|
Campaigning forre-election, Thaksin Shinawatra, Thailand's prime minister,
declared that the past four years, when the national economy revived after a
post-crisis slump, was a time for "repairing" the country. The next four
years, he said, would be a time for "building" it.
And building is what he intends. The centrepiece of the premier's agenda
is to spend Bt1,500bn ($39bn, €30bn, £21bn) on huge infrastructure projects,
including the expansion of
Bangkok's mass transit system, a new satellite city and a causeway from
the capital to the beach resort of
Hua
Hin.
But while Mr Thaksin says infrastructure projects will keep the economy
humming, his government has yet to outline how it intends to fund the
schemes. Economists are also urging careful evaluation of the investments to
determine whether they will generate strong, long-term returns or end up as
a drag on the economy.
"It should be clearly stated: are these projects for resolving
infrastructure bottlenecks or for economic stimulation?" asked Kosit
Panpiemras, a former economic minister and now executive chairman of Bangkok
Bank. "Proposals are fine, but you have to separate between stimulation and
economic requirements."
Local businessmen, foreign investors and credit-rating agencies want Mr
Thaksin's new administration to focus more on legal reforms and human
capital improvements, so the country can cope in an increasingly competitive
global environment.
"We certainly need to prepare ourselves, using this opportunity where we
still benefit from high [agricultural commodity] prices and other favourable
world conditions, to improve our own productivity, to upgrade our own
production system, move up the value chain, and those kinds of things, which
have been discussed for so long," Mr Kosit said.
For the past three years, Thailand's economy has grown strongly, fuelled
by surging exports and strong domestic consumption. It has also benefited
from global factors including high agricultural commodity prices, low
interest rates and strong growth. Government stimulus measures, in the form
of populist schemes, also fuelled a spending boom.
But Mr Kosit believes Mr Thaksin should now ease up on stimulus measures.
Instead, he says, government policy should focus on long-term reform
challenges, such as encouraging technological innovation.
According to a recent World Bank report, Thailand has south-east Asia's
best business climate if measured by basics such as ease of starting a
business, hiring and firing workers, registering property, obtaining credit
and enforcing contracts. But the report said other factors for business
success lagged behind, including technological development and availability
of telecom and IT infrastructure, fighting corruption and bureaucratic
efficiency.
Over the past year, investors' perceptions of Thai public institutions
have deteriorated due to "irregular payments" for importing and exporting,
organised crime and perceived "favouritism in decisions of government
officials", the World Economic Forum's Global Competitiveness Report found.
Executives surveyed identified bureaucratic inefficiency, corruption and
lack of an educated workforce as key barriers to business investment.
According to Phatra Securities, Thailand's net foreign direct investment
in 2004 was zero, down from around Bt60bn the previous year and far lower
than in the immediate aftermath of the Asian financial crisis.
While most economists agree Thailand also needs fresh public investment
in infrastructure after having almost none since the economic crisis, Ammar
Siamwalla, a Thailand Development Research Institute economists, says
projects need "more vigorous screening procedures" to ensure they are
viable.
The lack of clarity about how the grand infrastructure schemes will be
funded is also causing unease among foreign investors.
Pansak Vinyaratn, the prime minister's chief policy adviser, said last
week that Bangkok could use its surplus foreign exchange reserves to fund
some infrastructure development. This was immediately and publicly rejected
by Pridiyathorn Devakula, the central bank governor.
"By law, no one can use the reserves directly or in any other way," Mr
Pridiyathorn said. "It can land you in jail."
The number and scale of the proposed infrastructure projects have also
generated concerns about corruption, and public money being skimmed into the
private pockets. Mr Thaksin has sought to reassure the public with promises
that he will use transparent "e-bidding" - computerised auctions - to
prevent fraud.
But Somkiat Tangkitvanit, a TDRI policy analyst, said fighting corruption
in infrastructure development required transparency throughout the entire
process - with full public disclosure of all the details and specifications
of the project, not only a public auction in the bidding stages.
"Everyone knows the real manipulation doesn't happen at the time of the
bidding," he said. "It happens at the time of the project formation, the
budget allocation. There is so much manipulation upstream, you cannot just
do something downstream and pretend the problem goes away." |