NEW PRESIDENTS PART I NEW POLITICS

After the final verdict of the Supreme Court in the U.S. of A. the whole world was told by Mr. Bush Senior, that his son had won the election. What a lie. He was “voted” into his new office as a result of a corrupt Supreme Court, whose members voted against the own statements made just a few months prior to this so called election. So Mr. Bush did not win, the people wanted Mr. Al Gore, but learned that partly the electoral system and partly the judges can overrule democracy. The USA is now left with a very split country, divided into two parts with a very narrow majority to the republicans.

Mr. Bush is now facing the most difficult task an American President can face and that is to deliver what he promised when he campaigned. To cut the income tax for the rich, meaning to implement a tax cut in the total of 1.3 trillion USD over the next 10 years, and that at a time, when we all know that a certain recession has started to show the first signs. Nobody ought to be worried if the American economy was operating within the USA only, but the fact is, that when the US economy is sneezing the rest of the world catches a cold. Mr. Bush wants a fast implementation of his proposal, but the traditional investors and advisors are reluctant and most likely for good and solid reasons. The reason is simple, because Mr. Bush wants to increase the public spending at the same time, when he proposes to decrease the income. That is a financial enigma and it will be interesting to see how it may work. Jesus could walk on the high sea, but others have failed when trying and I do not think Mr. Bush can do that either even if his very arrogant attitude reflects that he can do anything he wants as long as his father covers for him.

Mr. Bush has proven to be a very poor businessman. He was first given a business by his rich father, and he ruined that very fast. Then he was given by some of his father’s friends 2 more chances and they were both ruined. Then they felt sorry for him and gave him a football club with a very high potential and a sale already in place and he managed to sell it and make a huge profit that then made him a financial wizard, who will from January 20th be the head of the strongest economy in the world.

In Thailand we have just almost finished a similar election. This took place on January 6th and was won by the richest man in Thailand, a multi billionaire, who has proven by his own record that you can start with nothing and become the richest man in Thailand. The election is not over because a recount has been called for plus some new elections in parts of the Kingdom, where fraud was exercised. The new elections will take place on the 13th this month but the results will not change the fact the Mr. Thaksin is a top winner in a land sliding election. He won 257 seats (maybe more) out of the 500 in the Parliament.

Mr. Thaksin, our new PM, will take over from Mr. Chuan, a democrat, who was steady in his government but said to be boring, which I cannot understand. Chuan is a poor lawyer, but honest to the bone, which in this country is considered a disqualification.

This election is the first since the new constitution was implemented in 1997 giving almost all the power here to the people, leaving the generals out. Even now non-military persons now represent the Senate, which was previously consisted of generals only.

Also Mr. Thaksin is in favor of cutting taxes, personal as well as company taxes and it will be equally interesting to see how that will work. The words Civil Society have now become important and they are said to change the Thai Society and the face of politics. The question is if it can remain a significant player in the coming years, trying to break away from the last 4 years of political turmoil, and more important breaks from the true Thai traditions, which sometimes overrule the normal political and financial plays.

It has been called a curtain raiser, our new constitution, so Mr. Thaksin faces a chance and a challenge at the same time. How will he cut the taxes and finance expansion of our Kingdom at the same time?

Due to the financial very sincere situation the Kingdom has been facing since the crisis in 1997 and still is, the major issues in the recent campaign before the election have been linked to the fiscal policy (policies) as a major point. How do you maintain the highest possible degree of fiscal discipline where the banks are suffering from all the bad debts? How do you finance tax cuts in the personal income tax? How to you decrease the company taxes from 30 to 25% and give tax relief for new companies resulting in a total lower income tax at the same time you need to increase Public Spending?

Another important issue is the question of how to solve the severe problems in the financial sector, needing a new policy for debt restructuring? Mr. Thaksin proposes to establish a governmental body to take over and handle all bad debts from all banks, how can it be financed and who will buy the bad assets? He proposes to issue State Bonds to get the initial capital, but who will buy them? It all ends up in the implementation of a monetary policy, which is strong and reliable enough for foreign banks and investors to believe in, because Thailand is still running at a deficit on the State Budget. Thaksin is considering a boost by introducing a buy now pay later schedule, exactly the one that was a major contributor to the crisis in 1997. He also proposes a new debt structure plan for the poor farmers and village societies, which is understandable but how can it be financed? He has to deliver, because a majority of farmers voted him into his new office.

The most important issue is that Mr. Thaksin is waiting for a judgment from the Constitutional Court about his declarations of assets. All persons in the Senate and the Government must submit a declaration of assets and liabilities when entering and leaving office. Thaksin was deputy prime minister a few years back and “forgot” to declare assets worth billions of THB claiming that it is not easy to keep proper record when you are the owner of 67 companies and the richest man in the country. So he “forgot” some billions and also was surprised to learn that nobody believed him when it was proved that some of his major companies belong to his driver, his maid and other employees, who all of a sudden were holding share worth billions of which they had no clue. He has sold his shares so he was not so rich anymore! Prior to the election he was found guilty by the National Counter Corruption Commission but appealed to the Constitutional Court that will issue the final verdict in 2 months time. If this court upholds the first verdict, he cannot hold a public office for 5 years, so now we are waiting to see what will happen, because the truth is, that nobody in the government can take over as PM should Thaksin be forced to resign.

Is it not interesting that there are so many similarities between the two scenarios, the one in the States and the one here in Thailand? Except that here we have not seen the policy for education, an issue needing a lot of attention since this important area is almost totally ignored.

Let me move back to the real world. Thailand is at present running at a public budget deficit of 100 billion THB per year and the interest on the proposed financial rescue package will amount to another 100 billion baht per year. When asked how to solve this problem Mr. Thaksin has answered that he will get foreign loans, additional that is, at the same time the country has to pull all financial strings to raise funds high enough to pay back the capital injections from IMF in 1997/1998.

So now we are all asking this question: How can tax cuts, new debt moratorium, increases in public budgets be financed with tax cuts? A huge amount of foreign reserves would be needed to bridge this gab, but Thailand is already broke, so who will come to rescue? Will the Thais mortgage the future of their children to ease the present tight financial situation? Thailand is not strong enough being on its own. It depends still to a high degree on the Japanese economy and that is in a bad shape as well. Our Kingdom is also depending on the overall world-financial-picture, which again is heavily depending on one man Mr. Greenspan, whose word is the ultimate financial solution to all economies all over.

Mr. George Bush is now forming his new USA government and Mr. Thaksin is slowly forming a new Thai cabinet and we are all looking for how we will do it. Due to his tremendous victory he can choose and pick, but he wants a coalition government controlling more than 300 seats in the Parliament and thus enabling him to force through the system all his proposed new laws. The skeptical Thais call this new situation for “Parliamentary Dictatorship” and they fear that the true meaning of democracy will then disappear from the scene. Mr. Thaksin’s party is called Thai Rak Thai, meaning Thai love Thai, but if Thaksin just forces all new laws through the parliament using his comfortable majority and thus causing great harm to the country, where is the love?

The Thais do not like to think too far ahead. It is more safe and better just to think about today and maybe offer a few thoughts for tomorrow, which may never come, but to elect a person and a new party wanting to implement new financial laws, the inventor of which cannot walk on the water either, will have deep effect on the country’s total financial picture for years to come. Maybe this time the Thais will realize that it is better to do some hard thinking about the future. The new party TRT got a lot of its new political figures from an old party New Aspiration, headed by General Chavaliet who was the PM of the government from 1996-1997 and who ran the country into the crisis, proving that generals have no clue about politics and finance. In 1997 the people moved into the streets calling for Chavaliet to step down and he was forced to do that. Now his previous party members have shifted side and joined Thaksin, but have they changed their ability to run a country properly? I do not think so. The truth is that nobody in the government in this country thinks about Thailand. They think only about if their pockets are deep enough to hold all the bribes they will get when in power.

The major focus on the new financial policy is centered on Thaksin’s proposal to form a National Asset Management Corporation called AMC, which is supposed to handle all non-performing loans. No doubt a lot of people with heavy debts will be happy about this proposal, but how will it be financed, who can or will carry the related burdens?  The total debts of non-performing loans are close to 750 billion THB. The proposed no pay scheme for a period of 3 years for the poor farmers will cost Thailand maybe 50 billion THB and his proposal to develop poor villages is budgeted to cost Thailand 70 billion THB. Who thinks that any foreign bank will give loans or buy the proposed State Bonds?

Mr. Thaksin has an American training in businesses, which have helped him to get to his present position as the richest fellow here. He has been greatly admired for his business concepts, which have proven to be right. He is no doubt 10 times as intelligent as Mr. Bush. It took Thaksin 10 years to build his empire and tremendous wealth. He is a very shrewd businessman and he will know, in this capacity, how his American counterpart, Mr. Bush will react, when the garbage load of non-performing loans will be made public, and presented to him, who is heading the largest economy in the world?

TO US HERE IN Thailand it is interesting to find so many parallels to the present political scenes here and in the States.

It will be a new learning process to see how the two new Head of States can implement new ideas, based on financial laws, which up to today have proven not to work, but maybe after all, these two guys can walk on the deep sea?

Hua Hin

January 2001

Leave a reply

Click here to cancel reply.

Name (required)

Mail (will not be published) (required)

Website

CAPTCHA Code

Anti-Spam Protection by WP-SpamFree