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Economy

Czar wars: The sequel

The new economic czar under the Thai junta, Somkid Jatusripitak talked to the Nikkei Asian Review. (Photo by Hiroshi Kotani)

BANGKOK -- Deputy Prime Minister Somkid Jatusripitak is a month into arguably Thailand's toughest job, and has already warned the foreign media not to lecture the government on how the economy should be run.

     "The future of Thailand in 20 to 30 years depends on these two years," Somkid told the Nikkei Asian Review in his office at Government House.

     The military government's new economic czar has already found the limelight with some well-received short-term stimulus measures to help ordinary Thais and smaller businesses.

     Somkid was a key figure in the cabinets of Thaksin Shinawatra, the fugitive former prime minister, and a co-founder of Thaksin's Thai Rak Thai party. As variously deputy prime minister, minister of finance and minister of commerce, Somkid was central to the evolution of what was dubbed Thaksinomics, a vision sometimes derided as populist and short term -- but evidently not without a merit or two worth revisiting.

     As the treacherous world economy bears down, Somkid's immediate task is to hotwire Thailand's wallowing, apparently growth-free economy before the military hands power back to an elected government -- which the generals now say will not be before 2017.

     "I want to cross this difficult period and revitalize confidence," the 62- year-old told the Nikkei. He said a primary concern is boosting purchasing power, particularly for some 30 million people who depend on agriculture and have been seriously set back by falling commodity prices. "It's like our body looks OK but the pulse is not strong enough."

     Somkid's first economic stimulus package included interest-free loans straight to the grassroots and cash injections to over 7,000 districts, or tambon, around the country, worth 136 billion baht ($3.75 billion). Small and medium businesses are also in line for tax exemptions and soft loans from government banks.

     Asked if gross domestic product growth will reach 3% this year, Somkid said he did not want to talk about figures. "If you just inject more money, by the end of this year GDP will be 3% for sure -- but why do we have to do that?"

     The new stimulus packages should certainly help raise growth beyond last year's dismal 0.7%, and Somkid says he has "some more arrows" in his quiver if the first shots fall short.

     "This is the first phase," he said. "From now on, I will push in transforming the fundamentals."

     On Sept. 22, the cabinet approved its "super cluster" strategy for nine provinces that have been identified for their important contribution to the economy in terms of producing raw materials, logistics, established industries, and other factors. Priority industries are automobiles, electronics, digital and information technology, garments, petrochemicals and processed food.

     To spur investment in the clusters -- especially foreign -- special incentives are under consideration. These could include exemptions on corporate and import taxes. Somkid is also looking for infrastructure investments -- roads, airports, ports -- to connect the clusters internally and externally.

     The idea is not new. Somkid pushed an earlier version under Thaksin. The intent is to nourish industrial development and "innovation," and make Thailand less dependent on labor intensive industries.

     "We are stuck in the middle," said Somkid. "We cannot compete with low-price producers but at the same time we are not innovative enough to compete with high-value producers."

     By contrast, Malaysia has seen faster growth in the past decade or so due to its promotion of higher value-added production, a policy championed by Prime Minister Mahathir Mohamad. Somkid noted, however, that Malaysia has lost momentum, and now "cannot upgrade to another level."

     Alluding to another policy often talked about under Thaksin, Somkid wants to strengthen the domestic economy and make Thailand less export dependent. Exports amount to as much as about 70% of GDP but declined for the first seven months of 2015, dragging down the overall economic performance.

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