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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Politics of a Troubled Economy

A respected technocrat falls victim to power plays

By Matthew Fletcher and
Julian Gearing / Bangkok


Go to a list of major economic players

Go to Industry Minister Korn Dabbaransi interview

STRENGTH LIES IN NUMBERS, but so does confusion, as Thais know only too despairingly well. When Chavalit Yongchaiyudh became prime minister in November, the former army general promised strong medicine for Thailand's lackluster economy. He drafted a "dream team" of technocrats, headed by respected businessman and non-politician Amnuay Viravan, to reverse the mismanagement and profligacy wrought by the last administration. The move was praised by voters and foreign investors alike.

Thai politics is not known for following textbook remedies, however. An old-school pol, Chavalit came to power in a campaign notorious even by Thailand's standards for its excessive sleaze and vote-buying. Within days of victory, members of the five-party ruling coalition were scrambling for plum cabinet posts as reward. First in line was the Chart Pattana party headed by onetime premier Chatichai Choonhavan. Its support was critical in order for Chavalit to form a government. In return, Chart Pattana MPs got the foreign affairs, industry and transport portfolios. Amnuay was put in charge of finance, but he had to compete with rival camps within the coalition for control of the economy.

Last week, Chavalit's dream-team finance minister quit, indicating he had had enough of the pressures of working in a government riven by conflicts. "I told the PM that honesty and appropriate management of financial resources are basic factors for creating credibility and economic stability," said Amnuay, Thailand's fifth finance chief in as many years. Read: the intense politicking, power plays and runaway egos were too much for him to handle. The last straw was probably a cabinet row over his plans to balance the budget by introducing a raft of new excise taxes. Amnuay was forced to withdraw the proposal after a clash with Industry Minister Korn Dabbaransi, No. 2 in Chart Pattana (see interview on following page).

As big a spur was the lack of support from his boss. Under pressure from coalition partners and an electorate wanting quick solutions to economic woes, Chavalit may have thought it politically astute to distance himself from his tough-minded finance chief, who preached austerity. Instead, he increasingly relied on a team of advisers, including right-hand man and legal counsel Pokin Polakul, an Amnuay critic. A sign of the strained relations occurred in May. While Amnuay was on an official trip to Japan, Chavalit announced he would oversee the economy. He was forced to backpedal when the stock market dropped. But the PM later appointed Chatichai to advise him on economic matters and to meet with him on a regular basis. Said Chavalit: "Amnuay can come along if he wants to."

Now he is gone and Thais are questioning who really is in charge of the economy. On the surface, the answer is Thanong Bidaya, Amnuay's replacement. Thanong who? Precisely. For the record, the little-known financier ran Thai Military Bank -- none too well, if its books are any indicator. The bank is a troubled institution, with the highest proportion of non-performing loans among the eight biggest banks. As a non-politician, Thanong, like Amnuay before him, can be vulnerable to political pressure. Frets a Bangkok-based broker: "He has neither the clout nor the political base for such an important position."

Maybe that is why Chavalit chose him. Said the independent Nation newspaper in a toughly worded editorial: "Thanong is likely to [be] a pawn in this political survival game -- at best a puppet that will enable the government to crawl a little longer." Despite the gloomy forecasts, a political crisis looks unlikely in the near term. Talk of a cabinet shuffle is muted. And in an effort to give the impression that his political house was at least temporarily in order, Chavalit left Bangkok last week for a scheduled trip to Cambodia and Laos.

Thanong, for his part, is trying to say the right things -- and perhaps even do some of them too. He promises to hew to Amnuay's reform policies. Three days after his appointment, he got emergency powers to order ailing finance companies to merge in order to strengthen the sector. Also, unlike his predecessor, Thanong should be able to count on a better working relationship with the PM and Chart Pattana MPs, though that may not count for much. "It'll be hard to regain confidence and to match the former finance minister," says Deutsche Morgan Grenfell analyst Arporn Chewakrengkrai. Some Thais have already decided that the newcomer will be little more than a mouthpiece. "The real finance minister will be the premier himself," said The Nation. Or more accurately, given the PM's limited grasp of economic issues, a composite drawn from his various advisers.

Including Chatichai Choonhavan and his Chart Pattana followers. Until his government -- which was deeply immersed in money politics -- was toppled in a bloodless coup in 1991, Chatichai presided over double-digit growth. With 52 seats in Parliament, Chart Pattana is the second-largest party in the coalition after Chavalit's New Aspiration group. Chavalit owes Chatichai, and "Uncle Chat" is angling for a bigger say over the economy. "Now we have two economic teams: the prime minister's and Chart Pattana's," says a Thai analyst. "It remains to be seen who will hold sway."

Though unlikely to gain control of the finance portfolio, Chart Pattana could strengthen its position by eventually ousting another non-pol, Narongchai Akrasani, from commerce. If Chatichai were to gain the upper hand in directing the economy, it would likely mean more expansionary policies and less reform. At a time when tough steps are needed to rein in budget spending, this would be a recipe foreign investors could have trouble swallowing.

Thailand's economic problems are profound. The country is in the throes of a property glut, rising bad debts, declining exports and a currency trading near its 11-year low. Not helping are ministers intent on pursuing expensive political projects. Juggling all this requires a firm-handed finance chief. Amnuay might have been the man if he had been allowed to stay and do the job for which he was named. For Amnuay's downfall, fingers point at Chavalit. "The government leader is the core of all the problems," says Sanan Kachornprasart of the opposition Democrat Party. Adds a Thai analyst at a Bangkok brokerage firm: "The prime minister is the one causing the confusion." If so, he better be the one to clear it up.


MONEY MEN

UNTIL HIS RESIGNATION LAST week, Amnuay Viravan wrestled with several rival camps for control over Thailand's beleaguered economy. Who will try to run economic policy now? Here are some of the main players:

Thanong Bidaya, 49, new finance minister. The former banker appears to have a better working relationship with PM Chavalit Yongchaiyudh and the Chart Pattana party than his predecessor had. But he is virtually unknown outside Thailand, and is considered merely a mouthpiece for Chavalit.

Chatichai Choonhavan, 76, an economic adviser and head of Chart Pattana. The former premier is remembered for overseeing Thailand's boom years, but also for running a government plagued with corruption. Leans toward expansionary policies at a time when cutbacks are needed.

Korn Dabbaransi, 52, industry minister and Chart Pattana MP. An experienced politician and businessman, he is a possible successor to Chatichai.

Pokin Polakul, 45, heads the PM's team of advisers. A noted academic and an outspoken critic of Amnuay.

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