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Conflicts could hurt Thai role in ASEAN

Saturday, November 7, 2009

November 8, 2009

Thailand could lose its leadership role in Asean due to sour relations with neighbouring countries and internal political conflicts, experts have warned.

Speaking at the "Thailand Second Lecture" hosted by Nida Business School, former finance minister Somkid Jatusripitak expressed his concern about the country's image in both international politics and economic affairs.

"Our efforts should not be at a daily retaliation," said Somkid referring to the current sour relationship with Cambodia.

He said the country runs a high risk of losing credibility in the eyes of the world because of its self-defeating politics.

He lamented that while street politics had strengthened and caused deep social divisions, formal politics had weakened. "Nobody can guarantee that the next street protests will not lead to more violence," he said. Public confidence in the administration also has declined as people were starting to wonder how long the government would stay in power, he said.

The coalition government, led by the Democrats, has failed to centralise command and direct the path of development. Its efforts are aimed at day-to-day survival. So the government has no strategic plan for long-term development. Nor could it put the right people in the right jobs, he noted.

The government has to reinforce public confidence in the administration or it could plunge further, he warned.

He was concerned that the country could lose its leadership role in Asean and in the international community. He suggested that Thailand should stay close to emerging economic superpowers such as China, India and Australia. The country also needs to deepen its relationship with the United States.

"While global geopolitics have changed with the G-20 emerging as the new mechanism for global cooperation, Thailand has to position itself to fit into the new landscape, he suggested.

Somkid voiced concern about the long-term economic development of the country as the government was more preoccupied with short-term economic recovery. He said that though the government had no clear plan for economic restructuring, it planned to borrow a massive Bt800 billion. He warned that such large borrowings could destabilise the fiscal position due to the sharp rise in public debt.

Meanwhile, former foreign minister Surakiat Sathirathai shared Somkid's view that Thailand did not have a good relationship with its neighbours Burma, Laos and Cambodia. "When public opinion embraces nationalism, it is very difficult for the government to manage foreign policy," warned Surakiat.

He said that Thailand had a long history of being a friendly country and had many times been chosen as a venue for peace negotiations between conflicting outside parties.

He said that now foreigners, Thais and academics are confused about what is happening in the country. He pointed to an obscure legal system, such as laws and regulations related to the environment, which had led to conflict between local people and investors at the Map Ta Phut Eastern Seaboard industrial complex. While investors insist that they follow the rules for reducing pollution emission, local people do suffer from aggregate pollution. "We should ask how to develop our country without any harmful impact on the health of the local people, instead of engaging in a dispute on who does or does not follow the environment rules," said Surakiat.

Finance Ministry permanent secretary Sathit Limpongpan, said economic development and environment protection had to go hand-in-hand. The country cannot only opt for high economic growth. Economic development should also address issues such as the disparity of incomes among different groups.

Bandid Nijathaworn, Bank of Thailand's deputy governor, said economic recovery has been obvious, but it is still under the water. The momentum of recovery has been spurred by government spending, but sustainable recovery also needs private investment, he cautioned.

"The fragile recovery has to be supported by easing monetary policy. When solid recovery is achieved, the monetary policy would be back to normal [increasing policy rate]," he said.

"The more serious issue is our long-term competitiveness: we must not miss the train [of economic progress]," said Bandid.

Emerging economies are likely to spend more money as they have been less affected by the global financial crisis, he said.

The G-20 may not be able to push for real solutions due to the group's expansion. Since Thailand is not a member of the G-20, the country's role may reduce.

The country has to have a close relationship with emerging economies, he suggested. Domestic demand will be the next engine to drive world economic growth, in particularly Asian domestic demand, according to Bandid.

"Our challenge is how to be a part of the growth story," he said. He went said rewards will be high if Thailand behaves well but penalty would also be severe if the country behaves badly.

The Bank of Thailand has to stabilise the economy not only looking at the inflation threat but also strengthening financial institutions. He was optimistic about economic prospects, saying that exports to Asia had increased. He expected more Asian tourists to follow. Capital was also expected to flow into direct investment, stock and bond markets.

The central bank also aims to promote micro-finance and financial services to lower-income groups.



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