The real economic test: Stimulus versus reform

“If we can achieve our target, our recovery could even be like the Nike logo,” he said, suggesting something like a V-shaped return of growth.

One can, of course, understand why it would be too risky for anyone in the Cabinet to offer a firmly positive picture of the economy, which is still hanging in the balance. Projections of economic growth for the whole of this year have dropped from 3 per cent to somewhere between 2.5 and 2.7 per cent.

You won’t hear about boosting GDP growth from this Cabinet economic team. The short-term stimulus is simply to “put a halt to the slowdown or to stem a further downward trend” – and not necessarily to boost the growth rate.

If some measures are indeed aimed at immediate results that prop up certain sectors of the economy, the team would bend over backwards to point out that this is not the same brand of populism of previous governments. The official version of the new policy avoids the name “pracha-niyom” and instead stamps it with a new logo, “pracha-rath”, which can be loosely translated as “civil state” or “state of the people”.

Cynics will, of course, insist that the difference is in name only, not substance. But the political distinction is crucial if real change is to be seriously pursued.

For one thing, Somkid stresses that the principle aim of this government, with less than 18 months in office, isn’t to seek short-term results but to lay the groundwork for real economic reform. In other words, the fundamentals have to be tackled for the medium and long term – and sustainably, not by “flash-in-the-pan” political manipulation.

Tackling structural reform entails reducing dependence on exports and strengthening domestic purchasing power. Injecting an ailing patient with steroids may enable him to stand up and walk, but unless he undergoes the painful process of physical therapy and systematic treatment, he won’t be able to build enough muscle and strength to meet the challenges in the long term.

Hence the first major move is to boost the purchasing power of the agricultural sector. This means strengthening the grass-roots communities – and not through freebies and government hand-outs, but by empowering local villages to build up their own fundamentals so they are in a stronger position to bargain with the political establishment.

The second vital measure is to do everything possible to improve the country’s competitiveness in the world market. That means investing in innovations, building up small and medium-size enterprises in a serious way and launching full support for start-ups in promising sectors.

This is where the emerging battle cry to build Thailand’s new generation of “economic warriors” comes into full play. The country’s business scene has to date been dominated by a handful of traditional, family-run big conglomerates, which aren’t necessarily very competitive in the regional market, never mind the global sphere.

Thailand will compete effectively only if new SME entrepreneurs mushroom in the new areas of innovation that meet 21st-century demand. For that to happen, we need to create conducive working environments, revamp outdated laws and, most importantly, get down to education reform in a no-nonsense way.

The third plank of economic reform would be to set up “clusters” in different industries so as to identify promising projects and boost synergy, scale and efficiency.

The fourth pillar of a strong and sustainable economy is to turn Thailand into a real regional hub for transportation, logistics, tourism and so-called medical tourism. This is possible only if the government implements a bold vision to build major infrastructure projects, such as expanding the third international airport at U-tapao into a major transport hub for a new industrial complex that forms a major extension of the Eastern Seaboard. New railroad links as well as deep-sea ports that link up with neighbouring countries will also be vital to the effort of turning Thailand into a genuine “centre of connectivity” in the region.

The goals may sound overly ambitious, considering the time constraints, yet the basic framework isn’t dramatically different from that of the previous government. The litmus test would be for this economic team to set policy priorities with a specific timeline so that every step of the implementation could be monitored, measured and evaluated.

We can’t afford for things to get any worse. Somkid’s team has to hit the ground running.