VZCZCXRO6318
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #4943/01 2560953
ZNR UUUUU ZZH
P 130953Z SEP 07
FM AMEMBASSY BANGKOK
TO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 9622
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 4093
UNCLAS SECTION 01 OF 03 BANGKOK 004943
SIPDIS
SENSITIVE
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STATE FOR EAP/MLS AND EB
STATE PASS TO USTR
TREASURY FOR OASIA
COMMERCE FOR EAP/MAC/OKSA
FEDERAL RESERVE SAN FRANCISCO FOR DAN FINEMAN
SINGAPORE FOR SUSAN BAKER
E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV TH
SUBJECT: DEMOCRATS AND PPP OUTLINE ECONOMIC PLATFORMS
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1. Summary: Leaders of Thailand's likely top two political
parties in the coming elections, the Democrat Party and the
People's Power Party (PPP), outlined notional economic
platforms at an investment conference on September 12-13.
The Democrat leader, Abhisit Vejjajiva, said he would scrap
the 30 percent capital reserve requirement as well as
proposed changes to the Foreign Business Act. He called for
confidence-building and productivity enhancement measures,
leavened with populist rural programs similar to those of the
former Thai Rak Thai (TRT) administration. The PPP's
Secretary General, Surapong Suebwonglee, without mentioning
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TRT by name, said his party would largely implement the same
policies of the previous Thaksin-led government. "We did it
before; we'll do it again," he said, later adding that it
would be done "without retribution." End Summary.
2. Leaders of the Democrat Party (DP) and the People's Power
Party (PPP) outlined their prospective economic platforms
before an investment conference audience on September 13 in
Bangkok. The two parties are currently seen as the largest
potential vote-getters in the planned December 23 elections,
with the winner possibly able to form the core of a new
coalition government. The conference, organized by Phatra
Securities, Merrill Lynch and the Stock Exchange of Thailand,
featured a panel comprised of Democrat Party Leader Abhisit
Vejjajiva, Secretary General of the PPP Surapong Suebwonglee,
and current Minister of Energy Piyasvasti Amranand. Prime
Minister Surayud addressed the conference's opening session
September 12.
"Investor-Friendly" Program with Populist Flavor
--------------------------------------------- ---
3. Abhisit gave the more polished of the presentations,
laying out a three-pillar agenda aimed at restoring investor
confidence in Thailand after the "economic mismanagement" of
the Thai Rak Thai (TRT) administration, led by former PM
Thaskin, and the subsequent "year of inaction" following last
September's military coup. Abhisit blamed the TRT government
for causing political instability and resultant economic
stagnation through ill-considered policies and a climate of
corruption and cronyism. The first two pillars of Abhisit's
platform laid out plans to "Restore Confidence" and "Invest
to Increase Competitiveness" in the Thai economy. The third
pillar, "Invest in People", contained a series of populist
policies that bore similarities to previous TRT programs
targeted to rural constituencies.
4. Starting with the first two pillars, Abhisit said the
Democrats, if elected, would abolish the 30 percent
unremunerated reserve requirement on capital inflows imposed
last December by former Finance Minister Pridiyathorn. He
said the Democrats would shelve proposed amendments to the
Foreign Business Act that were recently debated in the
National Legislative Assembly (NLA). He called for greater
market liberalization measures, particularly in the services
sector and including telecommunications. He further said the
Democrats would protect the public interest through enhanced
competition laws and commitments to international standards
of governance.
5. Abhisit said a Democrat-led government would spur
domestic demand and increase productivity by funding mass
irrigation projects for the agricultural sector (amounting to
USD 2.9 billion from the government budget), completion of
subway and skytrain mass transit projects (USD 7.4 billion),
and renovation and extension of Thailand's railway system
(USD 5.9 billion). Abhisit said the Democrats' policy
package was aimed at improving crop yields in the
agricultural sector, reducing logistics and transportation
costs for manufacturing, and spurring innovation in service
sector industries such as film entertainment, health care and
tourism. He said he believed the government had enough
fiscal space to carry out these programs, citing the current
public debt-to-GDP ratio figure of less than 50 percent.
6. Abhisit's populist programs included a Village
Sufficiency Fund to provide credit and grants to farmers and
village entrepreneurs. He said this fund would differ from
the TRT's Million Baht Village Fund by ensuring that loans
would be put to productive use instead of consumption. He
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pledged to improve educational opportunities for students in
outlying provinces, expand universal health care, and reform
the social security, savings and pension programs to provide
an adequate safety net for all citizens. Abhisit did not
provide further details on how these programs would be
implemented or funded.
7. Referring to electoral prospects, Abhisit said he viewed
PPP as the Democrats' strongest adversary, and publicly
conceded the PPP would win the pivotal Northeast provinces,
considered the heart of TRT's former constituency. He added,
however, that "the Democrats will win all the others." (A
Democrat staffer told Econoff after the seminar that the
Party is focusing on promoting its education and irrigation
plans in its campaign, and that nationwide TV advertisements
over the past several months had boosted its poll numbers
around the country.)
People's Power Party: "We Did It Before; We'll Do It Again"
--------------------------------------------- --------------
8. PPP Secretary General Surapong made no pretense of
differentiating his party from its progenitor, although he
avoided mention of TRT by name. Surapong defended "the
previous government's" economic policies, crediting them with
restoring Thailand's growth rates following the 1997
financial crisis and leading to today's climate of strong
exports amidst minimal inflation and unemployment. Citing
the current account surplus and healthy level of foreign
exchange reserves as additional benefits accruing from the
TRT program, Surapong said a return to the "dual-track"
economic approach (i.e. external economic liberalization
combined with populist domestic programs) would alleviate
what he called the two largest challenges faced by the Thai
economy today: 1) The negative impact of the strong baht on
labor-intensive and agricultural industries, and 2) The
decline in domestic demand.
9. Surapong said, however, that drastic measures to control
the exchange rate were unnecessary, ranking the problem as
"less than a 5" on a scale of 1 to 10 in importance. "Many
countries would like to be in our situation (of having a
strong currency)," he added. He said the PPP's top priority
would be to "re-align the mindset and skillset of financial
policymakers to match fast-moving developments in global
capital markets." He did not elaborate. Surapong attributed
his shorter presentation to a "desire to implement the
policies that people have already approved." He described at
length the research conducted by the previous government to
ascertain the needs of the people, and the subsequent
implementation of the resulting programs, including the 30
baht health care program, microfinance for village
entrepreneurs, and liberalized trade agreements. Declaring
that "We did it before, and we'll do it again, with just a
few adjustments," Surapong stressed that the PPP would do so
"while seeking no retribution" against those who forced the
prior government out of power.
10. Surapong also criticized the Foreign Business Act
amendments, saying "It's time to face facts," and decide
which business sectors need foreign investment and which
should be restricted. In a short question-and-and answer
session, Surapong declined to name the PPP thinkers behind
the party's economic program (largely believed to include
former TRT advisers and Thaksin himself). He stated that
"many are afraid to come out into the limelight, but you may
start seeing braver members appear next month."
11. When asked how his party would work to prevent another
coup, Surapong said the PPP's leadership accepted that
"mistakes were made in the past, especially with regard to
corruption," and that his party had learned lessons to apply
to the future. Abhisit, in response, said that democracy is
more than just having an election, and requires respect for
the rule of law, freedom of expression and human rights
(noting past extrajudicial killings). Minister Piyasvasti
added that stable democratic governance requires the rule of
the majority with respect for the rights of the minority,
"something that the previous government did not abide by."
12. Energy Minister Piyasvasti, the only current government
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member on the panel, limited himself to mostly non-partisan
comments. In fact, his sharpest criticism was of the current
government's 30 percent capital reserve requirement, calling
for its immediate repeal "hopefully before the end of this
administration." He further said that the Bank of Thailand
needed to be reined in under the supervision of the Ministry
of Finance, "implementing policy rather than creating it."
In another observation, he said he hoped the future
government would focus strongly on developing nuclear energy,
declaring that "you can't reduce global warming and remain
self-sufficient without it."
BOYCE