February 8, 2008

This is from my weekly Overdrive column.

Mega-projects, populist policies back in vogue

You'll have to wait for a while before you can find your way around the labyrinth of the "ugly" Samak Cabinet.

Who is really in charge of economic matters? This issue has not been settled on amicable terms. PM Samak Sundaravej seems to have his own priorities. So do Surapong Suebwonglee, the finance minister, and Mingkwan Sangsuwan, the deputy prime minister and commerce minister. And you can't forget the man in London, who also has his game plan.

Shortly after his appointment as prime minister, Samak announced he would invest Bt500 billion in transport mega-projects and an irrigation system that would feed water from the Mekong River into the farmland of the Northeast. Did he consult his people before making the announcement? It looked as if Samak was being quick to make a payback to the Northeast by introducing the water project. The Isaan voters represent the political stronghold that has brought the 'power' to People Power.

Samak has also surprisingly tried to distance himself from his earlier pledge that he would be serving as a nominee for ousted prime minister Thaksin. He has made several political moves - from reshuffling the Cabinet list to announcing an intent to hang on to his job for the full term - that have given Thaksin conniptions.

Thaksin wants the Samak government to stay only for the short term, paving the way for his triumphant return to Thailand. But Samak has said he will serve the full four-year term and will only introduce amnesty legislation for the 111 former executives of the Thai Rak Thai - who were banned from politics for five years - in the last three months of his term.

If he is to stay the full term, he will need a smarter Cabinet, not an ugly one like this. Still, he is obliged to go along with his coalition partners for the time being. But the message is now clear that he does not in fact want to be Thaksin's puppet.

"I am who I am. And Thaksin is Thaksin," he told our reporters yesterday. "Whether I can serve the full term or not depends on destiny."

All this time, Surapong and Mingkwan have clashed over who should become this administration's economic tsar. During the election campaign last year, Mingkwan, a former PR man for Toyota and director of MCOT, announced that he had been assigned to lead the PPP economic team.

But Surapong has been able to edge him out. As a member of Thaksin's inner circle, Surapong is the man who will call the shots. He may also become prime minister one day. Samak has not been clear over this issue. But it is not a big problem in his eyes, since he is already prime minister.

In the end, the issue will be settled. Surapong will be in charge of macroeconomic issues, while Mingkwan will be responsible for microeconomic matters. Surapong will have his own advisory team, so will Mingkwan. Since both of them are novices in economic management at the national and international level, they will need a strong adviser. It seems that Thanong Bidaya, the former finance minister, will be staying behind the scenes to help both of them coordinate economic policy management.

If you look at Surapong's team of economic advisers, you'll realise quickly that the balance of power has tilted heavily toward him. Apart from Thanong, his advisers include heavyweights such as Olarn Chaipravat, Pansak Winyaratn, Nibhat Bhukkanasut and Supavud Saicheua. Practically all of them served as economic advisers to Thaksin during his reign between 2001 and 2006. Surapong is to be groomed and protected.

Two important messages have emerged from the Surapong camp. First, the government will be pursuing business-friendly policies. Second, it will aim for high economic growth by stimulating domestic demand.

Regarding the first message, Surapong has been giving interviews to court foreign investors and business people. He said the foreign business law would not become retroactive or become counterproductive to foreign investment. He will remove business barriers as well as end the capital controls. Now that he is finance minister, he will be more cautious when it comes to the sensitive issue of capital controls. He said he would need to consult the Bank of Thailand governor on this issue before making any further decisions. Already the central bank has responded to the winds of political change by announcing measures to further relax the foreign exchange controls.

On stimulating domestic demand, Surapong will be aiming for a high growth rate of 6 per cent. Growth is more important than stability. All the populist policies that put money into the pockets of the poor are being revived. The mega-projects will follow suit.

You are witnessing the pendulum swinging back. Thai politics is back to square one, as evidenced by the coalition government, while economic populism is a reminder of 2001-2004.