Thai currency needs three years to recover: Supachai
Thai currency needs three years to recover: Supachai
BANGKOK (AFP): The head of the incoming Thai government's economic team said in remarks published yesterday that it would take three years to tackle Thailand's financial problems and turn the economy around.
Supachai Panitchpakdi, slated to take the posts of deputy premier for economic affairs and commerce minister, said in an interview with The Nation that critical private sector debt and liquidity problems must be addressed to restore confidence in the economy.
A shorter tenure than three years for the new government would hurt efforts to rebuild the shattered economy, which has not yet seen the end of a severe downturn, he said.
"What I am worried about is that people have high expectations and the task ahead is very difficult, as the current economic crisis has not yet reached its bottom. But at least we will attempt to make a difference," Supachai said.
Thailand's banks and finance companies are saddled with more than US$35 billion in domestic bad debt, while the private sector owes around $75 billion to foreign creditors.
Supachai wants to expand the role of a nascent Financial Restructuring Agency (FRA) from that of a referee deciding what to do with 58 suspended finance companies to give it powers over all of the country's 106 banks and finance firms.
But Supachai said FRA should play a bigger role in the restructuring, while the Bank of Thailand should restrict itself to regulation and work towards transforming its rescue fund into a deposit insurance corporation.
The AMC, meanwhile, should be capitalized at 30-40 billion baht (around one billion dollars), rather than one billion baht as currently planned, and should manage bad assets for later resale rather than just auctioning them immediately at very low prices.
"We should not use the U.S. model (of quickly selling out bad assets), because the U.S. has more than 10,000 financial institutions while Thailand has only 106 with a small number of healthy financial institutions," The Nation quoted Supachai as saying.
The issue was raised last week at meetings between Democrat Party officials and International Monetary Fund (IMF) Asia and Pacific director Hubert Neiss.
The IMF official was here to review Thailand's progress and compliance with the terms of a $17.2 billion standby credit line to shore up the country's foreign reserves while it rides out the crisis.
The baht had recovered to around 37 to the dollar in trading Monday on news that Supachai and company were taking charge.
Immediate restoration of confidence was crucial as foreign creditors are considering whether to roll over some $20 billion in short-term loans to the Thai private sector coming due by the year end.
Supachai said the export sector will also have to be revitalized, and the government will need to push for more exports to Japan, China and South Korea.
The new government -- which should be up and running at the beginning of next week -- will also continue the liberalization of trade and investment sectors, he said.
Supachai's Democrat Party has nearly universal support in the markets due to the proven quality of its economic team, which operated independently under party leader and then premier Chuan Leekpai from 1992-95.
Chuan won approval late Sunday of his nomination to assume the premiership following the resignation of Chavalit Yongchaiyudh, who left office amid a complete collapse in the confidence of investors and creditors.
Chuan also said Monday that he was looking at an extended tenure, and that the elections Chavalit promised to hold early next year may not be on the cards.