was unfortunate that, in his haste to be seen to be doing something, Minister Suchart rushed to extend comprehensive deposit guarantee for three years and lost the opportunity to negotiate something in return from the banks, who are clear beneficiaries of this policy.
Current bank loan/deposit spreads are over 5% - the highest in the region. There could have been a quid pro quo on spreads as well as on increasing credits to SMEs in particular.
Vocabulary:
comprehensive - includes or covers everything
a guarantee - a promise that something will happen (See glossary)
comprehensive deposit guarantee - a promise that all bank deposits are protected from loss by the government (deposit insurance)
a spread - a difference
bank loan/deposit spreads - the difference between what the bank pays depositors for the use of their money and what it receives from borrowers (loan recipients) for the use of that money
a quid pro quo - what you give in exchange for getting something (if there is no "quid pro quo" then it is just a free giveaway or handout)
Instead, the minister is talking about merging the government-owned SME bank with the Credit Guarantee Corporation (CGC). This is not an optimum idea. The CGC is a tool for all commercial banks, and limiting it to just the SME bank does not make sense. The SME bank also needs to show that it can operate more efficiently without the catastrophic NPL levels of the past. Better to promote increased risk sharing with the commercial banks in order to stimulate loans while ensuring a level of good practice.
Domestic tourism is also clearly key - since much of the smaller SMEs and Otop products depend on this. With inbound tourism bound to suffer because of global problems, the government needs to be imaginative and committed to boosting domestic travel.
As for my scrutiny role, I am still pressing Minister Suchart to tell us what he will do with the Bank of Thailand now that the Ombudsman has ruled the MoF-sponsored BoT board to be illegal.
Credit Guarantee Corporation (CGC) -
optimum - the best possible
catastrophic - a terrible disaster, very bad
Non-Performing Loans (NPL) - loans with borrower is no longer paying back money owed
catastrophic NPL levels - very high levels of non-performing, that could lead to problems for the bank
MoF-sponsored BoT board - the people that the Ministry of Finance wanted to appoint to govern the Bank of Thailand
Key Thaksin case kept out of courts by government
More bitterly, and (sadly) as expected, there is an ongoing dog-fight between Thaksin and myself, on what I believe to be the main event in terms of his economic crimes: the alleged fraud, money laundering, false disclosure and stock manipulation activities that are all rolled into what is known as the Winmark/SC Asset case.bitterly - disappointing
alleged - claimed to be true, but not yet proven
fraud - the crime of making money by lieing or cheating
money laundering - financial transactions that hide the identity, source, and destination of money, most commonly by drug dealers to conceal their illegal earnings (See Wikipedia)
disclosure - making facts public (following a legal requirement)
false disclosure - stating publicly facts which are not true, lieing
stock manipulation - illegally buying and selling stocks to affect the price of stocks and make money from this
Winmark/SC Asset case - the name of the legal case that deals with the stock shares that Thaksin owned, considered by many to be the most important case
I have filed complaints against the Office of the Attorney-General at the National Counter Corruption Commission and will do the same against the Department of Special Investigations this week. Both agencies are, in my opinion, intentionally neglecting to do their proper duty in a most blatant way. It made me wonder, why is it that there are still so many people ready to do what is clearly wrong in order to protect Thaksin? I guess they must have real faith in his "Red Army" (Read previous article).
As for me, I have been warned not to mess with the OAG or the police.
Well, I'm being forced to take on both. Personally, I still believe that, in the end, justice will be served. If not, there is no chance for Thailand, and in that case, what happens to me is the least of our problems.
intentionally - you really want to do what you do, not an accident
blatant - done in an open and very obvious way
intentionally neglecting to do their proper duty in a most blatant way -
mess with - cause problems for
take on - decide to have a dispute or fight with someone more powerful than you
justice will be served - justice will be done, a just outcome will be achieved
the least of our problems - this will be the smallest problem in the end (meaning: this will lead to even bigger problems)
(Source: Bangkok Post, op-ed section, 04-11-08, link)
