BANGKOK: Few tipped him seriously as a likely prime minister, but Thai opposition leader Pita Limjaroenrat looks set to play a major role after voters rejected almost a decade of army-backed rule. With most of the votes from Sunday’s polls counted, Pita’s radical Move Forward Party was leading the popularContinue Reading
BANGKOK: Few tipped him seriously as a likely prime minister, but Thai opposition leader Pita Limjaroenrat looks set to play a major role after voters rejected almost a decade of army-backed rule. With most of the votes from Sunday’s polls counted, Pita’s radical Move Forward Party was leading the popularContinue Reading
There have been numerous fiscal crises in the United States where Congress has either failed to pass a budget on time or there were doubts that the federal debt ceiling would be raised, which could cause the US to default on its debt.
These two kinds of crises can sometimes play out at the same time. A federal budget was not adopted in time, for example, and there were threats of not increasing the debt ceiling.
I worked as the deputy director of the Congressional Budget Office and the executive director of the National Governors Association, and I witnessed firsthand much of the wrangling in Congress during these crises.
Since 1976, there have been 22 shutdowns of the federal government due to lack of a federal budget.
While these were very disruptive and damaged the economy and employment, they pale in comparison to the potential effects of failing to lift the debt ceiling, which could be catastrophic. It could bring down the entire international financial system. This in turn could devastate the world gross domestic product and create mass unemployment.
Fortunately, the US has never experienced a default. The debt ceiling has been raised 78 times since 1917 and currently stands at US$31.4 trillion.
Here are three debt-limit crises I watched play out – which not only had economic consequences, but political ones as well.
Often, a debt-limit crisis is preceded by an election that produces a major shift in who controls Congress.
In the 1994 midterm election, during President Bill Clinton’s first term, the Republicans gained eight Senate seats and 54 seats in the House, flipping both chambers. The election was seen as a Republican revolution. Bob Dole became the majority leader in the Senate, and Newt Gingrich became the speaker of the House.
GOP lawmakers pledged to pass a balanced budget as part of what they named their “Contract with America.” House Republicans sent Clinton a budget that cut spending on domestic programs, which he vetoed. This in turn led to a five-day shutdown of the federal government.
Gingrich then threatened not to increase the debt limit. A Washington Post story described the House leader’s actions as “House Speaker Newt Gingrich (R-Ga) threatened yesterday to take the government into default for the first time in history unless President Clinton bows to Republican demands for a balanced budget.”
Clinton responded to the latest GOP budget offer with a second veto, which led to a longer government shutdown of 21 days.
In the end, the Republicans passed a budget offered by Clinton and also lifted the debt ceiling.
There were unique aspects to this standoff. Dole was not interested in continuing the negotiation, as he was running for president. Gingrich made comments about being snubbed by the president while traveling with him on Air Force One, and the press had a field day with those comments, linking the shutdown to the snub.
Polling increasingly showed that the Republicans were getting blamed for the shutdown – a 1995 ABC poll indicated 46% blamed the Republicans and only 27% blamed the Democrats.
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As in 1995, the 2011 crisis happened after an election and a major power shift on Capitol Hill.
The election of 2010, in the middle of President Barack Obama’s first term, saw the Republicans gain seven Senate seats, but not yet a majority, and a net gain of 63 House seats, making the GOP the majority. The House then demanded that Obama negotiate a deficit reduction package in exchange for raising the debt ceiling.
As the deadline for increasing the debt limit approached, both the U.S. domestic and even international financial markets became chaotic. The S&P 500 fell by 17% and bond rates spiked. On August 5, 2011, the Standard and Poor’s rating agency reduced the rating for long-term U.S government debt, which could result in higher interest rates on that debt.
On July 31, 2011, only two days before the US government ran out of money, an agreement was reached between Congress and Obama that, once enacted, became the Budget Control Act of 2011. It reduced spending over the following 10 years by $917 billion and authorized raising the debt ceiling to $2.1 trillion.
The act also included several budget reforms – a concession to Republicans by Obama and the Democrats – including creating a congressional joint select committee to make recommendations on deficit reduction. It also included an automatic provision to cut the budget should Congress fail to act.
In January 2013, the debt ceiling that was established in 2011 was hit and the Treasury Department began extraordinary actions to continue funding necessary spending.
This included not paying into retirement funds of federal workers and borrowing from trust funds such as Social Security.
Treasury told Congress that those extraordinary measures to avoid default would be exhausted by mid-October 2013, and the debt limit would be reached then, meaning the US could not borrow any more money to pay its bills.
At the same time, Republicans, who controlled the House, had demanded budget cuts as well as policy changes. They wanted Obama to eliminate the funding for his Affordable Care Act, which was considered his major legislative achievement.
The government was shut down once more, for 16 days. Again, public support for the Republican approach began to erode. That led the GOP to capitulate and adopt a budget that did not include significant cuts, and raised the debt ceiling, all in a vote the day before the government was slated to run out of money.
“We got nothing,” said conservative Republican Representative Thomas Massie from Kentucky.
It is difficult to predict how the 2023 potential crisis over the debt limit will be resolved – each crisis is unique and depends on the specific leaders on both sides as well as how the public reacts to the crisis.
History indicates there are substantial risks to both parties as well as their respective leaders as the nation heads for the early June showdown. The 1995 crisis did not benefit Republicans, and some even argue it contributed to Clinton winning reelection.
In 2011, I would argue that the Republicans gained substantial budget reduction and budget reform concessions from Democrats. But lack of support for the Republican position in 2013 saw them concede.
The 2023 crisis that is unfolding is like 1995 and 2011 in that it was preceded by an election that flipped the House majority. But it differs substantially in the size of that majority. With only a four-seat majority, the risks to the Republican leadership are high.
If this standoff is long and financial markets react as they did in earlier crises, the stakes for the two parties and their respective two leaders are huge and will grow over time. This could well affect President Joe Biden’s reelection and the longevity of the current Speaker of the House, Kevin McCarthy.
Raymond Scheppach is Professor of Public Policy, University of Virginia
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Pinit Jarusombat, president of the Thai-Chinese Cultural Relationship Council (TCCRC), has urged any incoming government to boost trade ties with China as well as speed up a logistics master plan linking the two countries.
Mr Pinit, a former deputy prime minister, said that the trade value between Thailand and China is expected to reach about US$200 billion this year and the new government should roll out measures to further increase the trade value to $500 billion in the next two years.
In particular, he said the new government should promote the export of agricultural produce, including rubber products, maize, rice, tapioca and durian, to China.
“The onus is on the new government to boost the prices of local produce so farmers can make more money to ease their debt problems,” Mr Pinit said.
He said the new government should speed up cooperation in logistics, particularly the Silk Road Economic Belt and the 21st Century Maritime Silk Road.
“The new government and China must move to complete the high-speed railway from Kunming to Bangkok and then Malaysia and Singapore. This would make Thailand a regional logistics hub,” Mr Pinit said, adding Thailand and China have longstanding amicable relations.
He went on to say that with new global powers emerging, the new government must come up with a strong foreign policy, particularly regarding Thai-Chinese ties, that serves the country’s best interests.
“The new government will play a key role in the Indo-Pacific region, Asean and Thai-Chinese relations. It must not support or get the country involved in any confrontation or conflict.
“This will pose a challenge for the incoming government,” the TCCRC president said.
TEGUCIGALPA: Honduras will soon begin talks toward a trade deal with China, the Central American country’s top diplomat said on Friday (May 12), marking the latest step toward stronger bilateral ties between the two nations after Honduras broke off relations with Taiwan. Honduran Foreign Minister Eduardo Enrique Reina told reportersContinue Reading
Thai Airways (THAI) is expected to earn at least 130 billion baht in revenue this year after its net profit in the first quarter reached 12.5 billion baht.
THAI CEO Chai Eamsiri said on Friday the airline is expected to finish its financial rehabilitation in 2025 as planned.
He said the national carrier earned 41.5 billion baht of revenue in the first quarter — 271.2% more than the income of 11.1 billion baht in the same period last year due to increased commercial flights.
He added that flights to some popular tourist attractions, such as Japan and Korea, increased in the last quarter, with flights to China returning on March 1.
The better earnings gave the carrier 42.2 billion baht of cash flow, up from 5.7 billion baht last year.
Mr Chai said the carrier would pay the first amount of debt, costing at least eight billion baht, to their investors in mid-2024 and will pay its 140 billion baht total debt in ten years as planned.
Regarding the second quarter this year, Mr Chai said he expected more than 100% growth compared to last year. However, due to the country entering the low season for tourism, the passenger load rate is expected to be approximately 77%, and earnings are also expected to be lower than the first quarter, he said.
Mr Chai added that the airline would be raising employee salaries by 5% starting this month.
Thai Airways (THAI) executives at a press conference on Friday.(Photo: Pornprom Satrabhaya)
But so was a model Pakistan Air Force jet, army installations in the garrison city of Rawalpindi and even the house of the senior military officer in Lahore once owned by Pakistan’s founder, Mohammed Ali Jinnah. There’s no doubt in the protestors’ minds of who is to blame for Khan’s arrest: Pakistan’s military, which has run the country openly and from the shadows for most of its independent history.
We don’t know the truth of the many corruption allegations against Khan. The one he was arrested for involves Pakistan’s largest construction magnate, who was supposed to hand over £190 million (US$238 million) to the treasury, but was allowed to use it to pay down his tax debt instead. The government has accused Khan of receiving “donations” for one of his university projects as a payoff.
Unfortunately, however, the facts of this or other cases don’t matter. Khan’s supporters will argue that his troubles are all because the military wants him out. And that is undeniably true. It’s equally undeniable, however, that the military wanted him in first.
Khan’s two decades in the political wilderness only ended when the army put its massive thumb on the electoral scales in 2018, jailing and intimidating Khan’s opponents and ushering him into the prime minister’s office.
That it’s the National Accountability Bureau (NAB) being used against Khan is particularly telling, since it was originally set up by a former military dictator, Pervez Musharraf, to “put the fear of God” into Pakistan’s political elite. And it was, most recently, used to go after the military’s previous public enemy number one, former prime minister Nawaz Sharif, as well as his brother, the current PM.
The military succeeded in pushing Nawaz Sharif out of politics to get Khan in; and now they have made peace with his brother, in order to push Khan out. They have used the NAB, the media, and even judges to keep Pakistan’s politicians under control.
On March 20, 2023, Japanese Prime Minister Fumio Kishida chose to unveil his new plan for a “Free and Open Indo-Pacific” (FOIP) in India. Kishida’s decision symbolizes Japan’s policy continuity and unwavering commitment to the FOIP. Tokyo is not reformulating but enhancing its existing notion set forth by former prime minister Shinzo Abe.
Abe first mooted his idea of visualizing the merging of the Indian and Pacific oceans to establish a bond of like-minded countries 15 years ago in India. This basic idea eventually led to the political construction of an “Indo-Pacific” concept and the realization of the FOIP.
It also aims to reassure a wary India that has emphasized the need for “inclusivity” as well as “freedom” and “openness” multiple times. Inclusivity means the inclusion of China. On this, Kishida made clear in his speech, “We do not exclude anyone, we do not create camps and we do not impose values.” The statement was not aimed at New Delhi alone.
Despite closer Chinese-Russian relations, Kishida is choosing to keep the doors open with Beijing by emphasizing “rule-making through dialogue.” He is also making it clear to Washington that Tokyo does not want to see the FOIP becoming a containment policy against Beijing.
Some observers view the new plan as mere window dressing. But the plan goes beyond the initial idea of establishing connectivity across the two oceans and rallying countries to defend the existing international order.
The rule of law, freedom of the seas and democratic values were the main points of emphasis. While these fundamentals remain the bedrock of Japan’s FOIP, the focus is now geared toward securing vulnerable countries in the Global South, particularly those affected by unilateral aggression and debt traps.
Russia’s invasion of Ukraine in 2022 has significantly heightened Japan’s security awareness to the extent of changing its foreign policy approach. The invasion served as a point of departure that provides a new impetus for leadership.
In his speech at the Johns Hopkins University in January 2023, Kishida expressed, “If we let this unilateral change of the status quo by force go unchallenged, it will happen elsewhere in the world, including Asia. It is Japan that must rise to this challenge to take action to defend our freedom and democracy.”
The plan expands to address non-traditional security challenges “in a realistic and practical Indo-Pacific way”, including climate change, disinformation in cyberspace and public health — major concerns that resonate positively with the Global South. The plan identifies Southeast Asia, South Asia and the Pacific Islands as the three key regions.
By broadening the scope beyond territoriality and state security, Kishida makes the FOIP more palatable to ASEAN countries. This is significant when factoring in ASEAN’s decision to issue their own ASEAN Outlook on the Indo-Pacific as a direct response to the FOIP for fear of being sidelined and entangled in great power rivalry.
Tokyo has aided the Pacific Islands in tackling climate change and natural disasters even when Abe was prime minister. But the region is now viewed as pivotal because of how far Beijing has made inroads.
Mihai Sora wrote: “China has been more successful than the United States in convincing Pacific leaders that its interests in the region are broader than shaping the Pacific’s military environment.”
This explains the bigger focus on non-traditional issues demonstrated by Kishida’s new plan, in line with the US-led Partners in the Blue Pacific initiative that coordinates developmental assistance to the region, of which Japan is an integral part.
The plan provides a crucial role for human security to take shape by broadening the FOIP to include bottom-up approaches.
Although the term “human security” is not explicitly mentioned, the phrase “survival, welfare and life with dignity of individual people” in the plan is clearly within its ambit and points to Tokyo’s readiness to define the FOIP beyond the narrow confines of traditional security.
Kishida can re-energize the FOIP because of the groundwork laid by Abe who has worked tirelessly to gain the diplomatic support of the other Quad members, specifically the United States.
The new plan also re-establishes Japan’s leadership role in light of China’s economic clout by emphasizing an “Indo-Pacific way” of cooperation. Providing a clear outline of what it entails is crucial to the development of a sustained political culture where Japan can better exert its influence.
The vigor of Kishida’s new plan will depend on two factors — the support of the Quad members and the wider international community, and public support in domestic politics. The strong solidarity shown against China and Russia at the latest G7 foreign ministers’ meeting in Japan enhances Tokyo’s foreign policy perspective.
Domestically, Kishida may face resistance in terms of funding the plan. He will need to shore up his cabinet approval rating, which currently hovers around 40%. Although the next general election is not slated until 2025, rumors are rife that he may seek a fresh mandate soon considering the favorable results of the April state-wide local and by-elections.
The plan provides insights into how Kishida intends to lead the FOIP ― by expanding the vision to embody practical issues associated with the developing world. The quest is ultimately to wrest control of the liberal international order in the key regions where China has formidable strategic influence.
Benny Teh Cheng Guan is an Associate Professor at the School of Social Sciences, Universiti Sains Malaysia, Penang, and a Japan Foundation Fellow at the Graduate School of Arts and Sciences, The University of Tokyo, Japan.
This article was originally published by East Asia Forum and is republished under a Creative Commons license.
Congressional leaders at loggerheads over a debt ceiling impasse sat down with President Joe Biden on May 9, 2023, as the clock ticks down to a potentially catastrophic default if nothing is done by the end of the month.
Republicans, who regained control of the House of Representatives in November 2022, are threatening not to allow an increase in the debt limit unless they get spending cuts and regulatory rollbacks in return, which they outlined in a bill passed in April 2023. In so doing, they risk pushing the US government into default.
It feels a lot like a case of deja vu all over again.
Brinkmanship over the debt ceiling has become a regular ritual – it happened under the Clinton administration in 1995, then again with Barack Obama as president in 2011, and more recently in 2021.
Defaulting on the national debt would have real-life consequences. Even the threat of pushing the US into default has an economic impact.
In August 2021, the mere prospect of a potential default led to an unprecedented downgrade of the the nation’s credit rating, hurting America’s financial prestige as well as countless individuals, including retirees.
And that was caused by the mere specter of default. An actual default would be far more damaging.
Possibly the most serious consequence would be the collapse of the US dollar and its replacement as global trade’s “unit of account.” That essentially means that it is widely used in global finance and trade.
Day to day, most Americans are likely unaware of the economic and political power that goes with being the world’s unit of account. Currently, more than half of world trade – from oil and gold to cars and smartphones – is in US dollars, with the euro accounting for around 30% and all other currencies making up the balance.
As a result of this dominance, the US is the only country on the planet that can pay its foreign debt in its own currency. This gives both the US government and American companies tremendous leeway in international trade and finance.
No matter how much debt the US government owes foreign investors, it can simply print the money needed to pay them back – although for economic reasons, it may not be wise to do so.
Other countries must buy either the dollar or the euro to pay their foreign debt. And the only way for them to do so is either to export more than they import or borrow more dollars or euros on the international market.
The US is free from such constraints and can run up large trade deficits – that is, import more than it exports – for decades without the same consequences.
For American companies, the dominance of the dollar means they’re not as subject to the exchange rate risk as are their foreign competitors. Exchange rate risk refers to how changes in the relative value of currencies may affect a company’s profitability.
Since international trade is generally denominated in dollars, US businesses can buy and sell in their own currency, something their foreign competitors cannot do as easily. As simple as this sounds, it gives American companies a tremendous competitive advantage.
If Republicans push the US into default, the dollar would likely lose its position as the international unit of account, forcing the government and companies to pay their international bills in another currency.
The dollar’s dominance means trade must go through an American bank at some point. This is one important way it gives the US tremendous political power, especially to punish economic rivals and unfriendly governments.
For example, when former President Donald Trump imposed economic sanctions on Iran, he denied the country access to American banks and to the dollar. He also imposed secondary sanctions, which means that non-American companies trading with Iran were also sanctioned.
Given a choice of access to the dollar or trading with Iran, most of the world economies chose access to the dollar and complied with the sanctions. As a result, Iran entered a deep recession, and its currency plummeted about 30%.
US President Joe Biden did something similar against Russia in response to its invasion of Ukraine. Limiting Russia’s access to the dollar has helped push the country into a recession that’s bordering on a depression.
No other country today could unilaterally impose this level of economic pain on another country. And all an American president currently needs is a pen.
Another consequence of the dollar’s collapse would be enhancing the position of the US’s top rival for global influence: China.
While the euro would likely replace the dollar as the world’s primary unit of account, the Chinese yuan would move into second place.
If the yuan were to become a significant international unit of account, this would enhance China’s international position both economically and politically.
As it is, China has been working with the other BRIC countries – Brazil, Russia and India – to accept the yuan as a unit of account. With the other three already resentful of US economic and political dominance, a US default would support that effort.
They may not be alone: Recently, Saudi Arabia suggested it was open to trading some of its oil in currencies other than the dollar – something that would change long-standing policy.
Beyond the impact on the dollar and the economic and political clout of the US, a default would be profoundly felt in many other ways and by countless people.
In the US, tens of millions of Americans and thousands of companies that depend on government support could suffer, and the economy would most likely sink into recession – or worse, given the US is already expected to soon suffer a downturn. In addition, retirees could see the worth of their pensions dwindle.
The truth is, we really don’t know what will happen or how bad it will get. The scale of the damage caused by a US default is hard to calculate in advance because it has never happened before.
But there’s one thing we can be certain of. If Republicans take their threat of default too far, the US and Americans will suffer tremendously.
Michael Humphries is Deputy Chair of Business Administration, Touro University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Clearly, self-awareness isn’t Prayut Chan-ocha’s forte as the Thai prime minister warns of a “black hole of conflict” in what was once one of Southeast Asia’s most promising economies.
The conflict about which Prayut warns is assured if voters support opposition groups in Sunday’s general election, or so he claims. Yet many economists agree that Prayut’s nine years in power have been their own black hole of dysfunction and complacency.
In May 2014, the general-turned-politician led the latest military junta to grab power in Bangkok. Since the 1930s, Thailand has experienced at least 28 coups. And just like most junta leaders who came before him, Prayut had no real plan to improve the efficiency of government or raise living standards.
In fact, the last nine years of political gridlock were preceded, too, by eight years of complacency. An earlier coup, in 2006, showed then-prime minister Thaksin Shinawatra the door. After that, a revolving door of governments came and went with few, if any, upgrades to raise Thailand’s economic game.
This lost period is coming back to haunt the kingdom, regardless of who wins on May 14 — be it Prayut’s United Thai Nation Party or one of the opposition parties. These last 17 years of political turbulence have greatly increased the odds that Thailand is falling into the dreaded “middle-income trap.”
“Thailand is a middle-income economy that risks having its lunch eaten by lower-income rivals competing in similar manufacturing segments —especially Vietnam,” warns economist Vincent Tsui at Gavekal Research.
As generals plotted and politicians dithered, Tsui says, “Thailand has suffered a steady deindustrialization, with both the export and investment share of GDP having fallen, while that for tourism-related services has risen — although badly hit in the pandemic.”
The real black hole to worry about here is how China, India, Indonesia, Vietnam and other competitors got their innovative acts together. The pace at which Indonesia alone is minting tech “unicorn” startups should panic officials in Bangkok.
So should the ways in which Vietnam is arguably the biggest winner from the US-China trade war. Vietnam is winning a disproportionate amount of the factories, jobs and longer-term investment fleeing the mainland.
To understand why Thailand is stuck in place, says economist Peerasit Kamnuansilpa at Khon Kaen University, one has to recognize it’s dominated by central economic development agencies, which provide economic incentives for large businesses, investors and wealthy entrepreneurs in the forms of income and capital gains tax breaks coupled with other indirect benefits such as business protection or market monopolies.
This latest experiment with “trickle-down economics,” though, isn’t working. “Perhaps the most important obstacle to long-term economic prosperity is its institutional weaknesses,” Peerasit notes. “All economic development policies have been formulated and strategic choices have been made by heavy-handed central government agencies.”
Thailand, in other words, is heavy on economic hardware but lacking in the software needed to compete in the 2020s. To address the problem, says economist Upalat Korwatanasakul at Waseda University, the government should “consider policies that can deal with the issues of insufficient knowledge and technology transfer and a lack of local firms’ capacities as they are the primary causes of the limited upgrading.”
The trouble, of course, is that the last several Thai governments have been so busy struggling to keep their jobs that they failed to do their jobs.
Gavekal’s Tsui adds that “Thailand had been an important exporter of electronics products but its global share has shrunk to about 1.7% from 2.2% a decade ago. In the same period, Vietnam has registered fivefold gains to account for 5% of this market.”
Automobiles are a bright spot for Thailand, which remains Southeast Asia’s largest vehicle exporter and the world’s 10th largest with a 2.1% global export share over the last five years. Here, though, there are two big problems.
One, as Tsui explains, the real challenge is that this position is built around the internal combustion engine, and as for many car-producing nations the risk is that China, in particular, steals a march as it comes to dominate production of electric vehicles.
The other: neighbors like the Philippines are lobbying automakers to migrate to the greater Manila area. Indonesia, too, is positioning itself for EV manufacturing in a big way.
True, Thailand has managed to secure investments from Chinese automakers like BYD, Great Wall Motor and SAIC Motor, which are looking to build some offshore production capacity.
“Still,” Tsui says, “Chinese automakers have well-developed onshore supply chains and are less likely to outsource material amounts of production as Thailand does not offer much of a cost advantage. In reality, Thailand’s auto sector is in a defensive crouch and is at risk of losing its existing share and seeing a further wave of deindustrialization.”
Thailand’s waning competitiveness has voters wondering what Prayut was thinking when he commandeered power in 2014. On his watch, critics argue, inequality rose while many freedoms disappeared. The fruits of Thailand’s gross domestic product (GDP) are being shared by an increasingly narrow elite.
As young Thais fret about their future, past empires are trying to stage comebacks. Exhibit A: the Shinawatra family.
Since his coup ouster in 2006 and later criminal convictions, Thaksin Shinawatra has lived in self-exile. So does his sister, Yingluck, also a former prime minister, who was removed in 2014 by the nation’s Constitutional Court.
Now, Thaksin’s daughter, Paetongtarn Shinawatra, has her own date with destiny. On May 14, she hopes to carry her father’s opposition Peua Thai party to power. And with her, repair the tarnished legacy of her billionaire father who played an outsized role in Thailand’s current chaos.
Thaksin first came to power making a claim Donald Trump would later make to win the US presidency: as a wildly successful CEO, I know how to fix the nation’s problems.
This was back in 2001, as the shadow of the 1997-98 Asian financial crisis hung over Thai politics. Amid great upheaval and economic pain, uber-wealthy Thaksin embraced first nationalistic then populist rhetoric to gain an unlikely, pro-poor folk-hero status.
After five years, voters realized they had elected Thailand’s Silvio Berlusconi. Like the Italian billionaire-turned-prime-minister, Thaksin also weakened government institutions in the service of his telecom empire. He, Berlusconi-style, channeled massive amounts of stimulus money to rural areas to counter the skepticism of urban elites.
But the urban-rural divide that Thaksin exacerbated blew up on him in 2006. Since that coup, a revolving door of governments simply papered over the cracks.
Rather than revive institutions, increase transparency and invest in innovation, government after government juiced up GDP with short-term plans. This sugar high after sugar high did little to prepare Thailand for the digital age now reordering Asia’s economic hierarchy.
When it was Prayut’s turn to give government-ing a try, he forgot what US political guru James Carville said two decades earlier: “It’s the economy, stupid.”
Carville was an advisor to then-US president Bill Clinton, on whose watch the Asian crisis occurred. But nine years on, Prayut is giving coup leaders a bad name for a whole new reason. When generals grab power, they tend to argue the motive is to restore order and get big things done.
Scarcely little reform has taken place since the early 2000s. All the while, troubles are bubbling under the surface that the government is too distracted, or economically inept, to address. Prayut’s Eastern Economic Corridor (EEC) project, which has aimed to lure multinational investment in “4.0” industries has by most assessments been a flop due to a lack of local talent.
Household debt, meanwhile, hit 90% of GDP in 2021, among the highest levels in Asia. All too many past governments promoted household borrowing to consume as a short-term fix to economic headwinds. Now, the hangover.
Economist Bert Burger at Atradius calls the “high level of household debt” a “lingering risk for Thailand’s economy.” He adds that “in the long run,” the “high household debt might affect private consumption and derail the financial sector in the event of rising interest rates or falling income.”
It’s no wonder then that nearly all political parties, Prayut and Paetongtan’s included, are campaigning on populist promises, including de facto cash handouts, they won’t likely be able to implement, legally or fiscally.
Constant electioneering also has been hazardous to Bangkok’s fiscal health, warns Bank of Thailand officials. With inflation near 14-year highs, the government continues to prioritize subsidies to ease the pain of rising living costs over supply-side reforms to increase productivity and economic efficiency.
“We should avoid policies promoting bad incentives,” says economist Somchai Jitsuchon, a member of the BOT’s rate panel.
The bigger-picture problem, though, is that none of the 10 governments that have managed the economy since 2001 tackled the middle-income trap risk that can no longer be ignored. This trap is defined by gains in per capita income stalling out around $10,000. Thailand is now at $8,100, by International Monetary Fund’s numbers.
Another problem: Thailand’s Southeast Asian neighbors are accelerating efforts to increase competitiveness as Thailand walks in place. Raising the temperature further, Indonesia, Malaysia, the Philippines, Vietnam and others are lobbying multinational companies to pivot their way, some of which are major employers in Thailand.
This Thai election should be a moment to plot a new course for the one-time Asian tiger economy. Sadly, it seems the vicious cycle that Bangkok fell into two decades back will continue to dim prospects for the next two.
Shawn W Crispin contributed reporting from Bangkok.