A brief review of Taksinomics

[Chlp]

From Forbes:

 

Fixing What's Not Broken

Yuwa Hedrick-Wong, 11.28.05, 12:00 AM ET

 

Thaksinomics, the brainchild of Prime Minister Thaksin of Thailand, was born after he took office in 2001. It aims to reduce Thailand's supposed dependency on exports and also tries to redress the imbalance between rural and urban sectors by restructuring the Thai economy. Four years on, what has Thaksinomics done for Thailand? It has at best been an exercise in redundancy, with embedded risks of misallocating scarce resources and creating market distortion over the longer term.

 

It's hard to disagree with the stated objectives of Thaksinomics. However, its application is nothing more or less than fiscal spending: from income support to promoting arts and crafts as well as protecting targeted industries. And in 2003 large public investment projects--such as developing the northern city of Chiang Mai into an international aviation hub--were introduced. In other words, there is nothing really new in Thaksinomics apart from sticking the prime minister's name to a fiscal spending program.

 

As explained by Thaksin when he first took office, Thaksinomics is meant to move Thailand away from a perceived dependency on exports, a supposed bitter lesson learned in the aftermath of the 1997 crisis. However, the empirical evidence strongly suggests that whatever was the cause of the crisis in Thailand, it was not an overdependence on exports. Research conducted by the Asian Development Bank shows clearly that in the decade leading up to the 1997 crisis, it was too much domestic demand (private and government consumption plus domestic investment) and weak exports that was the problematic imbalance in the Thai economy, not the other way round. Thaksinomics is barking up the wrong tree.

 

Furthermore, rapid growth in domestic demand was driven by a massive buildup of asset bubbles on the back of foreign borrowing, priced at an overvalued baht-to-dollar exchange rate. This in turn was a direct consequence of the noncompetitive or even anticompetitive business behavior prevailing at the time, especially between large borrowers and the banks and financial companies. Though foreigners appeared to be the bogeyman when the crisis came, the root causes were all homegrown.

 

The Thai economy has grown solidly since 2001, with real GDP growing at around 6% a year between 2002 and 2004. So can it be said that Thaksinomics is being vindicated by performance? I would caution against opening the bubbly right away. The period since Thaksin took office has coincided with not only a strong upswing of the business cycle both in the U.S. and in Asia, but also with a new phase of accelerated regional integration, with the emergence of the Chinese market as the catalyst. Intraregional trade in Asia has been growing at more than 20% per year, and Thailand's export growth to China since 2001 has averaged more than 25% a year, versus around 6% to the U.S. Tariffs have been coming down across the region, including those in Thailand. The financial sector in virtually all key Asian countries has become more competitive with the entrance of foreign players, leading to the emergence of a whole new generation of entrepreneurs driving business development in the region. Thailand is no exception.

 

From 2002 to 2004, the period of Thaksinomics, both domestic demand and exports have been growing in tandem. This is the real secret behind the robust performance of the Thai economy. It in turn suggests that Thai businesses have become more competitive, both in the domestic market and abroad. This new competitiveness has come about as a result of regional integration, meaning effectively a more open and competitive environment for businesses, regardless of whether they are domestic or foreign. The bar has been raised, and it seems that the best of Thai businesses have more than met the challenge. Their success has pulled the whole economy along with them. Left behind are, inevitably, failed Thai businesses. And herein lies the potential risk of Thaksinomics. By supporting and promoting specific Thai industries, Thaksinomics ends up protecting them, rendering them less competitive and dooming them to eventual failure.

 

Thaksinomics may not be all for naught, however. Among other things, it is also meant to strengthen property rights, especially for the poor. As the Peruvian economist Hernando de Soto has convincingly argued, poor property-rights protection and enforcement is the cause of stifled business development and retarded entrepreneurial activities in the poorest countries. To the extent that Thaksinomics could correct this neglect in Thailand, it's a wonderful thing. But then it is the proper role for any self-respecting government to ensure that the market can function properly, Thaksinomics or otherwise.

 

Yuwa Hedrick-Wong is chief strategist at Davos Management Institute and an Asia-Pacific economic adviser for MasterCard International.

[Guest]

Soon to all be a thing of the past, quite possibly. Looks like Thaksin seems to have pushed the envelope too far with this Sondhi controversy. I'm prediciting he'll be toppled by a popular uprising within the next 6 months, probably after another Black May-style incident.

[Mekong]

And lets not forget Sondhi Limthongkul?s anti Taskin campaign that is gathering momentum week in week out, last nights rally at Lumpini was "Live" on the internet last night and even in Chiang Mai, Phuket , Hat Yai and Khon Kaen the rally was shown on huge open air projectors to overcome the ban on ASTV1 relaying the rally via satellite.

TV.

 

When I got home for the weekend last night this was the the main topic of conversation with the Mrs. FYI she is Ex Thammasat as are most of the family, her Auntie was deeply invloved in the 1973 uprising that lead to the collapse of the Thanom-Prapas regime.

 

The feeling I get is that the heat is going to be put on CEO Taksin and if he does not take notice it is geared up for October 2006, again that is only the feedback I am getting from discussions I tend to keep out of.

 

It now appears that the military are also getting involved See Here

[Guest]

Maybe it's Black November?

[Nervous_Dog]

Huge gatherring last night, I have seen the photos from mates there and a LOT fo people, 97.75 fm broadcast it, the taxi driver loved it.

 

I dont know though, I doubt it is as serious aas people make out, also military divided, many also like Sondhi

 

DOG

[Flashermac]

For the first time in many years, I feel like I'm living back in the 1970s again. So far, the Army is supporting Mr T. But then could change ...

[Guest]

Of course the army supports Mr T. They owe their positions to him. I've heard there are some deep divisions in the army, pro- and anti-Thaksin. Could end up like "Reservoir Dogs", with them all shooting each other.