Chuan sees more economic hurdles ahead

Chuan sees more economic hurdles ahead

BANGKOK (Reuters): Thai Prime Minister Chuan Leekpai said
yesterday his battered country still faced economic hurdles one
year after the float of its currency, a move that sparked its
worst economic crisis in decades.

Chuan told Reuters in an interview the currency was now at a
more realistic level than it had been earlier this year. It hit a
historic low of 56.90 baht to the U.S. dollar in January.

"There are still many problems in the future," Chuan said,
adding that the government would have to use various "mechanisms
and measures" to improve the economy.

"It is a matter of not slowing the economy further," he said.
"The government has to restore confidence to bring money in from
foreign countries so that we can reduce local interest rates."

Cash-strapped Thailand is suffering from a severe liquidity
crunch, high interest rates, sagging exports, capital shortages
in its ailing financial sector, loss of foreign investor
confidence and growing unemployment.

As if all this were not enough, Chuan's government must also
grapple with the resultant social stresses.

Speaking on the first anniversary of the devaluation of the
Thai baht on July 2 last year, which in turn triggered Asia's
financial crisis, Chuan said the government had been successful
in stabilizing the baht.

"The current baht value is more realistic and more stable. The
movement of the baht now is normal," he said. "The market
interest now is not on the rate of the baht but on the stability
of the baht."

The baht, which has traded in a 37.50-45.00 per dollar range
in recent months, was quoted at 41.75-41.85 late in the Asian
trading day yesterday.

The currency has lost about 40 percent of its value since its
flotation.

Chuan said there had been many problems since devaluation, and
his government understood people's concerns.

"I understand that people want the situation to be the same as
before 1997. But it is impossible in the short- to medium-term,"
he said.

Chuan's six-party coalition took power last December, and has
had a rough ride since with the opposition, depressed farmers and
activists claiming his administration is funding bail-outs of
rich, failed businessmen at the expense of the poor.

But Thailand still retained some advantages, Chuan said.

"In terms of exports and doing business, Thailand is quite
competitive compared to Malaysia, the Philippines and South
Korea," he said.

Chuan indicated the government wanted lower interest rates,
saying it wanted to convey this to the markets.

Thai rates are among the highest in the region, with the
minimum lending rate at between 15.25-15.50 percent.

But he suggested that the priority was improving liquidity,
which would in turn bring down rates.

"Comparing the problem of high interest rates with the
liquidity problem at the moment, businessmen prefer to have more
liquidity in the system," he said.

Businessmen and exporters have complained bitterly that high
rates and selective lending by commercial banks have choked their
operations.

Thailand has received millions of dollars in loans from the
Asian Development Bank and the Japan Export Import Bank to
finance exporters, but local industry representatives say the
money has failed to find its way to those really in need.