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NOVEMBER 24, 2000 VOL. 26 NO. 46 | SEARCH ASIAWEEK

Taking the Heat
In the run-up to Thailand's election, Finance Minister Tarrin Nimmanhaeminda finds himself criticized and reviled by a fickle public
By JULIAN GEARING Bangkok

Tarrin Nimmanhaeminda appreciates good cognac. The 56-year-old finance minister is known to enjoy drinking liquor and smoking cigars with friends deep into the night. Lately, however, there have been few colleagues willing to stay up late with him. As Prime Minister Chuan Leekpai dissolved parliament to pave the way for a Jan. 6 election, Thailand's erstwhile "economic savior" finds himself a lone, unpopular figure. Even members of his Democrat Party have impugned his character and criticized his performance. A state corruption watchdog recently declared his brother Sirin guilty of causing damage to state-run Krung Thai Bank during his stint as its head. Sirin may face jail time. Tarrin faces demotion.

It has been a hard fall from grace for someone once dubbed Thailand's economic "superman." Three years ago, the IMF and foreign investors hailed Tarrin, a coolly professional, Harvard-educated former banker, as the poster boy for economic recovery. Together with Deputy Prime Minister Supachai Panitchpakdi, he made up the economic "dream team" that was expected to lift Thailand out of its financial crisis. Tarrin is convinced his tenure has been a success. "I have done my job," he told Asiaweek. "I have stabilized the country, put the economy on track and set out all the reforms."

But few Thais seem to agree with that assessment. With economic growth noticeably sluggish in the lead-up to the election, everyone from talk show hosts to academics to taxi drivers has been complaining about economic mismanagement, corruption scandals, pain from reforms and the plight of struggling businessmen and farmers. Tarrin, rightly or wrongly, has become a target of this swelling discontent. And that could cost the Democrats dearly at the polls.

Thus, Chuan has been in damage-control mode. The PM is reluctant to damn his finance minister, but he has buckled under growing criticism of Tarrin and is not putting him forward as his future economic supremo. If opinion polls are anything to go by, that shuffle may not do anything to help. The fickle public seems ready to try the economic policies of the untested two-year-old Thai Rak Thai Party — despite the fact that its leader, business tycoon Thaksin Shinawatra, faces charges of concealing his extensive assets, an offense that could have him banned from politics for five years.

Yet it had all started so promisingly for Tarrin and the Democrats. Taking over at the end of 1997 after the inept administration of Chavalit Yongchaiyudh, Chuan's government quickly moved to stabilize the economy and arrest the freefall of the Thai baht. "On the plus side, the government followed the $17.2-billion IMF program quite closely and graduated with honors by all accounts," says James Marshall, head of research at Bangkok-based securities firm Finansa. "That is quite positive in terms of the perception of Thailand being a good investment prospect, a good citizen of the world." Tarrin's primary goal was to resuscitate the banking sector — everything else would then follow.

Thailand's economic data indicates that Tarrin has met with some success. The baht, which plunged as low as 56 to the dollar in 1998, has stabilized at 43. Inflation is a manageable 1.6%, down from 8.1% two years ago. Exports are growing at 21.6%. "The high point is that we managed a turnaround in the economy using the right strategy," says Deputy Finance Minister Pisit Leatham, who has worked closely with Tarrin for three years. "In 1997, the whole system was collapsing. We managed to bring it back, brought stability to the exchange rate and reduced inflation." Despite inheriting a flawed IMF program — designed for a strongly government-controlled economy, not a free-market model like Thailand — Pisit says the government managed to relax fiscal and monetary policy, reversing the initial IMF dosage which itself had plunged the economy into further shock. A senate critic concedes: "It is questionable whether anybody could have done better."

But that has not stopped the grumbling. Tarrin's emphasis on banking has critics carping that he failed to pay due attention to other sectors, including small businessmen and farmers. "Tarrin doesn't look at macroeconomic policy," says Surakiart Sathirathai, a leading economic adviser to the Thai Rak Thai Party. "He only emphasized the financial sector." Last week, the Federation of Thai Industries gave its verdict on Tarrin's tenure: "The government's three-year efforts to revive the economy have been a failure."

Even Tarrin's record in the banking sector is a subject of contention. "Although the government has put so much effort into the financial sector, it is clear that financial institutions have not been restored at all," says Surakiart. "They have put in over 1 trillion baht [$23 billion] and the result is that credit growth is -7.1% in August and -11.9% in September." Marshall of Finansa notes: "On the negative side, I think the handling of the non-performing loan crisis could have been handled more effectively. The banking sector is still seeing negative loan growth and is still perceived as being undercapitalized." Non-performing loans have dropped from a high of 46% in 1999, but they still bog down the banks at 38%.

And then there is the Krung Thai Bank affair. The National Counter Corruption Commission has just found Tarrin's brother guilty of misconduct and negligence of duty in approving a 75-million-baht loan while he was president of the bank. Causing damage to a state enterprise can lead to jail, and the case has now been forwarded to the attorney-general. Sirin has said in a statement that he is willing to contest the charges against him in court.

What has this got to do with Tarrin? A lot, say critics. Tarrin is accused of engineering the Finance Ministry's takeover of Krung Thai Bank from the Financial Institutions Development Fund in the wake of last year's leak of a PricewaterhouseCoopers audit report that exposed allegedly poor lending practices at the bank. Krung Thai's board of directors was replaced, and PWC lost its contract. The suspicion now is that Tarrin was trying to cover up for his brother, a charge he rejects.

To be fair, many of the attacks on Tarrin come from political opponents with axes to grind. Some of the criticisms have a distinct personal edge — Tarrin has been accused of, among other sins, excessive ambition, greed and ruthlessness. Abhisit Vejjajiva, a minister in the PM's office, dismisses such talk and maintains that Tarrin and his team did their best under the circumstances. "Particularly during hard times, finance ministers can easily become unpopular," he says. "I think he has shown determination and a lot more strength than people give him credit for."

But not all Democrats are coming to Tarrin's defense. "He is over-confident and that is why we can't see our economy recover," says party adviser Boonchu Rojanasatien, who is now leaving the Democrats. "He has this misconception that things are better, but we all know the truth." Even Tarrin's "dream-team" partner Supachai has fallen out with him, the two men having openly disagreed on a number of issues. Supachai is due to head the World Trade Organization in two years and has announced that he would quit the party in preparation. Thai Rak Thai's Surakiart sneers: "Thailand can't afford to have a superman. It needs a team. But the dream team has become a nightmare."

For his part, Tarrin is unapologetic about his track record. Asked about the public's growing discontent with the Democrats, he remarks: "I understand that. It is like a patient who has been suffering, receiving treatment and convalescing over a couple of years. Patience is running thin. You almost want to hit the doctor."

Indeed, the Democrats will likely be hit — and hit hard — on polling day when all the bubbling discontent comes down on their heads. "Obviously, the fact that consumer confidence and agricultural prices are weak is going to weigh heavily against the Democrat Party," says Marshall. No less a figure than leading business tycoon Dhanin Chearavanont has said that he would back fellow entrepreneur Thaksin.

With an election loss a real possibility, Chuan is now scrambling to find a candidate to head his economic team. Tarrin is out of favor and Supachai is leaving the party — even Deputy Finance Minister Pisit has announced he would quit politics — so Chuan may have to look to an outsider to fill the void, perhaps another leading banker or businessman. Election rules do not require him to announce a new economic supremo ahead of the polls. But the appeal of the Democrats has always hinged on their purported expertise in economic affairs, and the only hope of returning to office may lie in unveiling another "dream team."

Perhaps because of his already fallen status, Tarrin appears less uptight about the prospect of losing power. "If you ask why we may lose the election," he says philosophically, "it's because we did the right thing." Noble words, indeed — but they probably won't find him many new drinking partners in the near future.

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