More than just the father of Thai economics

During his career as governor of the Bank of Thailand, Puey Ungphakorn contributed a great deal to the cooperation among central banks in the region. At that time, Southeast Asian countries were individually attached to different constituency groups in the International Monetary Fund, which fragmented and diluted their power and influence. 

Back in February 1966, 50 years ago, Puey arranged for the very first Southeast Asia Governors Conference (SEACEN), held in Thailand. The initial membership of seven – Laos, Malaysia, the Philippines, Singapore, Sri Lanka, Thailand and Vietnam – has since grown to 20.

Through his unwavering commitment, his tireless campaigning, vision and foresight, and with the help of his good friend, Ismail Ali, the Governor of Bank Negara Malaysia, the group finally came together as the Southeast Asia Voting Group (SEAVG). 

The SEAVG still functions well to serve the interest of Asean member countries along with other Asia-Pacific members, and has been recognised in the international arena as a voice of reason and moderation.

Puey was an ordinary person who led an extraordinary life and became one of the most respected public figures in Thailand. Throughout his exceptional career, his many initiatives laid strong foundations for all the offices he was in charge of or involved in.

In 1959, Puey became the director of the newly established Budget Bureau. The Budget Procedure Act of 1959 was enacted as a result of a study of the Thai accounting and budgetary system that he himself had instigated three years earlier. Since its enforcement, the flagrant spending of government funds in excess of annual budgets has become negligible. 

Later in the same year, he was appointed governor of the Bank of Thailand, and in 1962 he became the first director general of the newly established Fiscal Policy office of the Finance Ministry. So, at age 46, Puey was in charge of both the country’s monetary and fiscal policies. He was in a strategic position to help formulate and execute reforms in trade, exchange rate, monetary and fiscal policies that were to have far-reaching effects.

Puey’s main achievement during his 12-year tenure as central bank governor was to beef up the authority to supervise and regulate the commercial banks, first by pushing the government to enact the Commercial Bank Act of 1962, and then by building up the supervisory department within the bank to implement the law. These encouraged public confidence in Thai commercial banks, enabling them to grow rapidly and play an important role of financial intermediary and broadening accessibility of financial services to the general public. As a result, the Thai banking sector expanded considerably and became a truly important mechanism in the economic development of Thailand.

Puey also succeeded in 1963 in fixing the par value of the baht and keeping the currency stable. A single exchange rate replaced the former multiple exchange rate system while an Exchange Equalisation Fund (EEF) was established to eliminate short-term fluctuations. 

Another of Puey’s legacies was the development of human resources. Recognising that education was an important factor in economic growth and development, he initiated a scholarship programme for the Bank of Thailand and, later on, for Thammasat University. Over the last 44 years, more than 400 top Thai students have received Bank of Thailand scholarships to study in some of the world’s most renowned universities.

The more excellent work Puey delivered, the more he was asked to do. In addition to his positions at the Budget Bureau, the Bank of Thailand and the Fiscal Policy Office, Puey was one of the 10 members of the Executive Committee of the National Economic Development Board since its inception. He was a member of the National Research Council and head of its economic branch. His presence on the National Statistics Board since 1961 contributed to substantial improvement in the gathering of up-to-date and accurate statistics without which, he emphasised, sound economic policy could not be formulated. 

In 1964 he was appointed the Dean of the Faculty of Economics at Thammasat University. In his role as dean, he built the faculty into one of the best economic departments in Asia. He structured and beefed up all curricula towards international standard and also opened an English-language bachelor’s programme in economics. The end result was a modern economics faculty that set the standard for others in the country. He was later elected the 10th rector of Thammasat University.

Although Thailand’s economy performed brilliantly in terms of stability and growth in the 1950s and 1960s – mostly thanks to his contributions of good policy and realisation that knowledge of what constitutes good policy needs to be studied by students – Puey always felt that what was missing was that the growth was not shared widely among Thais, particularly in the rural areas. To increase awareness of the problems faced by these forgotten Thais, he persuaded the university to open a non-degree volunteer graduate programme, where graduates would spend time in rural villages and contribute to the villagers’ well-being, most often by teaching at the local school. At the end of their stay, they are expected to write a report on the village and its problems as well as ways and means of solving or ameliorating them.

Despite holding so many positions in so many offices, Puey treated all of his offices seriously and professionally. He was active and conscientious in the discharge of his many responsibilities. Leading by example, he instilled in his colleagues and staff pride and respect for quality performance and provided inspiration to other hardworking civil servants. He was generous in giving credit where it was due. And once an office had been put in order and was on a firmer footing, he felt compelled to recommend his replacement to allow promotion of his subordinates. Examples were his resignation as director of the Budget Bureau in favour of his deputy in 1961, and similarly in 1966, he relinquished his position as the director general of the Fiscal Policy Office, also in favour of his deputy.

He was not only admired for his professional competency and his hard work, he was also widely praised for being a “role model in honesty and integrity”. People have constantly talked about his courage to fight for what was right for the country and how he was undaunted by any influential powers.

Puey once said, “If the policy in question could undermine principles or lead to catastrophe, the central bank governor may not only voice his disapproval against it, but he also has the ultimate prerogative of resigning from the governorship.” He practised what he preached without fail. In any serious conflict over principles, he resolutely refused to be swayed by political influence and was always prepared to resign.

Countless times he put his position on the line. In late 1953 when he was a deputy governor of the Bank of Thailand, a prominent military member of the cabinet wanted to take over a particular commercial bank that was going to be fined a large sum due to non-compliance with central bank regulations. Puey insisted on the commercial bank being fined despite a special request asking the bank not to impose such penalty. Soon after, the cabinet had him removed from his position.

In another case, an influential person was trying to force the Finance Ministry and the Bank of Thailand to switch from the existing banknote-printing company, Thomas De La Rue, to an American company that he allegedly received some benefit from. Asked by the finance minister to investigate, Puey candidly reported that the American company was not trustworthy and strongly recommended the continued usage of the Thomas De La Rue company.

Incidents like these imbued the Bank of Thailand with a spirit of absolute integrity to the point where corrupt practices there were unthinkable. This reputation of uncompromising adherence to moral values gave the central bank considerable prestige and allowed it to enjoy de facto autonomy.

Another well-known incident had to do with democracy and the power of the people. In 1971, while Puey was a visiting professor at Cambridge, he wrote an open letter to the head of the ruling military party requesting that democratic power be returned to the public as soon as possible. The government deplored his action and condemned him as an antagonist. The political threat caused him to stay in England a year longer than he had intended, prompting him to resign from his positions as the Dean of Thammasat University and governor of the Bank of Thailand.

In all these cases, he never once used or even threatened to use force. Instead, he advised, persuaded and sometimes pressured tactfully to bring things into line.  

I cannot help being proud whenever I talk about Puey and how he influenced and helped shape the history of Thailand. His decisions and actions on matters relating to economic, social as well as political institutions have tremendously affected our lives. 

In recently naming him a key figure of world history, Unesco offered these words to the UN General Assembly:

“Dr Puey is widely considered one of the fathers of Thailand’s post-World War II economic development as well as a prominent educator and civil servant of impeccable ethics who has had a major impact on national development. He has played a central role in the shaping of Thailand’s economic development and in the strengthening of its system of higher education. His capacity to strike a compromise between what was objectively possible and morally desirable was an extraordinary accomplishment. … The career of Dr Puey Ungphakorn confirms that a single individual can make significant contributions to the progress of his country”.

 

Excerpt of the keynote address delivered by MR Pridiyathorn Devakula, former deputy prime minister and chairman of Puey Ungphakorn Institute, at the Southeast Asian Central Banks (SEACEN) Conference in Kuala Lumpur yesterday.