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Economics : An economic policy recommendation for the new cabinet

โดย Dr.Kriengsak Chareonwongsak

 

We cannot deny that since Thaksin’s cabinet era, it has been economic policy more than policies of any other kind, that have played a leading role to entice voters, especially grassroots voters. It is vital therefore for the new cabinet to have its package of favorable economic policies.
            From observation, I conclude that the new cabinet’s economic policy concepts follow two approaches. The first approach is to increase budget deficit by increasing government expenditure and, at the same time, by decreasing the tax collection target by ten percent, in order to stimulate the economy that will probably be down to its nadir in 2009. The other approach is to maintain populist policies, including the six economic stimulation measures of Samak’s cabinet (with the exception of the petrol tax exemption measure).
      In principle, I partly agree with the new cabinet’s economic policies. I agree with maintaining the six economic stimulation measures. I also agree that the petrol tax exemption measure is now unnecessary due to low oil prices in the world market. However, the new cabinet should re-consider some of their administrative methods in order to be fair to all. For example, many poor people who live in apartments will not benefit from the water tariff exemption measure because their water supply usage is pooled into the central metre of each apartment.
            As for the idea of budget deficit, I consider it a right move to make during this economic crisis period. In this world crisis time, Thai export, which has been our economic hero, will shrink very soon. The economic plunge will also discourage business sector investment, and households will have no choice but to spend less and save more in case of unemployment. Thus, government expenditure is the only single mechanism to assuage economic trauma by injecting money into the economy in order to boost liquidity and employment. Nevertheless, I have some detailed recommendations for the new cabinet in at least three areas, as follows.
            Firstly, the new cabinet is strongly advised to rescind the new 4,000 NGV bus rental project, to which I have been opposed since Samak’s cabinet first proposed it. Due to current low oil prices, BMTA’s benefit from the difference between NGV and diesel prices is lessened. Moreover, this project will put its cost on passengers, who are going to pay higher bus fares (according to the BMTA’s old plan), and bus attendants, who are on the brink of unemployment (despite BMTA’s employment guarantee).
            Above all, if the new cabinet rescinds this project, they will have 60,000 billion baht for any other beneficial stimulus package or anti-poverty project during the crisis, instead of paying for new but unnecessary buses. Let’s imagine, if this budget of 60,000 million baht is spent on the free bus project, which requires 1,400 million baht bi-annually, the government may have to implement the free bus project for a further twenty years!
            Not only will NGV bus rental rescinding be beneficial to the Thai economy and Thai people’s welfare, but the new government will also earn popularity from their integrity and attention to the public interest.
            Secondly, it is inescapable that the new cabinet must work with alacrity – I mean especially considering the expenditure velocity rate. The government’s expenditure process is like transferring money from the public treasury to the private sector through a pipe which symbolizes the bureaucratic procedure. Despite abundant money, if stuck in the pipe for a long time, policy effectiveness will be low. For this reason, if the new cabinet wants their stimulus package to be highly effective, they must unclog the pipe – expediting the expenditure velocity rate. This implies that the new cabinet and bureaucrats must dispatch their work with haste.
            The new cabinet may have many excuses for the clogged pipe, for instance, the parliamentary process or bureaucratic culture, but I consider these to be a challenge for the new cabinet’s administrative capability to accelerate the process.
            Lastly, the new government should grasp the opportunity to establish a systematic poverty database through the unemployment support programme, which I regard as not only a hit-to-the-point measure in the short-run, but also a “pivot point” for poverty resolution in the long-run. So far, most of all government anti-poverty policy cannot specify the targeted group, and is therefore ineffective, due to a lack of individual-level information about poor people, especially those in the informal sector.
            My nascent plan following on from this idea is that the new cabinet should launch an unemployment support programme for informal laborers. The members of this programme would receive the same unemployment compensations as those in the social welfare system under several conditions. First of all, beneficiaries should be required to be volunteers on government projects. This condition should be stipulated to cut off the false report of unemployment. The other condition is that beneficiaries’ personal information, especially about their vocation and income, must be accumulated into a central information center. If the government accumulates enough information, any anti-poverty policy which specifies a target group - Earned Income Tax credit (EITC). for example, can be launched effectively.
            Now Thailand’s entire future partly depends on the new cabinet, thus they ought to response to this fact by working enthusiastically and wisely.
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