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Economy

Thailand turns to 'Thaksinomics' acolyte

BANGKOK -- Stuck in low growth, the Thai junta is hastily stepping up its efforts to boost the economy. The centerpiece of the effort was the Aug. 23 cabinet reshuffle, which reinstated Somkid Jatusripitak, a close aide to deposed Prime Minister Thaksin Shinawatra, as the new chief of economic policy.

Somkid Jatusripitak, the former right-hand man of the ousted Prime Minister Thaksin Shinawatra, has been hand-picked by the junta to handle economic policy in Thailand (Photo by Hiroshi Kotani).

     Somkid served as deputy prime minister and finance minister for the Thaksin government in power from 2001 to 2006. He was known as Thaksin's right-hand man and the architect of the toppled government's populist economic policy, known as "Thaksinomics."

     Now, the 62-year-old marketing expert has the challenge of engineering an economic turnaround in the aftermath of the Aug. 17 terrorist attack. Perhaps just as difficult, Somkid must work with the junta, which is hostile to his former boss's policy.

     The once vibrant Thai economy has screeched to a halt as consumer spending and export growth have weakened sharply. Household debt, which is now equivalent to 80% of the nation's gross domestic product, is forcing Thai consumers to tighten their purse strings. China's increasingly pronounced economic slowdown is also cramping Thailand's exports.

     The Office of the National Economic and Social Development Board has revised down its forecast for economic growth in 2015, from 3-4% to 2.7-3.2%.

Marketing man

Born as one of the 10 children of a Chinese-Thai family in Bangkok, Somkid obtained a doctorate in business administration from the Kellogg School of Management at Northwestern University in the U.S. state of Illinois.

     A marketing expert, Somkid co-authored a book entitled "The Marketing of Nations" with Philip Kotler, a Kellogg professor and internationally known management guru. The book discusses government strategies for enhancing the competitiveness of nations through marketing.

     Shortly before the book was completed, Somkid first met Thaksin. At the time, Thaksin was a telecommunications business tycoon and yet to become a political star.

     Kotler, in autobiographical writings published in 2013 in The Nikkei, cited Somkid as one of his outstanding students. Somkid asked for Kotler's advice over whether he should pursue an academic career or enter politics. Kotler encouraged his Thai protege to carve out a political future for himself, according to the writings.

"A political redefinition"

Following his mentor's advice, Somkid became involved in the formation of the Thai Rak Thai Party with Thaksin in 1998. He helped the party's landslide victory in the 2001 general election as a key economic policy adviser.

     Thaksinomics is based on the idea that a nation should be governed like a company, with the prime minister serving as chief executive.

     A year before Thaksin's electoral win, Thai journalist Thanong Khanthong said the economic policy program proposed by Somkid represented a challenge to the control of the economy by 40-50 powerful ethnic Chinese families.

     "This agenda, if pursued sincerely, amounts to a political redefinition, a complete antithesis to letting the elite class collapse -- the class that had ruled over the Thai economy for the three decades until 1997," Thanong wrote.

The military-backed council's rejection of the draft constitution will delay Thailand's return to democracy.

Somkid's ideas about the power of marketing to boost a country's position in the world appear to reflect his experiences in the business world.

     After returning from the U.S., Somkid was recruited as a senior executive for Saha Group, a business conglomerate involved mainly in consumer goods businesses. He developed a close personal relationship with the group's founder, Thiam Chokwatana.

     As finance minister for the newly elected Thaksin government, Somkid led a marketing campaign targeting mainly farmers to promote the administration's economic policy.

     The administration's program featured such goodies for farmers as a three-year debt moratorium, a development fund to provide 1 million baht ($27,890 at current rates) in lending to every farming village and a universal health care system that allowed people to receive all medical services for 30 baht per treatment.

     These populist policies greatly bolstered Thaksin's power base and election machine.

     But the administration's policies were not a simple scheme to pamper farmers. The Thaksin government also rolled out a "One Tambon, One Product" campaign to help develop local economies. Tambon means district. The campaign replicated Japan's "One Village, One Product" movement, designed to support the production and marketing of local specialty goods.

     In 2006, the Thaksin administration started unraveling as its popularity and reputation were damaged by endemic corruption and allegations of tax evasion by members of the prime minister's family. The government was eventually ousted by a military coup in September that year.

     Thaksin had announced his resignation and named Somkid as a potential successor prior to the coup. The country's business community also endorsed Somkid as the nation's new leader. Somkid might have become Thailand's prime minister if the government had not been toppled. 

Rejected once

Thais were surprised Somkid was appointed as economic envoy by the military government that took over from the Thaksin administration. Somkid was forced to resign after only a week in office.

      Eight years later, Somkid has been hand-picked by Prime Minister Prayuth Chan-ocha, the army chief who led the coup in May 2014 to oust the government of Prime Minister Yingluck Shinawatra, Thaksin's younger sister.

      Has Somkid not been able to shed his image as Thaksin's right-hand man? It seems so far that his appointment as the new economic policy chief has not provoked any strong criticism among anti-Thaksin conservatives.

     The question being asked in the Thai political community is whether Somkid's reputation as a populist policymaker will get the better of him. At least, business leaders and economists initially welcomed the 136 billion baht stimulus plan approved by the cabinet on Sept. 1.

     The stimulus plan consists of three pillars. They are loans totaling 60 billion baht over seven years to low-income earners with two years' interest waived; a 5 million baht individual cash injection to more than 7,000 tambon nationwide for small construction and repair projects that employ locals; and a 40 billion baht budget for small government projects of less than 1 million baht to be contracted to small and medium enterprises.

      "This is strong medicine," Banthoon Lamsam told reporters. The chairman of Kasikornbank, Thailand's fourth-largest bank by asset, went on to describe the package as "an injection right where the stagnation is."

     He said that "seed" money is essential, but the government must keep a sharp eye on how it is spent. Interest-free loans, for example, should not be used to repay debt. "The money must be spent for trading and purchasing products to create real circulation in the economic system," he said.

      Isara Ordeedolchest, senior vice president at SCB Securities, is also siding with Somkid's policy. "Some may see the measures as partially populist but it is something that the government has to do to revive the grass-roots economy," he said. The government's previous economic team, led by Somkid's archrival Pridiyathorn Devakula, did "not do much" at the grassroots level.

      Doubters are concerned that the measures could aggravate household debt. However, Banthoon brushed aside such concerns, saying that "when each individual has more income, they will be able to cope with the new debt."

     Isara conceded that some may spend beyond their means but the "positive impact should be larger than the negative." He noted that 136 billion baht is about 1% of GDP and full implementation could lift GDP growth to 3% for 2015.

    On Sept. 8, Somkid introduced a new round of stimulus measures targeting small and medium sized enterprises, with 100 billion baht of soft loans, tax cuts, credit guarantees, and new venture capital fund.

    Local media is awash with comments from business leaders lauding Somkid. Even the rejection of the draft constitution by the military-appointed council on Sept. 6 has been interpreted as giving Somkid more time to execute his economic agenda. But the tough economic conditions in Thailand mean there will be no long honeymoon with the media.

      Somkid now faces a series of difficult tests of his policy acumen as he grapples with the challenge of pulling the economy out of its current stagnation.

Nikkei staff writer Yukako Ono in Bangkok contributed to this story.

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