Thailand Looks Vainly for a Magic Finance Minister

There was much irony to be savored on Dec. 20 as the Thai junta’s former deputy prime minister and finance minister MR Pridyathorn Devakula officiated at an event to mark the birth 100 years ago of the nation’s most noted economist, Dr Puey Ungpakorn. Puey was one of the first graduates of Bangkok’s prestigious Thammasat University and the first Thai to receive a doctorate in economics from the London School of Economics.

Puey is revered not merely for his contribution to Thai economic policies between 1950 and 1976, but as a scrupulously honest man who rejected both high political office and financial gain. He was seen as a moderate but consistent promoter of liberal and democratic principles. He joined the World War II Free Thai movement in London and was parachuted into Thailand by the British in 1944, and his career as an economist with an international reputation, especially in rural development, led him to be named Governor of the Bank of Thailand and become Rector of Thammasat University.

Although critical of student protests at the university in 1976, his condemnation of the bloodbath when the military killed dozens of students in an assault on the campus made him a marked man.

Dubbed a communist, Puey had to flee into exile in Britain, where he remained till his death in 1999. Puey’s sons Giles Ji Ungpakorn and Jon and Peter Ungpakorn live in exile, Giles being a particular thorn in the side of the current military regime after being accused of lese majeste for a long record of criticism of the monarchy.

Pridyathorn may as an economist have respect for Puey as a fellow economist. He may even claim that his service for the junta is little different from Puey’s, whose professional advice was sought by military strongmen Sarit Thanarat and Thanom Kittikachorn in the 1960s and 70s.

But Pridyathorn is not just a competent conservative economist. With his title of Mom Ratchawong (of royal descent) he is a key player in the monarchist movement allied closely to a succession of military juntas. He played the same role under Surayud Chalanont, the general who took over following the 2006 coup against then Prime Minister Thaksin Shinawatra as he did for Prayuth Chan-ocha, the current ruling prime minister and junta leader, last year.

Unfortunately the junta’s simply reversing some of Yingluck’s more stupid policies, notably its rice buying program, was not enough to spur the economy back to life. So Pridyathorn was replaced in August by none other than a former Thaksin Finance Minister Somkid Jatusripitak. The hope was that an injection of some of the populist policies previously-condemned populist policies could spur the economy and buy some popular support for a regime whose increasingly authoritarian nature is a response to public disdain.

Now Pridyathorn himself seems sufficiently disillusioned that he used the Puey event to warn that the junta must face up to difficulties that the economy faces, be honest with the people and not suggest that recovery is just around the corner. The fact is that GDP growth this year is unlikely to exceed 2.5 percent after almost stagnating in 2014. Exports will probably end the year down 5 percent of so with demand from China especially weak. With the Chinese renminbi now weakening, the euro and Russian ruble well down on a year ago and most neighboring currencies also weak, there are calls for a baht devaluation.

The currency has declined by 9 percent over the past year although some industries would like a further fall to regain competitiveness. But a weak currency is not part of a conservative agenda and would also damage Thai corporates that have borrowed heavily in US dollars.

There has been a small pick-up in investment but nothing like what was heralded when the junta took power, and though consumption is still expanding its growth is restrained by household debt levels. Thailand’s relations with its western trade partners have been damaged by issues ranging from suppression of democracy to airline safety to the deportation to China of Uighur refugees, to military involvement in human trafficking the revelations of appalling labour abuses affecting its millions of migrant workers.

Even the close and longstanding military relationship with the US has been strained by the junta’s cosying up to China. Thailand has also slipped in the regional league table for ease of doing business – still quite high but others are improving fast.

For the longer term, junta policies in practice are a deterrent to Thailand’s raising of skill levels rather than relying on the same industries, not least tourism, which were behind previous growth, and on the army of low-paid migrants who help keep the work force growing despite the rapid aging of the indigenous population. Pridyathorn’s economics may be sensible enough but he could learn a lot from the political principles of the Puey he praises.