The Wall Street Journal-20080122-Politics - Economics- New Thai Leaders to Woo Foreign Investors
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Politics & Economics: New Thai Leaders to Woo Foreign Investors
BANGKOK, Thailand -- Supporters of Thailand's ousted Prime Minister Thaksin Shinawatra are preparing a series of economic measures to put the country back on the international investment map, as Parliament opened yesterday under the lead of the pro-Thaksin People Power Party.
Thailand has struggled to keep its economy growing as fast as some of its neighbors since the September 2006 military coup that removed telecommunications billionaire Mr. Thaksin from power. Local confidence has faded because of a lack of policy direction from a military-appointed interim government, while capital controls introduced by the central bank in December 2006 to halt the appreciation of the Thai currency against the dollar unnerved foreign equity investors.
While Thailand managed to attract additional investments from Ford Motor Co. and Toyota Motor Corp. last year, fast-growing Vietnam overtook the country as a destination for foreign direct investment. During 2007, Vietnam picked up $20 billion in new commitments, compared with $15 billion for Thailand.
The People Power Party's path to power was cleared by Thailand's Supreme Court, which on Friday said it had no authority to rule on a suit charging that the party was an illegal proxy for Mr. Thaksin.
The decision removed a legal obstacle to the PPP taking power after it won a plurality of seats in a Dec. 23 poll to elect a new democratic government. The party on Saturday announced it would lead a six-party coalition government backed by more than 300 seats in Thailand's 480-seat Parliament.
Party Secretary-General Surapong Suebwongle said afterward that party officials and advisers are working on a "quick-win" economic- policy plan.
First up: cancellation of all capital controls imposed in December 2006 "to send the message that foreigners are welcome to do business in Thailand," Mr. Surapong said.
Many of the more stringent controls -- for example, one that required investors to deposit a portion of their funds destined for the stock market with the central bank for at least a year -- have already been rolled back by Thai authorities. The controls that remain in place mostly affect only foreign investments in the local money market, to prevent speculators from betting on the strengthening of the baht.
But the assistant governor of Thailand's central bank, Suchada Kirakul, yesterday said it isn't the right time to lift the capital controls, setting the stage for a potential showdown with the incoming government.The controls on certain short-term inflows are still needed, she said, because the subprime-lending crisis will continue to weigh on the U.S. dollar while trade surpluses and capital inflows bolster the baht.
Mr. Surapong said removing the curbs entirely would send a powerful signal to the international investment community before the new government starts working on a package of economic-stimulus measures. That package will include several large infrastructure projects designed to improve Thailand's economic efficiency and relieve traffic congestion in Bangkok, he said.
Mr. Surapong said the new government also will begin discussing interest-rate cuts with the central bank. The central bank has kept its policy interest rate unchanged at 3.25% since July.
Parliament is scheduled to elect the new prime minister on Friday.
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Phisanu Phromchanya contributed to this article.
