Thailand finance: Korn dares the old guard

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By:
Eric Ellis
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Korn Chatikavanij, JPMorgan’s former Thailand boss, has been a finance minister, a fintech pioneer and a philanthropist; he is now trying to disrupt politics with a new party.

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Banker, bureaucrat, author, businessman and then some, Korn Chatikavanij has crammed a lot of careers into his 55 years.

Now, just after launching a new political party that he has provocatively called ‘Dare’ (or Kra in Thai), he is hoping to add disruptor to that job list – and, many Thais believe, perhaps even prime minister.

Not that Korn will openly say so. Speaking to Asiamoney a day before his party was formally legalized in Bangkok, Korn struck a banker’s tone of cautious confidence.

“It’s hard work, and very few startup parties or newly integrated parties ever succeed historically in Thai politics,” he says: “But we are in an age of disruption here. It’s a new age. People expect and are used to change and creativity. So I think the Thai public is more ready for this kind of political disruption.”

That Korn should regard his re-entry into Thai politics as disruptive says much about how broken the coup-prone country has become, and how Korn is positioning himself as both national champion and agent of renewal.

Thailand has been run by a military junta since 2014. The incumbent generals’ rule was somewhat legitimised by an election last year, although Human Rights Watch says the election did not meet international standards. The economy – which through the 1990s into the 2000s was one of southeast Asia’s most buoyant – is sputtering under the current regime. Economic growth was just 2.4% in 2019, making it the weakest-performing large economy in the region. Inflation ended the year at 0.7%.

But the economy is Korn’s strong suit. He’s an acclaimed former finance minister whose sure-handedness protected Thailand from the worst ripples following the 2008 global financial crisis.

His reputation was such that in 2011, Korn was a warm favourite to become the first non-European to break Europe’s hold at the top of the IMF.

Korn hails from solid establishment stock, the son of a senior civil servant and grandson of an ennobled Privy Councillor advising the Thai royal court. Korn is British-born and schooled, having attended Winchester College and then St John’s College, Oxford before taking an investment banking job in the City. He has a CV that would not be out of place in the upper echelons of Whitehall.


It’s a new age. People expect and are used to change and creativity. So I think the Thai public is more ready for this kind of political disruption 
 - Korn Chatikavanij

Korn may once have seemed destined for the job of leading Thailand. But that was before the arrival of telecoms billionaire Thaksin Shinawatra on the Thai business and political scene 20 years ago destroyed the Thai ‘amart,’ or establishment, monopoly on power.

Tall and articulate, Korn has wide recognition in Thailand, and there are many who say that his reputation as a clean politician means he is not ruthless enough for Thailand’s noxious politics. But there are also those who say he’s too aristocratic, privileged and liberal – even too Western – to run one of Asia’s more boisterous countries.

In the first days of Dare’s existence, Korn seems thrilled by the attacks from his opponents.

“The right, the current supporters of the military party, were basically saying that I’m a liberal,” he says, “and that many of my (party) co-founders apparently have showed sympathy toward a left-wing agenda. But the radical left are basically saying I’m a fraud because intrinsically I’m a right-wing conservative. So it seems I’m both a fascist and a communist.”

Korn laughs wryly. “I must be doing something right.”

Politics can be toxic anywhere, but Thailand seems to be burdened by a particularly vicious strain.

It is supposed to be a constitutional monarchy, but since 1932, when it notionally embraced democracy, Thailand has had more coups than any other country – 12, the last in 2014. But it took the democratically elected Shinawatra to upend Thai politics.

Thaksin’s vote-buying ‘money politics’ brand of populism swept him to power in 2001, but claims of institutional corruption grew during his term in office until the generals eventually ousted him in 2006. Thailand has been in turmoil since, lurching from crisis to crisis. Elections have been annulled, parties formed and almost as quickly dissolved, and politicians co-opted as the establishment plots to keep pro-Thaksin successors out of power.

Thaksin’s sister Yingluck Shinawatra was elected prime minister in 2011 and removed three years later because she was seen as a proxy for her exiled brother. The generals seized power again, and have shown little sign of letting it go since.

Apprenticeship

Korn’s profile is hardly revolutionary. In 1985, armed with a philosophy, politics and economics degree from Oxford, Korn joined merchant bank SG Warburg in the City of London. He says business was in his soul, and describes how, as a child, he was fascinated by supermarkets and the where, how and why products were placed for sale.

Warburg was to be his apprenticeship in investment banking, and at 24 he brought his new skills and an expanding contacts book home to Bangkok, which was then regarded as a frontier emerging market.

In 1988, he launched Thanakom Securities, a joint venture with the Hong Kong-based investment bank Jardine Fleming.

Thanakom proved to be a business of the times in Bangkok. Korn says he had seen how far behind Thailand’s financial industry was compared with Europe and other Asian markets and he wanted to rectify that. Thanakom became an investment bank pioneer in Thailand, which hadn’t really known – or had much need – for such an operation until then.

With Korn’s impeccable connections through the Thai business establishment, Thanakom essentially created the investment banking industry in Thailand.

It became the first Thai investment bank to be mandated to handle the takeover of a listed Thai company (the takeover of Bangkok’s Regent Hotel by the Tanayong Group, which is now part of public transport operator BTS), and it raised the first locally derived Eurobond for a Thai corporation, property firm Land and Houses.

This was ground-breaking in Bangkok at the time and, though imitators followed, Thanakom became Thailand’s biggest home-grown broking and investment banking house through the 1980s and 1990s.

Korn made millions of dollars along the way before selling out in 1999 to JPMorgan, which was cherry picking the Jardine Fleming carcass after its savaging in the 1997/98 Asian financial crisis. Thailand was also ravaged, but Thanakom was one of the few local firms to survive the battering. As Korn emerged from the crisis with a reputation for being astute, JPMorgan promptly installed Korn as its Bangkok boss, a job he held until 2004.

That year, as Thaksin was remaking Thailand and alarming the establishment in the process, Korn told JPMorgan of his political ambitions. He resigned and the next year became a parliamentarian, winning a seat at his first attempt for the Democratic Party in the capital’s fashionable Sathorn district. But the election was a landslide victory for Thaksin, and the size of Thaksin’s win spooked the Thai military. Thaksin pushed back, forcing another poll in early 2006 and winning that easily too, only to see it annulled by Thailand’s constitutional court. But by October that year, the generals moved and Thaksin was overthrown in a coup.

A haphazard series of elections and annulments followed, but by 2008 Korn was finance minister; his fellow Oxford alumnus Abhisit Vejjajiva was prime minister, while Korn was the number-crunching half of an aristocratic dream team running Thailand. Korn won acclaim for his time in the ministry, taking on pernicious loan sharking that has impoverished many Thais, while calmly managing the economy through the 2008 global financial crisis that rippled into vulnerable Thailand, one of Asia’s more open economies. That he came to the portfolio as a former banker, at a time when the perception was that a failure of banks had caused the crisis, was invaluable, he says.

Although they were backed by the military, the Democrats were brought down by the conflict between Thaksin’s supporters and the royalists (known as the red shirts and yellow shirts respectively) in 2011, a divide that continues to have an impact in Thailand a decade on.

Korn took a back seat from politics from 2015 and turned to Thailand’s emerging fintech scene, launching the industry umbrella Thai FinTech Club. Under Korn’s chairmanship, the club has morphed into the Thailand Fintech Association, and Korn has profitably backed a few likely prospects along the way, notably the startup Refinn.com, which has revolutionised how Thais handle their loans.


The Thai public is looking for a party that would actually have the courage or the dare to get up and make change, do something 
 - Korn Chatikavanij

Refinn.com provides Thais with options to refinance their mortgages, something Korn says Thais never really knew they could do, because banks didn’t want them to know, lest they switch to a competitor. Launched in 2016, Refinn.com’s position in the market has become baked in.

“The banks hated us,” Korn says. “But now over 50% of all mortgage refinancing goes through Refinn.”

Along the way, Korn has also been an author – of an Obama-like vision-for-the-nation handbook – a journalist and philanthropist (he launched a philanthropic fair-trade system for Thai rice farmers). He is also a father of four, and his wife Vorakorn is a visible Bangkok socialite.

A year ago, the idea of Korn as prime minister seemed far-fetched. His then party, the Democrats, had just been mauled in the election, while the military-backed junta, which seized power in 2014, had won comfortably. The Democrat party won no seats in Korn’s Bangkok heartland and lost two thirds of the 159 seats it previously held. It then did a deal with populist party Bhumjaithai, or Thai Pride, ditched its leader Abhisit and was co-opted into government as a minor coalition member of the military-supported government, which it had just run against in the poll.

Korn ran for the party leadership but lost. At that point, he began divorcing himself from the splintered Democrats.

A year on, Korn is back with renewed vigour. After formally breaking with the Democrats in January, he and influential Democrat defector Attawit Suwanpakdee launched a progressive new party, drawing support from across the Thai divide.

“The Thai public is looking for a party that would actually have the courage or the dare to get up and make change, do something,” Korn says.

Thai political analysts estimate that early support for Dare could land it an initial 25 seats in the 500-seat Thai lower house of representatives, where government is formed, which could be enough for it to have a kingmaker role in the fragmented legislature.

With its centrist message of modernity and renewal, and with support from across the Thai spectrum, some even suggest Dare might be the vehicle for Korn to emerge as a compromise candidate for prime minister.

But Korn knows from his banking career that timing is crucial, and his well-publicised break from the Democrats to start up a fresh new voice is intriguing. With its progressive, modern message of change, Dare is pitched at Thailand’s tech-savvy, urban middle class, who account for about 40% to 50% of the electorate.

The party’s emergence follows the demise in February of the progressive Future Forward Party, which Thailand’s constitutional court dissolved. Future Forward was openly anti-junta. Although it is early days, Dare doesn’t so much oppose the junta as reserve the right to criticize it, particularly on its management of the economy, though that became a lot harder on March 26 when, citing the Covid-19 outbreak, the junta moved to take absolute control over Thailand, “a coup upon itself,” as one observer put it.


We really need to get our act together in terms of becoming a digital-savvy country, adding technology pretty much to everything we do, starting very much with the government 
 - Korn Chatikavanij

The mixed and confusing messaging from the government through the outbreak of the coronavirus is a case in point for Korn. He says this is part of a wider trend, a failure of the government to make the most of technology, to use ‘gov-tech’ to both identify and solve problems.

“We really need to get our act together in terms of becoming a digital-savvy country, adding technology pretty much to everything we do, starting very much with the government,” he says.

As the coronavirus spreads, Thais have been panicked by a sudden shortage of protective facemasks as production and sourcing falters, and the government’s public messaging has been erratic.

“Why is there a shortage? We would know every crate, every box of masks that is being produced, where it’s delivered to, who they’re sold to, which shop has masks in stock, which shop doesn’t,” Korn says.

“We need to have very clear plans in terms of how we’re going to digitize the economy, digitize the way government operates,” he adds. “We need to address issues related to some of our key manufacturing industries already being challenged by the advent of technology, for example, automobiles. Our entire automobile factory is still very much based on the internal combustion engine.”

Korn says his new party is timely.

“I think that it’s generating an increasing demand for this kind of politics. In a way, I’m also a proven product. I’m new as a party leader with a new party, but there are no question marks over my knowledge or ability, given what I’ve done both in the private sector or in public, and what I’ve done in my 15 years in politics. So the usual question mark of risk that is often attached to a new venture doesn’t exist in this case.

“To me it was obvious there is a growing segment of the Thai population that feels that none of the existing political parties addresses the issues that they consider to be important or represent a good choice for them,” he adds. “There’s an increasing level of frustration that there’s no party to vote for.

“I have no doubt the public will over time and very soon begin to see us as essentially a pragmatic political party, and that’s the word we use when asked what our ideology is. We say pragmatism.”

He says more and more people are being pushed into the middle ground, asking: “Isn’t there something better? Isn’t there a better choice for us? A more pragmatic, practical political party?”

Provocative

These are provocative words in a military-run country. Over the years, Thai top-brass have proven to be recidivist power-grabbers, and once in office, they are reluctant to yield power. Thailand’s coup in 2014 installed the army head general Prayut Chan-o-cha in the Italianate palazzo confection that is Government House in Bangkok; from there, he likes to sing on national television about ‘returning happiness to the people’.

But after a solid start, the six-year rule of the Prayut junta is proving less than happy economically, and that plays well for Korn.

While Thailand’s average GDP growth was in the region of 6% to 8% in the 1990s to 2000s, the economy has been moribund on Prayut’s watch. Second-quarter growth in 2018 was 5% year on year, the most buoyant under Prayut.

Thailand’s GDP grew 1.6% in the fourth quarter of 2019, compared with 2018, the slowest since the third quarter of 2014, and not helped by a 5% fall in exports and official spending that was off 5.6%.

Full-year growth in 2019 came in at just 2.4%, well under the government’s 3.2% target.

“The economy was doing quite well from 2014 to 2018,” says Tim Leelahaphan, chief economist at Standard Chartered Thailand. “We had political stability and continuity. This was one of the very good things for Thailand, even though it was coming after a military coup.”

But last year was a game changer for the economy, Leelahaphan adds, citing election uncertainty, rising political protests – notably the impact of the dissolution of the Future Forward Party – and the ripple effect from the US-China trade war. A drought is also hurting Thailand’s farming sector, which is 10% of the economy but provides about 45% of Thai jobs.

And things are growing worse this year. Thailand’s official economic planning agency, the National Economic and Social Development Board, has revised its initial 2020 growth estimate from an unremarkable 2.7% to 3.7% to a meagre 1.5% to 2.5% – and that is before the catastrophic impact of the coronavirus outbreak on tourism, a crucial earner for Thai businesses.

“Thailand’s economy shows no signs of a turnaround,” Leelahapan wrote in a note to clients, dated March 19. The coronavirus outbreak has dealt a further blow to activity, and the consumer confidence index declined in February to the lowest level since April 1999. Domestic financial markets, even bond markets, continue to sell off. The outlook is grim.

Moody’s Investors Service’s growth forecast for Thailand this year has been cut to 1.8%, from 3.1% in late 2019. The agency, which has a Baa1 positive rating for Thailand, outlined the circumstances under which that rating might be at risk in a report in December.

“We would likely consider changing the outlook to stable in case of an apparent significant deviation from policies that deliver macroeconomic stability and offer prospects of higher competitiveness, which could stem from a renewed escalation of political conflict,” Moody’s said in its report.

“In general, prolonged political tensions that contributed to sustained weakness in foreign direct investment inflows, tourism and manufacturing would lower growth potential, erode fiscal strength and raise external vulnerability risks, likely leading us to change the outlook to stable,” it adds.

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Korn Chatikavanij

Korn says: “This government term has another three and a half years, and very few governments in Thailand ever make it to last the full term, but given the increased majority it has in parliament, it has the numbers to do so.

“The problem is, does it have the popularity to retain its legitimacy in power? And that’s a very relevant question, given the obvious decline in popularity [due to] the state of the economy, which was really bad even before the virus hit. And now post-virus, given how open our economy is, it is a disaster.”

Korn warns that first-quarter growth could even be negative compared with the same time last year. When he was finance minister, Korn channelled two massive stimulus packages into the economy. They were criticized at the time, but managed to keep the Thai economy afloat as it was buffeted by the late 2000s financial crisis.

He says the current circumstances are similar, and has been urging the junta to step up since February, via social media messaging and media interviews, urging income support, tax cuts, loan relief and soft loans for small businesses.

“I’ve got to accept the reality of the fact that things are tough and no single policy is going to be a cure,” he says. “But the government does have fiscal leeway to be more proactive in keeping up a level of demand in the country.

“Demand is [lacking] and purchasing power is non-existent on the part of the citizens. So they need to be using all the firepower that they have. What better time to do it than now when your debt-to-GDP is only about 41%, when your costs of your government borrowing is almost zero and when there’s a lack of demand from every other sector in the economy?”

“But this government, I don’t think they get that,” he adds. “They seem to think that it looks good for them if they’re shown to be fiscally prudent, but you have no right as a government to be prudent at a time when dramatic action needs to be taken.”

The junta finally announced a cocktail of measures worth $3.2 billion – cash handouts, soft loans and tax benefits – on March 6, about eight hours after Korn’s interview with Asiamoney.

Korn says the measures still don’t go far enough, and responded with a seven-point package to deliver more buying power to Thais, proposing deeper income support, tax cuts, loan relief and more generous soft loan packages for small businesses.

The central Bank of Thailand has also stepped up to aggressively support financial markets with four interest rate cuts since August. As Asiamoney went to press, Thai rates were at a record low of 0.75%.

Torpedoed

Korn says tourism had been the only remaining engine “still running” until the pandemic outbreak. But with airports almost empty and Thai hotels discounting room rates by as much as 60% or 70%, the virus outbreak has torpedoed even that staple.

“There are supply-side disruptions to manufacturing and demand-side disruption as a result of the disappearing tourists,” says Korn. “Plus a huge issue that’s affecting tens of millions of farmers has been pushed off the national radar altogether, which is the ongoing drought. It could be one of the worst droughts we’ve seen for 40 years.”

As for Korn’s old stomping ground, Thailand’s sputtering banking sector, he sees a tech-led renewal.


Right now, the question is not issuing more bank licences to foreign banks, it’s about opening up the whole financial sector towards financial services provided by tech companies. That’s where the innovation is 
 - Korn Chatikavanij

“Right now, the question is not issuing more bank licences to foreign banks, it’s about opening up the whole financial sector towards financial services provided by tech companies. That’s where the innovation is.

“The next step really is opening up the game towards a different kind of financial provider altogether; the internet banks,” he says, pointing to similar moves in Hong Kong, Singapore and Malaysia.

“I love the internet banks. I love what they do in terms of a customer experience. I love how they can provide that experience without the brick-and-mortar legacy costs of the existing commercial banks. We should be asking whether we should be doing the same.”

And as their country struggles with their junta’s direction, Thais will be asking themselves much the same question, albeit of Korn and his attempted return to the heart of the Thai economic and political conversation.

Or as one prominent local economist says: “I think we should listen to him. Not only him, but other parties and other leaders.”