Thaksinomics: a few hits, a lot of misses and troubles

The Nation, Asia News Network, Bangkok

The external environment has become more hostile with the recession in the United States and competing exports from China. Unemployment is growing as new graduates cannot find jobs. Business stagnation is being felt all around. The Thai economy is seen on the verge of becoming another Japan, where the low interest-rate environment has failed to spur economic recovery.

Government House must be feeling the strain of further deterioration in the economy. The festive season of December is as good a time as any for the government to review its approaches. Ironically, even if criticism is not welcomed by the prime minister, it is about the only thing that will help the government address its weaknesses.

Government House may not actually be missing any basic information about the economy, but its interpretation and approach to economic management have been a case of "hit or miss". If it is more humble, more approachable and more flexible, it may avoid many of the misses for the benefit of us all.

So, what marks has the Thaksin government managed to hit? The biggest accomplishment is arguably the paradigm change concerning development. It attacked the orthodox economic model of market- led extremism, stayed cautious on economic liberalization and gave more weight to the virtue of income equality, especially for the "have-nots".

The government has also moved on competitiveness despite the difficult economic environment. It is using tax cuts and other incentives to help build selected competitive arenas for Thai businesses. It is trying to overhaul the bureaucracy. It is looking to seize on opportunities from the growing economic might of China.

But these hits have not always translated into positive results, not least because the real world is far more complex. Furthermore, the government is finding policy implementation difficult to effect with speed. Coordination among state agencies to implement the policies now take up most of the efforts and time of the few key cabinet members, especially the prime minister and deputy prime ministers.

There have been many misses as well. It is here that judgment can be pervasive because the government set out to be unorthodox and is trying to interpret the world in that way. While the general public can only wonder and give the government the benefit of the doubt, a few of the vocal experts are being shunted aside for "speaking with hot-headed ignorance" while many others are keeping silent.

The misses are evident in three areas. The first is the way that the government communicates with the international business community. The second is about the perceived and actual role of the state in managing the economy. The third is related to policy focus and priority.

Nowhere is the government subject to closer scrutiny than in the international arena -- partly because the political spins exercised by the prime minister and senior ministers do not interest foreign players who are more concerned with hard economic data and the actual performance of the economy.

The government has been aggressive in its international economic policy as part of the effort to promote "Thaksinomics". This comprises the so-called dual track approach which gives equal weight to foreign trade and investment, as well as the domestic economy and ability to generate growth.

While some self-indulgence is forgivable, it also has a cost. As the orthodox economic model is slain, foreign investors have become naturally weary about the credibility and reliability of the government. With the slump in private investment, every single dollar invested here is a reprieve, and no one ought to recognize this more than the government.

It is not that the world does not expect a gradual resurgence of economic nationalism, but some foreign investors have shied away because they are not certain how they will be received by the government when there are other alternatives as well as attractive destinations.

Another miss is the constant eagerness to want to be different and to give importance to "form" rather than "essence". This has resulted in neglect by the government to see through some fundamental economic variables, which are typically boring. Firms and individuals are also giving an apparent signal that the government is a cure for all. In fact they need to be signaled about policy framework in order to act appropriately.

Such was the macroeconomic framework that was approved at the Cabinet meeting in Chiang Mai. The economy is set to grow up to 5 per cent annually under a set of guided variables such as public debt, export targets and so on. It was a message the government would give importance to -- quality and sustained growth, unlike in the past. But the Chiang Mai manifesto has hardly been referred to since, despite its "biblical" features.

As a result, the broad macroeconomic framework has not been used in a timely manner to guide policies. The reality of the private investment slump came sooner rather than later, and the government has been scrambling to hype investment confidence -- but it is too late. Moreover, some urgent fiscal spending was late in coming and the economy suffered more than it should have.

At the same time, the economic actors have become weary about the government's tendency to spend, cut taxes and borrow. All of these do not bode well in the long run because the state, known for its inefficiency, will become a drag on the economy.

Last but not least, is the biggest miss of all: Education reform. This is without doubt universally recognized as the ultimate savior of national economic competitiveness. But education policy has changed hands so many times and the ministers are left to quarrel among themselves as the CEO prime minister fails to give it daily importance. Political reform is now looked upon sadly as a political tool and its essence twisted and turned for short-term gains.

The prime minister may irk at the attacks by the press and his critics, silent or otherwise. He may feel good about the hits. But he should be fair to us all and see the misses, and act on them. The world around him will then look friendlier.