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Surapong Suebwonglee: democracy and progress for Thailand |
It’s fair to say that a lot of people were sceptical about your appointment as finance minister, given your professional background as a doctor and lack of a track record in economic management. What would you say to people who think you’re not qualified?
It’s nice to let people underestimate you. I would remind people that my background is not only medical: I graduated from business school at the oldest university in Thailand, I’ve studied at top schools overseas and I sat in the cabinet of the Thaksin administration for five years and discussed policies. It’s not all as new to me as some people think.
From talking to people at the ADB meeting and listening to the presentations, it seems that inflation is the chief worry across large swathes of Asia at the moment. How worried are you in Thailand about inflation, and what measures are you going to use to fight it?
In our case, inflation is occurring not because of demand or cost-push but because of the rising prices of oil and commodities; Thailand is a net importer of oil but we are an exporter of rice and agricultural products, so we’re not as affected by rising food prices as some.
At the beginning of this year we forecast 4.2% inflation, and it’s true that we are facing higher levels than that: 5.2% in March, 6.2% in April. To cope with this we’re not going to implement price controls in local markets if we can help it. Instead we aim to solve the issue in a sustainable manner by increasing people’s income, especially those in rural areas. We’ve also launched a stimulus package consisting of tax deductions to help increase incomes in villages.
Your counterpart in the opposition, Korn Chatikavanij, seems to support many of your policies but he has questioned whether those tax cuts might be counterproductive – that is, inflationary – or simply promote saving over spending.
As I’ve mentioned already, those tax deductions are for low-income people, and if they have money they tend to spend it. We’re seeing signs of that already: motorcycle sales are up for the first time in two years, sales of raw materials for building are increasing. We think the real estate sector can have a very positive impact in stimulating the labour market.
Of course by cutting taxes you hit government revenues at a time when there’s lots of talk about enormous public works projects – the so-called mega projects – as a means of generating growth. How will these projects be funded?
First, by encouraging low-income people to spend we’ll generate more VAT for ourselves, so we don’t necessarily lose out. In the past two years we’ve seen slow growth and little private investment. If we don’t try to stimulate the economy we face stagflation, so we need to act. In the next couple of years we need to stick to fiscal discipline. However, public debt is only 36% of GDP and we set a goal of that figure not exceeding 50%, so we have 14% or around Bt1.7 trillion [$52.7 billion] to invest.
And presumably you’ll look to the private sector to help as well. You’ve already taken some measures to restore foreign investor confidence in Thailand by lifting capital controls but there’s clearly more to be done. What else can we expect to see?
When I came to office my first priority was to build up the confidence of people locally and internationally – the 30% capital controls that you mentioned ruined the confidence of foreign investors. There were divided opinions among academics as to whether we should remove the controls gradually, suddenly, or not at all. I thought immediate action would have the best response from the market, so I met confidentially with the governor of the Bank of Thailand two weeks beforehand to discuss that proposal and I think we had a good response. That’s my style. I like to listen to authorities on a subject and then act. That’s why I visited the Thai Stock Exchange to hear their views on capital markets reform and I’ve set up a committee to plan and implement changes. I told them I don’t want just another plan, I want action in the short, medium and long term. So after the next meeting on June 2 you can expect some action.
You mention your meetings with Tarisa Watanagase, governor of the Bank of Thailand. Media reports at the time suggested the two of you were clashing; that you had strong disagreements over policy and a difficult working relationship. Is that a fair assessment?
This is something that the public predicted wrongly. I met with her after I’d been in office for just four days, and in that very meeting I proposed lifting the capital controls. She agreed with the idea, but we didn’t say when to do it. I asked if there’d be any difference if we lifted the controls now or in six months, and she said no but perhaps it would be better to wait a while for things to calm down.
I said that ultimately we had to work as a team, I don’t want her to be solely responsible if things go wrong. I said I’d be more than happy to resign in that case, which created the sense of a team working together. The rumours still exist – even on the day we announced the lifting of the controls, there were rumours that the governor would resign and yet when we had the press conferences everything went smoothly. The public perception is totally wrong. We had to work confidentially to prevent market panic, so I think some of the rumours arose because local reporters tried to interpret my silence as a sign that we saw no way out of our problems.