Politicking disrupts the Thai economy

Politicking disrupts the Thai economy

By Rajan Moses

BANGKOK (Reuters): The Thai opposition's constitutional challenge to four executive decrees crucial to help repair the battered economy has made Prime Minister Chuan government look vulnerable, analysts said last Friday.

The move has raised doubts about the government's ability to take decisive action to lift Thailand out of its worst economic crisis in decades, they said.

Though the delay in ratification was seen only as a temporary hiccup, analysts said it appeared to be a bad precedent for Chuan's government, which took power last November on a wave of popular public and market support.

"The delay in itself is not important as it is likely to be short," said Richard Henderson, head of research at Krungthai Thanakit Plc.

"But it does leave a slight lingering feeling that the government has been outsmarted and does not have such a strong grip on things as it did in past months," Henderson added.

Thailand has had three prime ministers, seven finance ministers and four central bank governors since mid-1995. The high turnover has resulted from intense politicking and foreign investors' shaky confidence in the country, analysts said.

Opposition members of parliament took the government by surprise late last Thursday when they queried the validity of the decrees and got the speaker of the lower house to refer them to a constitutional court for a ruling.

The decrees, approved by Chuan's cabinet last month, would have empowered the government to raise about $18 billion in funds via the issue of local and foreign bonds and increase borrowings from abroad, besides launching sweeping financial reforms to help break out of a severe liquidity crunch.

Their ratification had been widely anticipated and the unexpected delay had a slightly negative impact on the local stock and baht markets last Friday, dealers said.

"It is worrying for the markets which would like to see the Thai government's efforts to beat a liquidity squeeze and undertake financial reform are successful," said Simon Flint, analyst at Singapore-based research house I.D.E.A.

"That it (the decrees) could be derailed in parliament, albeit temporarily, does cause us some worry," he added.

Market nervousness over the delay saw Thai stocks end the morning 3.92 points, or 0.92 percent, lower at 352.62 in trade worth a thin 743 million baht, dealers said.

Analysts said they expected a surge in political activity. One diplomat said: "I see this as a minor hiccup, but I also see more politicking rearing its head to make the government look not so perfect in coming months as the economy worsens."

Finance Minister Tarrin Nimmanahaeminda and Chuan, clearly miffed by the opposition's tactics, said the decrees' delay undermined government efforts to repair the economy and restore foreign investors' confidence.

"The decrees have not been defeated. The constitutional interpretation sought by the opposition is not a loss of vote by the government. They have a right to do so but it is sensitive to economic reforms at this difficult time," Chuan said.

To the government's relief, the head of the constitutional court, Chao Saicheu, signaled last Friday that he would ensure a speedy ruling on the validity of the decrees.

He also said he doubted the opposition's motives in questioning their validity.

But the opposition, arguing against the decrees in parliament last Wednesday and Thursday had said the decrees would raise Thailand's debt burdens further.

They were unfair to the nation's ordinary taxpayers and the poor, as the funds raised would be used to help out an elite minority with failed companies, they said.

Thais last Friday bombarded radio stations with phone calls voicing dissatisfaction over the opposition bid to derail the decrees, saying it jeopardized economic reform.

One businessman told a radio station that the opposition must be held responsible if the Thai crisis worsened because of the delay.

"Let it be known that the opposition is responsible if we have a national bankruptcy in the next few months. How could it help the poor if all businesses go bust?" he asked.