It has been a wrenching eight months for Thailand, and the country's Deputy Prime Minister, Supachai Panitchapkdi, sees more tough times ahead. In a wide-ranging interview, Supachai shared his views of the regional meltdown with Asia Regional Editor Joyce Barnathan at the BUSINESS WEEK President's Forum in Bali, Indonesia. Excerpts:
Q: Has Thailand hit bottom yet?
A: I don't think so. We will only hit the bottom when we see major assets changing hands, when a new bankruptcy law is passed by the Senate, and when unemployment reaches 4% or 5% of the workforce. At the moment, firms have really not begun laying off people.
Q: There is a sense that Thailand has turned the corner, though.
A: Yes, we have turned the corner. If Korea or Indonesia were to face another round of deep difficulties, it would have much less effect than it had in late December or the beginning of January. I think that people have begun to take note that we have completed the first two reviews of the International Monetary Fund with flying colors. The IMF required $23 billion in reserves, and we achieved $27 billion. The IMF set a target for our current account deficit of 3.9% of our GDP, and we achieved 2.2%.
Q: Are the IMF measures a good thing, or are they too draconian?
A: There was no question of whether we should accept the IMF program or not. It was inevitable. But we want to have our own input into the program.
Q: How worried are you about the situation in Indonesia?
A: Indonesia is a major economy for ASEAN, and its health can impinge upon all of us. They are major buyers of Thai agricultural products, mainly rice, and they might like to buy more but may not be able to finance it.
Q: Do you think Thailand's democratic system, in which governments change quite often, is good for the economy?
A: In good times, this ease in changing governments didn't help us very much. But in bad times, it has probably helped because you can change governments quickly and come up with new programs.
Q: What worries you most about Thailand now?
A: Foremost in our minds is the short-term private debt. We are not as forward-looking as the Korean decision-makers who have gone ahead and refinanced the private debt quickly. We seem to think that private-sector debt should be left to the private sector. We will help in trying to find additional sources of refinancing for them, but we will not be negotiating on their behalf. In other words, we won't nationalize the private-sector debt, so we cannot control repayment. Something like $30 billion will come due this year.
Q: Aren't some Thai executives still in denial? Prices haven't dropped in the property sector, for example.
A: The moment the Asset Management Corp. starts to auction the assets seized from 56 financial companies, that will set the benchmark for the real estate market. It should take place now, but AMC seems to be a little bit slow in moving. We are trying to give it a push to hurry up.
Q: Is there a rising sense of nationalism in Thailand because some believe assets are being sold to foreigners too cheaply?
A: Yes, that is worrying. As I try to lift many restrictions on foreign investment, there is some resentment. People are talking more and more about conspiracy theories.
Q: When do you expect investor confidence to return?
A: It's returning. At least 10 pension funds from the U.S. have asked me to see them.
Q: Are you very worried about unemployment?
A: It's a serious matter. Now, we have about 1 million migrant workers in Thailand, mainly from Myanmar [Burma], and we probably will have 1.5 million unemployed. We will ask some to go back, but it won't be possible to repatriate the whole lot because some are in the country illegally.