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Govt is focused on short-term plans for political gain

Nov 18. 2011
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By The Nation

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The administration's persistence with populist schemes raises the question of whether it has its priorities right


Although the Yingluck Shinawatra government has planned a budget for the 2012 fiscal year with spending as high as Bt2.38 trillion, the spending details do not respond well to the needs of the country, which is suffering from the ongoing flood crisis and mismanagement by the administration.
The massive flooding has prompted many economic institutions to revise the country’s growth projection downwards. The Bank of Thailand, for instance, has lowered the projected growth rate for next year to only 2.6 per cent compared to its earlier forecast of 4.8 per cent. 
It is clear that a lot of money will be needed to rehabilitate the country after the flood water recedes. However, the government is insisting on putting up a large amount of money to finance its populist policies, which may only benefit a select group of people. Opposition leader Abhisit Vejjajiva pointed out during the recently concluded budget debate that, for instance, the plans to provide tax rebates for first-time car buyers and tax reductions for first-time home-buyers will require several tens of billions of baht each. He added that the money for the two projects should instead be spent on rehabilitating flood-affected parts of the country and compensating the flood victims.
The Pheu Thai-led government may argue that it has to fulfil its election pledges to voters by implementing these populist schemes regardless of the circumstances. But the massive flooding has forced the government to shift its priority from boosting consumption to rebuilding after the worst deluge in 50 years.
The plan to reduce the corporate tax rate, for example, would cause the government to lose about Bt55 billion in revenue annually. And the planned exemption of contributions to the Oil Fund would cause the government to lose further huge revenues. The rice-pledging scheme will drain away about Bt100 billion, even though it is not certain if small-scale farmers will be able to benefit from this programme because most of them have seen their farms submerged. Even before the flood disaster, the government was set to borrow more to finance these policies. Additional policies to help the flood victims and the business sector will create a huge additional financial burden for the government.
It is now almost impossible for Thailand to achieve a growth rate of 4 to 5 per cent after this disaster. Instead of trying to inflate economic growth, the short-term goal should focus on how to revive beleaguered industries and companies. The goal in the medium term should be to ensure that these industries are able to grow in a sustainable manner. The government should, meanwhile, provide infrastructure and effective mechanisms to ensure that Thailand has better immunity against future natural disasters and better crisis management when they do occur.
Instead, the government continues to focus on short-term goals via these unnecessary populist policies even though they will almost certainly jeopardise the country’s fiscal position.
In addition, the government has also allocated a large central budget of Bt120 billion. But the budget bill does not include details on the proposed use of this sum. Therefore, the public should call for close scrutiny to ensure that tax payers’ money is well spent to serve the interests of the public, not a certain group of politicians.
In spite of the flaws in the fiscal policy that have been pointed out by the opposition parties during the debate, the prime minister still insists on going on with the original plan. She has simply come up with the answer that her government promised to implement these projects before the election. 
Yingluck’s answer only leads to the obvious question of whether the government has got its priorities right.

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