APRIL 25, 2009, 2:58 P.M. ET
By Min Zeng, Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Thai Finance Minister Korn Chatikavanij said Saturday that the government is committed to a new investment plan over the next three years to revitalize the economy which is pinched by contraction in world trade and domestic political turmoil.
In an interview with Dow Jones Newswires in Washington, Korn said the size of the program totals 1.4 trillion to 1.5 trillion Thai baht ($39.6 billion-$42.4 billion). He is putting together the financing for the plan and is going to work on details of investment projects in a wide range of industries such as logistics, agriculture and energy.
The program is expected to provide jobs as the unemployment rate has climbed. But more importantly, Korn said, "We believe that this investment program will help improve the competitiveness of the country in the long term."
Korn said the THB116.7 billion stimulus package already in place should have an "immediate" impact to boost domestic consumption in this quarter.
The minister was in Washington for the weekend's spring meetings of the International Monetary Fund and the World Bank.
Thailand has suffered from the global economic crisis as the Southeast Asian's economy relied heavily on exports. The government has forecast the economy will contract by 3% this year, which would be the first time it has shrunk in more than a decade.
The last time the country took such an economic hit was during the 1997 Asian financial crisis, when an exodus of foreign investors led to sharp declines in the baht.
This time, the Thai economy is facing several challenges, including a collapse in world trade. Also, recent antigovernment protests and the ensuing political unrest have sparked concern among foreign investors.
Korn said, though, that so far the political problems haven't had an impact on the local currency and that the global economic crisis has had a bigger impact on the country's economy. He said the nation is in a better position this time compared with in 1997, noting that the nation has built up foreign reserves while the level of leverage - the ratio of debt to equity - is significantly lower this time.
"Both at the national government level and in the private sector, the balance sheets are much stronger," said Korn. It allows "us to be more resilient. These are significant differences."
But he acknowledged that if the global economic crisis drags on and if political problems worsen, this will damp market sentiment and confidence in Thailand's economy.
"If the conditions were to remain negative for a longer period of time then, along with other countries, we would suffer," he said.
Korn said there have been signs of recovery not just in developed economies, but also in countries such as Thailand, adding that there are signs of a bottoming-out in terms of contractions in export numbers, as well as some pick-up in activity in some industrial sectors.
He said, though, that "only time will tell" whether this will lead to a sustainable recovery. He said the main challenge remains in asset impairment in Western economies, which need to sort out banking problems so they again can function as credit providers.
"Unless until that takes place, I don't think we can expect a sustained recovery," he said.
Korn said the government remained "active" to fill the gap left by the declining foreign demand and by the private sector. On the monetary side, he said the central bank still has room to cut interest rates given that stimulating demand is a more important issue than inflation, as price pressure has remained subdued.
On global growth, Korn said the international community needs to be committed to fiscal spending and easing monetary policies, noting that there are clear signs that countries remain committed to find solutions to the crisis. He also said that every nation should also be committed toward open, free and fair trade.
Turning to China's currency, Korn said it is "natural" that over time the yuan will have a growing role to play in world trade given that nation's economic fundamentals.
"China's basic fundamental is real and tangible - from that perspective, one would be surprised actually if" the yuan "doesn't [emerge] in a decade or two as a major world currency," he said.