As Thai opposition gains, populist reformer waits in the wings
By Vithoon Amorn
BANGKOK - A US-EDUCATED former central banker who could be Thailand's next finance minister, Olarn Chaipravat scoffs at suggestions that his party's policies would cause massive budget strains and damage Southeast Asia's second-largest economy.
And, he adds, taxes would not have to rise to finance them.
Olarn, architect of the opposition Puea Thai Party's economic platform, said his 1.5 trillion baht (S$60 billion), four-year programme would help his party carry out "bottom-up"economic reforms and speed income redistribution in Thailand.
That marks a revival of a brand of populism championed by fugitive former premier Thaksin Shinawatra, whose sister Yingluck is candidate for prime minister as the leader of Puea Thai, which is now leading the ruling Democrats in opinion polls ahead of Thailand's July 3 election.
"Contrary to media scepticism about our economic plan, it can be entirely funded without putting unsustainable strains on our fiscal position," Olarn told Reuters in an interview.
"It will need only up to 40 per cent in government budget financing with the rest through private capital participation, including some raised through the stock market."
"Each of our 12 economic projects has been well thought out in advance before we announced it. They will all be productive with at least 6 per cent in average economic returns, which means that we need not raise taxes or impose new ones," he said.
ECONOMIST TRAINED AT MIT AND CENTRAL BANKER
Thailand's current finance minister, British-born and Oxford-educated Korn Chatikavanij, is well liked by investors.
He was voted "Global Finance Minister of the Year" in 2010 by the Financial Times' Banker magazine.
A former chairman of JPMorgan Chase & Co's Thai unit, Korn is well connected. His grandfather was a privy councillor to King Prajadhipok, his uncle founded the Electricity Generating Authority of Thailand, a state monopoly, and his father was director of the Fiscal Policy Office.
But the soft-spoken Olarn, 66, also boasts impressive credentials. He graduated magnum cum laude from the Wharton School of the University of Pennsylvania before earning a Ph.D. in economics from the Massachusetts Institute of Technology in 1970.
He went straight into the central Bank of Thailand where he worked for 11 years, rising to become director of the Financial Institution Supervision and Examination Department. In 1992, he was appointed chief executive of Siam Commercial Bank , Thailand's fourth-largest lender, overseeing operations during the 1997-98 Asian economic crisis
He was also deputy prime minister for two months in 2008 under the short-lived premiership of Somchai Wongsawat, brother-in-law of the self-exiled Thaksin, who was removed in a 2006 coup and convicted in absentia of corruption-related charges he says were politically motivated.
Since the coup, Olarn has been a steadfast Thaksin ally, most recently as a behind-the-scenes engineer of the economic policies of Puea Thai, which has strong electoral support in the vote-rich north and northeast Thailand and is gaining ground in Bangkok.
"Puea Thai is a progressive, pro-change party pursuing'bottom up' reforms of income distribution, in contrast to the'top down' trickling of benefits we have long seen for the poor," said Olarn, who is expected to be named deputy premier or finance minister if Puea Thai wins.
The rival Democrats are also aggressively courting the rural vote with a trove of populist policies.
The populism of both parties is no surprise.
For the past decade, Thailand's minimum wage has trailed inflation, creating one of the widest gaps between rich and poor in Asia and fuelling working-class frustrations that helped spur violent street protests last year.
The richest 20 per cent of Thailand's population earn about 55 per cent of the income while the poorest fifth get 4 per cent, among Asia's widest income disparities, says the World Bank.
Olarn said a Puea Thai government would change that by improving the lot of farmers, low-wage workers and young university graduates, in part by providing easy credit and raising minimum wages.
That largesse includes a plan to issue farmers with credit cards for buying fertiliser, insecticide and farm equipment through a state agricultural bank.
"The farm credit cards will allow holders to tap a 300 billion baht ($9.8 billion) revolving fund run by the bank. Our two to three million rice farmers can use the cards to buy what they need for growing paddy with their card spending capped at 70 per cent of their expected earnings in the next six months.
"Registered farmers in the programme will be assisted to sell paddy at a government-guaranteed 15,000 baht per tonne, against a current market price of 8,000 baht," he said.
He denied the scheme amounted to a taxpayer-funded handout.
"This is an investment to help raise farm productivity," he said. "We are not talking about free handouts of fish. Instead we will give farmers fishing rods and teach them how to fish."
Puea Thai's critics say its rice price guarantee would distort the market and that the government would have to release the rice stock later into the market, depressing prices.
Olarn plans to raise the daily minimum wage to a uniform 300 baht throughout the country from the current 159-221 baht.
"To compensate employees paying higher wages, we will cut the corporate tax rate to 23 per cent next year and 20 per cent a year later from 30 per cent now. That will more than offset the increased labour cost they face," he said.
Olarn said about 70 per cent of employers already pay workers 300 baht or more a day, but critics say employers in remote rural areas with poor infrastructure will be hard-pressed to pay the same wages as those in or near Bangkok. --Reuters
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