Just as the Pheu Thai Party seems likely to appoint an insider, there have been calls for the appointment of a person with a proven record, given Thailand's huge public debts and the extra burden that will come from the government's new policies.
A source within Pheu Thai said yesterday that an insider was most likely, and he/she must be able to work smoothly with Bank of Thailand Governor Prasarn Trairatvorakul.
"An outsider would not thoroughly understand our economic policies, announced during the election campaign," the source said, adding that as an elected government, Pheu Thai did not need to fill key ministries with outsiders to secure public support.
He did not foresee any clash with the central bank as "Prasarn was a former member of the October 14 student movement. He's a friend of ours".
Prominent among the policies promised during campaigning are a cut in corporate tax, from 30 to 23 per cent; a minimum wage of Bt300; and a minimum monthly salary of Bt15,000 for new graduates. While the tax cut could shave off revenue, more investment was likely along with a bigger economy.
On concerns over extra borrowing, the Pheu Thai source said the government would invest in mega-projects through state enterprises and with private investment. Although new funds are needed for irrigation projects, a sovereign wealth fund could eventually be established in light of the weakening US dollar, to make use of Thailand's US$180 billion in international reserves. "The government need not run larger budget deficits. We can cut unproductive spending."
The preferred insiders for the finance minister's post are seen as Pheu Thai's chief economic strategist Olarn Chaipravat, who is tipped to be the deputy premier for economic affairs; former finance minister Suchart Thadathamrongvej; and former deputy finance minister Pichai Naripthaphan. Among potential outsiders is Securities and Exchange Commission secretary-general Thirachai Phuvanatnaranubala, whose term in office ends this year.
Thirachai's name has attracted support from the capital market because of his extensive knowledge in macroeconomics and the financial market, his experience in handling public and private institutes, and his international recognition.
"It is crucial for the government to restore investor confidence," said a capital-market source. "The finance minister should be a widely recognised person, and the party's insiders are not capable of delivering that, to either local or international investors. Thirachai is the person."
Global financial-market intelligence firm Standard & Poor's expressed concern yesterday over the new government's spending programmes, saying that there was downside risk on the country's fiscal position if many of the policies pledged were implemented. The Finance Ministry aims to balance the budget in 2016. However, in the first six months of the 2011 fiscal year, fiscal deficits hit Bt372 billion, up 44.8 per cent year on year, and public debts now amount to 42 per cent of gross domestic product.
Academics have urged the adoption of economic policies that avoid pushing the fiscal burden further.
The director of Rangsit University's Economic and Business Research Centre for Reform, Anusorn Tamajai, said some policies could be reviewed due to the large investment required and the balanced-budget target year of 2016 could be flexible, if borrowing was necessary to boost long-term growth.
Chulalongkorn University economics lecturer Somprawin Manprasert recommended the gradual phasing-in of populist policies, while wage hikes and income tax cuts should be implemented simultaneously with measures to help reduce the manufacturing sector's burden and counter inflation.
Thammasat University associate professor of economics Sakon Varanyuwatana urged Pheu Thai to put the credentials of the new finance minister above everything else.
"The new minister should work for the majority of Thais, not for a political party or a group of people. He or she should be a role model, adhering to fiscal disciplines and integrity. The task is huge, to ready Thailand for regional integration and beyond,
and to boost the country's competitiveness through development in all economic areas," Sakon said.
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