Ato: It's All Wet In Thailand

[BaronTT]

http://www.atimes.com/atimes/Southeast_Asia/MJ20Ae02.html

 

It's all wet in Thailand

By Shawn W Crispin

 

BANGKOK - As Thailand counts the cost of massive seasonal flooding, Prime Minister Yingluck Shinawatra's political and economic leadership is under sharp new scrutiny. Catapulted to power on a class struggle rally cry and pro-poor populist policies, her government's response to the disaster has prioritized the protection of industrial estates and central Bangkok property over grassroots livelihoods and lives.

 

The floods have devastated agricultural crops, inundated over 14,000 factories, including multinational manufacturers like Honda and Toyota, and caused over 300 deaths. As much as six million tons of rice crops have been damaged, representing 23% of the year's main harvest; thousands of manufacturers face extended work stoppages, jeopardizing global supply chains and the solvency of Thai plants that owe over US$2 billion in outstanding

 

 

loans; the total death toll won't be known until high waters recede in 14 worst-hit provinces.

 

Finance Minister Thirachai Phuvanatnaranubala has estimated the deluge will shave between 1% and 1.7% off this year's gross domestic product (GDP) growth, a loss assessment international investment banks corroborate. The government has signaled plans to spend at least 130 billion baht (US$4.2 billion) in flood relief and rehabilitation, pushing deficit spending to its 20% legal limit of total annual spending. The government has also indicated it may take out external loans to finance the emergency efforts.

 

Harder to calculate is the impact on Yingluck's credibility and popularity, which pre-flood was riding a July election win high, but post-flood is expected to sink, including in some of her Puea Thai party's worst-affected provincial strongholds. Her government's response to the disaster has been by all accounts erratic and uncoordinated, bringing the premier to tears at one point and underscoring her lack of political experience and control over her administration. Her self-exiled, former premier brother, Thaksin Shinawatra, has been widely reported to be managing her crisis team from the United Arab Emirates.

 

The floods have also raised new questions about Yingluck's economic priorities, including her dogged commitment to populist policies during a time of national crisis. Economic analysts contend the floods point to the pressing need to spend more on infrastructure, including on better water management systems, to avert future crises and reassure foreign investors in industrial estates that this year's floods are an anomaly rather than the new norm. Thailand was buffeted by major flooding last year as well. (Thaksin claimed in a press interview that he has a 400 billion baht plan to avoid future floods, though he failed to disclose details.)

 

Opposition leader Abhisit Vejjajiva has suggested that Yingluck reallocate funds earmarked for a populist policy cosseting first-time home and car buyers, a program critics say will benefit her family's and cronies' property businesses, to flood-affected victims in need of basic food and shelter. Those calls have so far been ignored: Yingluck's public relations team released a statement saying that all the "urgent economic stimulus plans" that were announced before the flooding will still be implemented to "improve [the] Thai economy".

 

Yingluck's commitment to the program underscores her need to regain suddenly lost political momentum, a drive that before the floods was pushing for the criminally convicted Thaksin's return to Thailand as a free man by year's end. Her government was elected in July on a wide raft of populist offerings, including a fixed rice price guarantee, a countrywide minimum wage hike, and free tablet computers for school students, among other frivolous giveaways.

 

The floods, deaths and devastation, however, have taken much of the buzz out of those offerings. Even before the deluge, Yingluck's brand of populism was viewed widely as a crude imitation of Thaksin's original pro-poor platform, which entailed village development funds, a debt moratorium for farmers and low-cost universal health care. Critics have argued her populist policies will do more harm than good for the rural poor, and through state intervention threatens to build up significant pricing distortions across the economy.

 

Heavy interventions

Criticism has centered on her main rice pledging scheme, where the government vows to pay a fixed 15,000 baht per ton at a time global prices float around 10,000 baht. Thailand is typically the world's largest rice exporter, commanding around 30% of the global market. Economic analysts argue that the scheme will encourage overproduction, encourage worker migration from industry and services to inefficient agriculture, burden the government with billions of dollars in annual losses, and potentially erode Thai rice export competitiveness. Nor does the scheme protect farmers against the flooding devastation they now face.

 

Yingluck's mandated minimum wage hike, which was pushed through on October 17, elicited calls from local manufacturers to suspend the plan until they can recoup massive flood-related losses and regain their financial footing. The scheme will raise minimum daily wages by 40% to 300 baht in Bangkok and six other well-off provinces, and by 40% on prevailing pay rates in other poorer provinces. Similarly, the scheme raises economic concerns about export price competitiveness and the future solvency of industries competing for markets and investments with lower-wage countries like Vietnam and Indonesia.

 

Because the informal sector employs as much as 60% of Thailand's work force, according to World Bank estimates, analysts contend the policy will be impossible to enforce in a meaningful way across the broad economy. Sriyan Pietersz, head of research at JP Morgan in Bangkok, says provincial small- and medium-sized enterprises (SMEs), many of which operate on thin margins and have been devastated by the floods, will feel the biggest impact. Ironically, SMEs were a grassroots constituency Thaksin championed through cheap government loans during his tenure but Yingluck's policies now threaten to put them out of business.

 

Korn Chatikavanij, formerly finance minister in the Democrat Party government, is among the critics of what he refers to as Yingluck's "cheap thrill" populism. Measured against the outgoing Democrat Party's grassroots policies, Korn contends that Yingluck's offerings are comparatively "wasteful" and represent a "serious distraction" from the economic inequalities and structural shortcomings his government addressed in a supposedly more "sustainable and practical way".

 

"Thaksin had fresh ideas; this government has no ideas," he quipped.

 

Thaksin's original populist policies, devised after rather than before he was elected, were heavily marketed to establish his pro-poor credentials. At the same time, his government spent more to rehabilitate indebted industrialists, property developers and other entrepreneurs flattened by the 1997-1998 Asian financial crisis. Thaksin's populist policies came under heavy criticism that the spending risked a fiscal blowout - warnings that came to nothing due to his use of off-balance-sheet state banks to fund many of the programs.

 

Yingluck has stolen pages from her elder brother's populist playbook, passing funding responsibility for her 114 billion baht rice pledging scheme to the state-run Bank for Agriculture and Agricultural Cooperatives. She has also shown flashes of political courage by scrapping or scaling back some of the wilder populist pledges her party made on the election campaign trail, including a plan to distribute government-backed credit cards to indebted farmers. An election pledge to distribute computer tablets to all eight million of the country's school children has since been limited to only first-year students.

 

With pre-flood public debt at 43% of GDP and calls for counter-cyclical spending to guard against a possible double dip recession in the United States and Europe, Yingluck has fiscal room to maneuver. Inflated popular expectations initially aimed to buoy Yingluck's popularity and keep the military on the hind foot while she pushed controversial political measures, including Thaksin's return to Thailand.

 

But the devastation of the floods has raised hard questions about Yingluck's economic and political priorities, and there is no guarantee the political novice's commitment to populism during times of crisis will amount to the same political boon as Thaksin's pro-poor policies.

 

Shawn W Crispin is Asia Times Online's Southeast Asia Editor.

[Flashermac]

I'd noticed from the beginning that it was largely red-shirt areas that were being hit. Early on, the red-shirts even came out to insult the soldiers who were trying to help them.

 

Inshallah.

[Flashermac]

<< In a related development, Prime Minister Yingluck yesterday dismissed a rumour that she watched a concert on Tuesday night while much of the country was facing severe floods.

 

"I didn't go to any concert. Now my daily life involves travelling from home to the FROC at Don Muang Airport and my office at Government House. I have attended no entertainment function and I do not dine out now," she said. >>

 

Nero with a saw duang?

[Flashermac]

<< Criticism has centered on her main rice pledging scheme, where the government vows to pay a fixed 15,000 baht per ton at a time global prices float around 10,000 baht. >>

 

Did Takky actually come up with this?

 

It was one of the campaign promises, and the posters said "Thaksin thinks, Pheu Thai does".

 

 

 

[Flashermac]

Hope they can swim.