Competing visions on nation's future

Kittiratt, Korn go head to head over Bt2-tn bill, interest rates, rice pledging

Every debate has its own attractions. When Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong and former finance minister Korn Chatikavanij convened for their first face-off on Thursday night, the audience was not disappointed.

Audience members were glued to their seats throughout the two-and-a-half-hour charitable debate - hosted by Nation Group to raise funds for Nation University - by the stark differences in the influential figures' views on a number of issues, chiefly the Bt2-trillion infrastructure investment, the policy rate direction and the rice-pledging policy. The following are excerpts of their arguments.

Bt2-trillion bill

Both share the view that Thailand could build up more debt, given the currently low public debt ratio of 44 per cent of gross domestic product.

Korn: The investment is necessary, but off-budget borrowing could jeopardise fiscal discipline. It is estimated that projects worth only Bt500 billion are ready for implementation, while many projects would not generate returns to the government. The Finance Ministry should stick to its role, to source low-cost funding. Some projects can be carried out through private partnership.

Kittiratt: I have no concerns about betraying an obsolete principle (on fiscal discipline). Some projects are not generating returns to the government - like some motorways, but the government needs to build them to facilitate transportation. In this case, the Finance Ministry still sticks to its role, but the government also realises that private partners always seek high returns. It's not difficult for the government to carry out some uncomplicated projects like motorway construction. We will only seek partners for projects that demand complicated management know-how.

Korn: Upholding fiscal discipline is not obsolete, taking the experiences of some European countries. Thailand's credit ratings have remained high, because we have relied on on-budget financing.

Kittiratt: Credit-rating agencies have been aware of this financing and remain comfortable with the public debt level. Even with the investment, the public debt will remain below the threshold, leaving some ammunition for unexpected developments.

Korn: The bill bypasses parliamentary screening, unlike on-budget financing.

Kittiratt: Parliament has never looked at the details of each project included in the annual budget bills. MPs never know why this project is allocated this sum, while nothing is allocated to that project, in a particular year. This bill requires the synchronisation of transport projects, to ensure continuity.

Korn: This increases the debt burden of all Thais. As a high-speed train network is costly and not accessible to all, why not focus more on double-track rail?

Kittiratt: We must look at the integrated picture. Rich people afford the high-speed train and along the way, their spending will benefit the poorer. I took this job with the intention of leaving after a few years. Now, I wish I stay on until I am 105, to see the last repayment under this bill.

Policy rate

Kittiratt: Huge inflows induce excess liquidity. Foreigners are encouraged by high bond coupon rates. Aside from sterilisation costs, the Bank of Thailand pays Bt10 billion monthly for the bonds. A lower rate will reduce gains from bond investments. A lower rate will not boost inflation, but inflows can. The stronger baht makes energy imports cheaper, but it severely hits the export sector. The rate should be slashed by as much as 1 percentage point, to address this. If the Bank of Thailand had heeded my advice when the baht was at 31 per dollar, a less severe cut might now be needed.

Korn: Thailand's economic circumstances are different from those of the US, the EU and Japan. We don't need low rates to spur the economy, and the Bank of Thailand's duty is to ensure financial stability. Regionally, Thai rates are the lowest, but for Taiwan's. A cut won't slow down inflows. Though inflows to the bond market may fall, these would go to the equity market.

Rice-pledging scheme

Korn: The government should instead sign cheques for farmers, as this scheme is corruption-ridden. The government can't survive the huge losses.

Kittiratt: We'll never back off. When you were in office, the Democrat government survived though the rice-price guarantee scheme, which caused a loss of Bt70 billion. Through this scheme, we intend to establish a new supply management scheme. In a restaurant, ever wonder why a rice dish costs less than a bottle of water? The process of making drinking water is short, but it takes a long process to harvest rice. The farmers deserve this. At least, under this scheme, they need to grow rice for the money. (Under the Democrats' scheme), just registering guaranteed them the money.

Middle-income trap

Korn: The Democrats would spend some money on infrastructure and allocate more to education and facilities to support the ageing society.

Kittiratt: Escaping the (middle-income) trap requires a higher GDP. Now, we are ready to make new investments to boost GDP. We also need to raise returns on government assets. Here's a message to the Bank of Thailand: when GDP heads up, don't be afraid of overheating.

Despite the heated arguments, both shared the views that an inheritance tax can wait and that currency inflows still have not sparked a bubble in property prices. Before leaving the stage with a handshake amid the long and loud applause, the men took turns commending each other.

"Khun Korn is one of the most talented in the financial sector. Pheu Thai and Democrats will inevitably take turns to run the country. Korn has a chance to be the prime minister? I'm convinced that in whatever position he holds, he would demonstrate his talents through extensive information gathering," Kittiratt said.

"Khun Kittiratt is a very committed and visionary man. He has initiated some creative projects beyond my expectation," Korn said.

Latest stories in this category

• Competing visions on nation's future


• Kittiratt, Korn go head to head over Bt2-tn bill,..


• Looking behind the dramatic drop in gold prices


• Pressure grows for BOT to lower rate

We Recommend

• The secret of 'Pee Mak's' success lies with the worms


• Writer's note: I assume most of you have seen "Pee..


• Cambodia 'altering maps'


• Romanian expert becomes star at the ICJ

Comments conditions

Users are solely responsible for their comments.We reserve the right to remove any comment and revoke posting rights for any reason withou prior notice.

Article source: http://www.thethailandlinks.com/2013/04/20/competing-visions-on-nations-future/