The new Bank
of Thailand Act
and central bank
independence
By Jon Fernquest
New laws should soon strengthen central
bank independence in Thailand.
The new 2008 amendments to the Bank of Thailand Act gives the central bank governor a five-year term. Governors may now only be dismissed for gross negligence or incompetence. In the past, the governor could be replaced by the Finance Minister for any reason whatsoever (at his discretion) which made the position vulnerable to poltical influence.
The power of the governor in monetary policy decision-making has been reduced by the new law while increasing the power of committees.
Questions remain about how the new laws will affect operations. What if a newly elected government quickly stacks these new committees with members to achieve short-term political objectives such as pumping the economy up before an election? It is not entirely clear how the new law makes the central bank more immune from political influence.
Recent conflict over money policy
"Finance Ministry officials have criticised the bank's move to raise interest rates to clamp down on inflation, as they have argued that rate hikes will only slow economic growth and increase costs for businesses and consumers.
But the central bank, which raised interest rates last month for the first time in more than a year, argues that curbing inflation and stabilising prices are critical for sustainable growth."
Checks and balances on the BOT board of directors
The BOT board of directors is powerful because it appoints the committees responsible for overseeing Thailand's monetary policy, supervising financial institutions and payments systems.
The new law will supposedly provide checks and balances and ensure that all BOT directors do not come from the same place. An outsider to the Bank of Thailand would now act as the bank's chairman. More outsiders than bank executives will now be appointed as directors on the board.
The central bank will share responsibility with the government in setting monetary policy targets. On the surface, this would seem to increase the influence of politicians making short-term election vote-maximizing decisions.
Respected economists, however, believe the new checks and balances will work and that political influence will be limited. The eminent Thai economist Dr. Ammar Siamwalla of the Thailand Development Research Institute and a member of the interim post-coup parliament (NLA) last year "questioned whether the new directors recently appointed by the government could undermine the central bank's independence."
Central bank "accountability" as well as clear policy "targets" are also needed according to Dr. Ammar Siamwalla.
Political appointments
Political appointments at the BOT board have arisen as another issue recently.
The qualifications and suitability of recent appointees has been questioned. For example, appointees to central bank boards could reasonably be expected to have a strong background in economics and/or business. Some clearly look like nominees for politically powerful people hidden in the background.
Questions have been raised about the selection committee responsible for screening candidates. Some members of committees screening candidates have been involved in corruption cases in the past:
On July 29, the cabinet approved the appointment of Pornchai Nuchsuwan, former director of the Budget Bureau, as chairman of the central bank. Mr Pornchai was nominated by a selection committee that included Nibhat Bhukkanasut, a former Finance Ministry technocrat once accused of corruption.
Public involvement in appointments
"Pasuk Phongpaichit, an economics lecturer at Chulalongkorn University, said the public should have a greater voice in appointments to key agencies such as the BoT and the Securities and Exchange Commission.
Speaking at a seminar on central bank independence, she said the appointment of selection committees with close ties to the government raised questions about the future independence of the country's financial and economic regulators.
The fact that the Stock Exchange of Thailand also had the same set of people on its board contradicted principles of good governance, Mrs Pasuk said.
Mrs Pasuk said the BoT Act should be amended to clarify the necessary qualifications of BoT directors. The law now prohibits people who have conflicts of interest or are in political positions from being elected to the board.
She said the public should be given better access to the selection process of financial regulators, and added that both the central bank and the SEC must also improve the transparency of their operations."
(Source: Bangkok Post, general news, front page, 22-08-08, temp-link)
Vocabulary:
central bank
independence - when a central bank can make monetary policy
decisions without excessive influence by outside short-term political
influences ความเป็นอิสระของธนาคารแห่งประเทศไทย
amendments - changes to a law เปลี่ยน แก้ไขกฎหมาย
Bank of Thailand Act - the law that governs the
operation of Thailand's central bank
dismissed
- fired, told to leave your job by your employer ไล่ออก ปลดออกจากตำแหน่ง
negligence - fail to do something you should have
done ประมาท
gross negligence - extreme negligence
ความประมาทอันใหญ่หลวง
dismissed for gross negligence - have your job taken
away for a very bad mistake you made
ปลดออกจากตำแหน่งเพราะความประมาทในหน้าที่
incompetence - unable to do a job or task properly
ไม่มีความสามารถ
at his discretion
- can happen if he gives his permission อยู่ในการตัดสินใจของ
vulnerable to - can be harmed easily by เปราะบาง
ละเอียดอ่อน
stacks these new
committees - fill the committee with members who will do what
you want แต่งตั้งคณะกรรมการชุดใหม่
pumping the economy up before an election - economic
polcies to get fast growth and happy voters before an election
กระตุ้นเศรษฐกิจก่อนการเลือกตั้ง
immune from
- cannot be affected or influenced by ปลอดภัยจาก
clamp down on inflation - take action to reduce
inflation แก้ปัญหาภาวะเงินเฟ้อ
curbing inflation
- reducing inflation ลดอัตราเงินเฟ้อ
sustainable growth - growth that can continue for a
long time without stopping การพัฒนาแบบยั่งยืน
overseeing
- managing and checking to see that everything goes well as planned
ควบคุมดูแล
checks and balances - a system of shared power for
preventing abuse of power, found in constitutions and laws (the
legislative, judicial, and executive branches often share power in a
government) การตรวจสอบและคานอำนาจ
eminent
- well-know and respected ที่มีชื่อเสียง
undermine - make weak ทำให้อ่อนลง
accountability
- responsible for your actions and must justify them to authorities
ความรับผิดชอบ
policy targets - goals the government hopes to
achieve from its policies นโยบาย
political appointments - positions in government
that are given to friends, allies, or people who have helped you in the
past ตำแหน่งทางการเมือง
a technocrat
- a type of bureaucrat, trained in engineering or economics and working
in national planning, someone who believes that engineers should manage
the economy
Securities and Exchange Commission (SEC) - the
government agency that regulates and governs Thailand's securities
industry คณะกรรมการตลาดหลักทรัพย์
contradicted
- not follow, go against, be the opposite of ขัดแย้ง
governance - when officially in charge of an
organisation, the approach taken to managing and making the rules for
the operation of the organisation การปกครอง
contradicted principles of good governance ขัดต่อหลักการบริหารองค์กรที่ดี
conflicts of
interest - a
situation occurring when an official's private interests may benefit
from his or her public actions ผลประโยชน์ทับซ้อน
คือการใช้อำนาจหน้าที่การงานเอื้อประโยชน์ส่วนตัว
transparency of their
operations -
the public can see how they operate มีความโปร่งใสในการทำงาน