Bangkok Post: 29/07/08
No end game in sight and no progress
As I write, I do not know the fate of my counterpart, the Finance Minister. However, by the time you are reading this you will have heard whether the criminal courts for those in political office have accepted the case against the Thaksin cabinet for allegedly illegally approving issuance of the two- and three-digit lottery. Effectively, this would lead to the determination as to whether Surapong Suebwonglee would have to step down from his position, and whether we would thus have a new caretaker of our economy.
If this is the case, the timing and manner is not positive for the economy. I would say that we are in need of a wholesale change of government, very much starting with the Prime Minister, but a removal of Dr Surapong while Mr Samak remains in power is net negative.
Other than the economy, we need to have strong leadership in the Foreign Ministry, where farce has turned to potential tragedy in Si Sa Ket. It is very easy for us, especially those with liberal tendencies, to turn up our noses at the Phra Viharn issue as nothing but futile nationalism. There are indeed those who believe that it doesn't matter who the temple belongs to, as long as it is well looked after and helps bring tourist dollars to the Thai people.
The problem is that gross misconduct on the part of the government has allowed Cambodia to lay claim beyond that of the temple itself, to include territory we consider to be ours. The problem now is that there is no one in the government who is willing or capable to provide the leadership required to re-establish our rights on the issue.
The government is essentially hampered by the fact that doing the right thing now requires an overt admission that everything they've done to date has been a mistake. The fact that they are not willing to face up to their errors is proving to be a major constraint in their ability to redress the situation in our favour.
I am hoping that the appointment of Tej Bunnag will make a difference. His appointment is telling in that whilst Mr Noppadon's appointment was a reward for services rendered, Mr Tej's role is to solve a specific problem. The willingness of the ruling party to give out an ``A'' grade ministerial post to an outsider reflects its desperation. The same may need to happen with the Finance post.
Whilst it remains to be seen whether the retired career diplomat can turn things around for us regarding Khao Phra Viharn, I have serious concern whether a new appointment to the Ministry of Finance would be able to restore confidence. Furthermore, even if Dr Surapong survives, he needs to address his tendency to prefer populist quick-fixes to the disciplined approach required by finance ministers in order to make genuine changes.
The so-called ``Six Measures for Six Months'' announced mid-month has been widely discussed. It is worth noting that the government might have actually picked the short-term peak of the oil price to remove the excise duties. Put another way, wait a little while and the government would not have had to lose the much needed revenue at all. The crude oil price has declined over 10% since the day the tax reduction plan was announced, compared with the equivalent of a 6% price reduction as a result of the tax removal.
In the meantime, the government has lost over 30 billion baht in excise revenue and an additional 2 billion baht in VAT revenues this assuming the taxes are reversed after six months.
All in all, this government has removed annualised tax revenue of 150,000 billion baht with no evidence of income being generated in return. That is free education for every child in the country for four years or, if you prefer, two whole new mass transit lines. Fair deal? You tell me.
In any case, we acknowledge the need to help reduce the financial burden of the public, and measures including the free third-class rail travel and the provision of free non-airconditioned buses are fine though with limited real impact on the poor.
The bulk of the cost to the government, though, is the removal of the excise tax on diesel and while clearly every user benefits, it is clear that it is the haves that use more fuel than the have-nots and, as such, the bulk of the loss in tax is to the benefit of the rich.
The impact on the broad economy is also debatable. On a macro level, the six-point plan has an effect of increasing the spending power of the consumer by around 50 billion baht. Assuming the government does not plan to reduce its own spending, this means a necessary increase in national debt of the same amount. This is not a problem in the short term, but it reduces the room to finance necessary projects by the same amount and is a worrying trend.
What we need clearly is a government that does not feel it needs to fan the fires of popularity on a daily basis in order to just survive politically.
A case in point is the fact that the Finance Minister has also given up the noble idea of providing food coupons. We were in full support of this scheme because it is more targeted. This means it helps those in real need, with no waste of financial resources. It is clear, though, that this government has no patience for effective schemes that require commitment and no way for politicians to make money.
We have pleaded with the government that they should use the very expensive six-month window bought by the six measures to prepare for a more sustainable policy that could truly help the poor. Unfortunately, with or without Mr Surapong, I cannot see this government making the effort.
The government is living day by day and on the economic front it is being carried by the export sector, and especially by the commodities boom. June numbers show a year-on-year increase in agricultural exports of over 50%.
With prices already softening, this will provide less of a cushion from here on.
With politics so uncertain, there is a lack of focus. The last cabinet meeting produced nothing of meaning from any ministry and, in the meantime, many MPs are out of the country in an effort to use the traveling allowances before parliament reconvenes next month or, worse, before there is no parliament at all.
Essential time is being wasted and it cannot go on. It was particularly sad to hear from the Finance Minister that we could afford the handouts through the six measures because infrastructure projects were delayed.
I have believed for a long time, and no more than now, that we will only have a chance of stability once the ``Thaksin question'' is resolved. We're inching there, though the closer we near the end game, the greater the risk of someone blinking first and triggering a tragic outcome.
I'm not usually so dramatic but ask any politician and you'll hear the same thing.
Korn Chatikavanij