Thailand's Man Of The Businesspeople

Could Premier-elect Thaksin ax market reforms?

Call it the Revenge of Thailand Inc. With the resounding Jan. 6 election victory of Thaksin Shinawatra, Thai executives at last have a leader who feels their pain. For the past three years, the Bangkok business community has chafed under the austerity policies of the administration of Prime Minister Chuan Leekpai. Foreign investors and the International Monetary Fund generally applauded Chuan's slow, steady postcrisis approach. But the business elite criticized his government for not doing enough to spur domestic demand, get the banks lending again, and protect local companies from foreign takeovers.

Now, Thai executives will have one of their own in the Prime Minister's chair. For how long is an open question, of course, because Thaksin may be forced to step down if a constitutional court upholds a ruling that he improperly hid assets. The charismatic telecom tycoon vows to rule by proxy if necessary, but how that would work is unclear.

Assuming Thaksin survives politically, the business community can expect an economic agenda that largely dovetails with its own. After all, Thaksin is Thailand's richest man: His family controls companies that account for more than 13% of the Thai stock market's $30 billion capitalization. Critics fear a Thaksin administration would dilute the Chuan team's market reforms in favor of politically popular short-term fixes that protect the wealthy elite. "He has managed to convince voters that the bailout of the rich is the best option for the taxpayer," says Andrew Stotz, a banking analyst at SG Securities.

Much of the criticism of Thaksin's platform has centered on his proposal to set up a national assets management corporation. It would use some $12 billion in public money to buy bad debt from Thailand's banks. Critics argue that the plan is nothing more than a bailout of Corporate Thailand and could bankrupt the country. The list of companies most likely to benefit from such a lifeline includes big Thaksin supporters, among them Bangkok Bank PLC and Bank of Ayudhya PLC. A bailout could prompt such serial deadbeats as the rice-trading company Soon Hua Seng to wriggle free of their obligations once the government inherits their IOUs. "That is a seriously scary thing," says David Kadarauch, head of research at ABN Amro Asia Securities.

Then there are the potential conflicts of interest inherent when the nation's richest man becomes Prime Minister. While Thaksin has handed off day-to-day management of his companies, he still could benefit from his government's policies. For example, Thaksin's wife, Pojamarn Shinawatra, owns 5% of Thai Military Bank PLC, the nation's fifth-largest lender. Its stock price surged 16.7% two days after the election. Analyst Stotz estimates Military Bank's net book value could nearly quadruple by 2003 if the bailout goes ahead.

Others wonder how Thaksin's satellite and cellular communications holdings (table) will affect all-important telecom policy. The sector sorely needs deregulating. Right now, service providers share revenues with the government--a recipe for cronyism if ever there was one. Thailand needs a fee-based licensing system to bring telecoms in line with global norms. But if Thaksin moves ahead with that, he could be accused of helping his family; if he doesn't, he may be hit for protecting the status quo.

PROMISES. Thaksin did not win office just by promising breaks to business. He also pledged $23,000 for every village, health care subsidies, and a three-year debt moratorium for farmers. "It was a savvy campaign," says Sriyan Pietersz, head of research at SG Securities. "He knew what voters wanted."

The big question is whether Thaksin's proposed policies will work. His populist promise to kick-start growth in the countryside may get people spending again, but a one-time handout to the poor is not enough to stimulate investment or put the nation on a path to self-sustaining recovery. Nor is his asset-management corporation a surefire way to get banks lending. Many companies are too busy trying to restore their balance sheets to contemplate new loans. Besides, "the banks are still hunkering down after their disasters," says Ammar Siamwalla, senior economist at the Thailand Development Research Institute.

Another question is whether Thaksin will be allowed to serve his term. If he does, Thais will find out if the man they elected in a landslide will run the nation like a well-managed company--or like a candy store for his cronies.

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