The European Union's new financial watchdog plans to use "moral pressure" instead of regulatory authority to crack down on countries posing major risks to Europe's economy.
The European Commission yesterday laid out a new financial oversight structure that it wants governments to back to prevent a repeat of last year's banking crisis. Still, it is shying away from creating forceful new regulators who could unilaterally overrule member states.
The commission says it wants risks in the financial system to be identified and resolved at an earlier stage; EU countries to co-operate better in emergency situations and clearer rules set out for solving disputes between financial supervisors in different countries.
Despite Europe's shared market of 500 million people, financial oversight is fragmented and divided between 27 member states who do not always apply the same EU rules in the same way.
That became very clear last year when governments scrambled to rescue banks and shore up a financial system under threat of collapse.
Ireland's move to guarantee all bank deposits alarmed British banks who feared that savers would move funds there. France and Germany, meanwhile,complained loudly about Luxembourg's lax investor protection rules that led to many losing money after investing in funds linked to the massive US financial fraud run by Bernard Madoff.
The European Commission says it wants to plug those weaknesses in the EU's supervisory framework.
The new European Systemic Risk Board is also supposed to watch out for wider risks to the economy, such as the financial situation of banks, potential asset bubbles and how well markets are functioning. It would issue recommendations and warnings to national governments and supervisors which must take action or explain why they haven't done so.
The European Commission says the new risk board will flag warnings that have been ignored to all EU governments,which will increase "the moral pressure on the recipient to act or explain."Warnings won't always be made public to avoid spooking financial markets.
The European Central Bank, which governs monetary policy in the 16 nations that use the euro, will help run the risk board and its president will likely lead the watchdog - although EU officials have said that senior jobs are open to non-euro nations.
The new financial supervisory framework will create three new authorities to watch over banking, financial markets and both insurance and pensions.
They will have more power than the supervisory committees they are replacing because they will be able to resolve disputes between national supervisors and suggest new technical standards.The European Securities and Markets Authority will also supervise credit rating agencies. That means EU agencies will have more power to counter national supervisors - something Britain has fiercely resisted.
But the EU executive insists that the new system won't veto national supervisors and will only step in where necessary - such as on EU-wide technical standards and sorting out disputes.
The new authorities will not be allowed to make decisions that would force a government to spend money - such as telling it to bail out a bank.
"Our aim is to protect European taxpayers from a repeat of the dark days of autumn 2008, when governments had to pour billions of euros into the banks,"said commission president Jose Manuel Barroso.
Friday, September 25, 2009
IMF trims Cambodia projection
The International Monetary Fund revised down its forecast for Cambodia's economy yesterday, predicting that gross domestic product (GDP) would contract 2.75% in 2009.
That is sharply lower than its previous forecast of a 0.5% drop.
Speaking to reporters in Phnom Penh,IMF official David Cowen said the global economic crisis was having a more significant impact than previously expected on the kingdom's economy, which suffers from a narrow production base.
Cambodia's economy rests on four key pillars - agriculture, tourism, construction and garments. The last three have all been badly hit by the crisis.
The IMF noted that agricultural production was "a bright spot with a good harvest expected" this year.
"Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead," the IMF stated.
But the three remaining pillars have performed worse than expected. Garment exports, for example, are expected to decline 15%, a drop Cowen blamed in part on weak retail demand in the key US market, the destination for most Cambodian garments.
But he said the country also remains less competitive than other garment exporters in the region, and as a result has lost some market share to countries such as Bangladesh and Vietnam.
Tourism too has been disappointing if measured by spending rather than actual visitor numbers. The IMF said arrivals by air - typically indicating higher-spending tourists - had fallen "by double digits" due to the global economic crisis affecting visitor nations.
"As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbouring countries," the IMF said.
The remaining pillar - construction - has been hit hard with many projects shelved or put on hold following a property boom that ended abruptly last year.
"New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property (sector) also down," the IMF noted.
Foreign direct investment is also expected to end the year sharply down,the IMF said, and is projected at $490 million this year versus an estimated $815 million last year.
That is sharply lower than its previous forecast of a 0.5% drop.
Speaking to reporters in Phnom Penh,IMF official David Cowen said the global economic crisis was having a more significant impact than previously expected on the kingdom's economy, which suffers from a narrow production base.
Cambodia's economy rests on four key pillars - agriculture, tourism, construction and garments. The last three have all been badly hit by the crisis.
The IMF noted that agricultural production was "a bright spot with a good harvest expected" this year.
"Investment in rural roads and irrigation systems should raise productivity and reduce operating costs in the period ahead," the IMF stated.
But the three remaining pillars have performed worse than expected. Garment exports, for example, are expected to decline 15%, a drop Cowen blamed in part on weak retail demand in the key US market, the destination for most Cambodian garments.
But he said the country also remains less competitive than other garment exporters in the region, and as a result has lost some market share to countries such as Bangladesh and Vietnam.
Tourism too has been disappointing if measured by spending rather than actual visitor numbers. The IMF said arrivals by air - typically indicating higher-spending tourists - had fallen "by double digits" due to the global economic crisis affecting visitor nations.
"As a consequence, overall tourism spending is sharply lower, despite the increase in same-day and land arrivals from neighbouring countries," the IMF said.
The remaining pillar - construction - has been hit hard with many projects shelved or put on hold following a property boom that ended abruptly last year.
"New project approvals are sharply lower, and imports of construction materials are down significantly compared to 2008, with bank lending to the property (sector) also down," the IMF noted.
Foreign direct investment is also expected to end the year sharply down,the IMF said, and is projected at $490 million this year versus an estimated $815 million last year.
New Zealand climbs out of recession
New Zealand's economy unexpectedly grew in the second quarter, ending its longest recession on record and raising expectations the central bank may start raising interest rates as soon as January.
Data yesterday showed gross domestic product rose a seasonally adjusted 0.1% in the second quarter, compared with a revised 0.8% drop in the previous three months and ending five straight quarters of contraction.
Economists in a Reuters poll had forecast a 0.2% contraction, while the Reserve Bank of New Zealand (RBNZ)had predicted a 0.1% fall.
Growth was driven by gains in domestic consumption and primary industries, including forestry and mining,which analysts said might prompt the RBNZ to reconsider its stated policy of keeping rates at record lows until late 2010.
"The market is going to continue to push for the bank to tighten policy much sooner than what the bank is currently stressing," said Deutsche Bank chief economist Darren Gibbs.
Markets now see an 80% chance of a quarter point rate rise in January, up from less than 50% before the data,according to overnight indexed swaps.An increase in March has already been fully factored in.
The RBNZ's oft-stated intention to hold rates at current or lower levels was seen as under further pressure from the data.
"The bank will need to normalise rates sooner than the market had discounted," said Sue Trinh, a senior currency strategist at RBC capital Markets.
The RBNZ had said in a statement on Sept 10 that it expected to eventually tighten monetary policy, if the economy recovers as projected, although it projected only a "patchy recovery" with a weak an uncertain outlook.
The central bank slashed its cash rate by 575 basis points between July 2008 and April this year to 2.5% to support the economy, but has been on hold since then.
A Reuters poll, conducted before the GDP data release, had a majority of the 14 economists expecting the next move to be a hike in the middle of 2010.
As the possibility of an early RBNZ hike comes into view, short-term rates are expected to keep rising more quickly,causing the swap curve to flatten.
The spread between the one- and three-year issues is now at 165 basis points, near a record peak of 170 basis points reached in August.
A Credit Suisse measure shows the market is now pricing in around 150 basis points of tightening for the next 12 months, up from 126 basis points early this week.
Finance Minister Bill English said the economy was through the bottom of the trough and was stabilising, but still faced pain. Despite marginal quarterly growth, the economy shrank 2.1%from a year earlier.
"However for most people the real measure of recession is unemployment,which is expected to keep rising for some time yet," English said after the data release.
Unemployment hit a six-year high of 6% in the second quarter and is expected to rise as high as 7.5% next year.
Household consumption, which makes up around 60% of the economy,rose 0.4% in the June quarter, the first increase since December 2007 quarter.
Data yesterday showed gross domestic product rose a seasonally adjusted 0.1% in the second quarter, compared with a revised 0.8% drop in the previous three months and ending five straight quarters of contraction.
Economists in a Reuters poll had forecast a 0.2% contraction, while the Reserve Bank of New Zealand (RBNZ)had predicted a 0.1% fall.
Growth was driven by gains in domestic consumption and primary industries, including forestry and mining,which analysts said might prompt the RBNZ to reconsider its stated policy of keeping rates at record lows until late 2010.
"The market is going to continue to push for the bank to tighten policy much sooner than what the bank is currently stressing," said Deutsche Bank chief economist Darren Gibbs.
Markets now see an 80% chance of a quarter point rate rise in January, up from less than 50% before the data,according to overnight indexed swaps.An increase in March has already been fully factored in.
The RBNZ's oft-stated intention to hold rates at current or lower levels was seen as under further pressure from the data.
"The bank will need to normalise rates sooner than the market had discounted," said Sue Trinh, a senior currency strategist at RBC capital Markets.
The RBNZ had said in a statement on Sept 10 that it expected to eventually tighten monetary policy, if the economy recovers as projected, although it projected only a "patchy recovery" with a weak an uncertain outlook.
The central bank slashed its cash rate by 575 basis points between July 2008 and April this year to 2.5% to support the economy, but has been on hold since then.
A Reuters poll, conducted before the GDP data release, had a majority of the 14 economists expecting the next move to be a hike in the middle of 2010.
As the possibility of an early RBNZ hike comes into view, short-term rates are expected to keep rising more quickly,causing the swap curve to flatten.
The spread between the one- and three-year issues is now at 165 basis points, near a record peak of 170 basis points reached in August.
A Credit Suisse measure shows the market is now pricing in around 150 basis points of tightening for the next 12 months, up from 126 basis points early this week.
Finance Minister Bill English said the economy was through the bottom of the trough and was stabilising, but still faced pain. Despite marginal quarterly growth, the economy shrank 2.1%from a year earlier.
"However for most people the real measure of recession is unemployment,which is expected to keep rising for some time yet," English said after the data release.
Unemployment hit a six-year high of 6% in the second quarter and is expected to rise as high as 7.5% next year.
Household consumption, which makes up around 60% of the economy,rose 0.4% in the June quarter, the first increase since December 2007 quarter.
FINANCE MINISTRY TO HIKE 2009 ECONOMIC FORECAST
The Finance Ministry will revise upward its 2009 economic forecast after several better-than-expected indicators have suggested a gradual recovery.
Ministry spokesman Ekniti Nitithanprapas yesterday said the Fiscal Policy Office would release its updated forecast next Monday.
He said several key indicators had recently suggested an improvement in economic conditions, such as exports rising month on month and the economic expansion of major trade partners China and India.
Consumption has also increased as a result of the government's stimulus package, he added.
The ministry previously predicted that the economy this year would shrink by about 3-3.5 per cent. The new projection could put the figure at between minus 2.5 per cent and minus 3 per cent, said Ekniti.
It is expected to expand by 4 per cent year on year in the fourth quarter, following a series of falls in the preceding quarters. The economy is expected to contract by about 3-4 per cent year on year in the current quarter.
The Asian Development Bank on Tuesday released its updated economic forecasts, which projected that China would grow by 8.2 per cent - up from the 7 per cent predicted in March.
The ADB now projects that the Thai economy will contract by 3.2 per cent, against its previous estimate of a 2-per-cent contraction.
The bank said that as Thai exports accounted for about 70 per cent of gross domestic product, a sharp fall in sales abroad had hit the economy particularly hard.
Indonesia, whose exports account for only 20-25 per cent of GDP, has been less impacted by the global downturn, resulting in the bank lifting its forecast for 2009 economic growth to 4.3 per cent, from the previous estimate of 3.6 per cent.
The ADB predicts the Thai economy will expand by 3 per cent next year.
Ekniti said the Thai economy would expand by an average of about 4 per cent each year from 2009-11, driven by public investment worth Bt1.43 trillion. The inflation rate is predicted to be 2 per cent.
Risks to growth, he added, were delays in the implementation of public projects and high oil prices.
Critics have said achieving growth next year would be no surprise, given the very low base this year.
Teerana Bhongmakapat, dean of Chulalongkorn University's Faculty of Economics, said the world economy would experience low growth in 2011 after expansion resumed next year. The recovery will, therefore, be W-shaped.
He said there was also a probability of further shocks in the next few years in some countries. If such shocks occurred in large economies such as China, then the global economy would experience another round of turbulence.
The risk of high inflation will also be a cause for concern after 2011 if the global economy recovers strongly.
However, for the time being, economic recession remains a threat. The Thai economy will likely move in line with the global economy, said Teerana.
Ministry spokesman Ekniti Nitithanprapas yesterday said the Fiscal Policy Office would release its updated forecast next Monday.
He said several key indicators had recently suggested an improvement in economic conditions, such as exports rising month on month and the economic expansion of major trade partners China and India.
Consumption has also increased as a result of the government's stimulus package, he added.
The ministry previously predicted that the economy this year would shrink by about 3-3.5 per cent. The new projection could put the figure at between minus 2.5 per cent and minus 3 per cent, said Ekniti.
It is expected to expand by 4 per cent year on year in the fourth quarter, following a series of falls in the preceding quarters. The economy is expected to contract by about 3-4 per cent year on year in the current quarter.
The Asian Development Bank on Tuesday released its updated economic forecasts, which projected that China would grow by 8.2 per cent - up from the 7 per cent predicted in March.
The ADB now projects that the Thai economy will contract by 3.2 per cent, against its previous estimate of a 2-per-cent contraction.
The bank said that as Thai exports accounted for about 70 per cent of gross domestic product, a sharp fall in sales abroad had hit the economy particularly hard.
Indonesia, whose exports account for only 20-25 per cent of GDP, has been less impacted by the global downturn, resulting in the bank lifting its forecast for 2009 economic growth to 4.3 per cent, from the previous estimate of 3.6 per cent.
The ADB predicts the Thai economy will expand by 3 per cent next year.
Ekniti said the Thai economy would expand by an average of about 4 per cent each year from 2009-11, driven by public investment worth Bt1.43 trillion. The inflation rate is predicted to be 2 per cent.
Risks to growth, he added, were delays in the implementation of public projects and high oil prices.
Critics have said achieving growth next year would be no surprise, given the very low base this year.
Teerana Bhongmakapat, dean of Chulalongkorn University's Faculty of Economics, said the world economy would experience low growth in 2011 after expansion resumed next year. The recovery will, therefore, be W-shaped.
He said there was also a probability of further shocks in the next few years in some countries. If such shocks occurred in large economies such as China, then the global economy would experience another round of turbulence.
The risk of high inflation will also be a cause for concern after 2011 if the global economy recovers strongly.
However, for the time being, economic recession remains a threat. The Thai economy will likely move in line with the global economy, said Teerana.
ARREST WARRANTS OVER ROAD BLOCK
A man who led a group of protesters to block a Bangkok road on Tuesday during a dispute over a lottery is now facing an arrest warrant.
Wiang Pakdee,43, is wanted for causing a disturbance with more than 10 accomplices.
"We are going to issue arrest warrants for about 10 other people," Metropolitan Police Division 1 commander Maj General Wichai Sangprapai said yesterday.
On Tuesday, Wiang and 100 others from Loei blocked Rama VI road in front of the Finance Ministry to protest the ministry's reluctance to agree with their demands.
The protesters wanted the lottery quota for Loei Government Lottery Vendor Cooperative to be raised from 4,000 tickets to 6,000.
"The road blockade caused serious inconvenience to motorists," Wichai said.
He said he and his deputy, Pol Colonel Weerawit Janjamroen talked to the protesters but they refused to lift the blockade.
"So, it was necessary to invoke laws and take action against them," Wichai said.
Wiang was identified from available photos and video recordings.
Wichai said all protesters should express their opinions within a constitutional framework.
"Don't do anything illegal, police will be watching you. If you do wrong, we will take legal action right away," Wichai added.
Wiang Pakdee,43, is wanted for causing a disturbance with more than 10 accomplices.
"We are going to issue arrest warrants for about 10 other people," Metropolitan Police Division 1 commander Maj General Wichai Sangprapai said yesterday.
On Tuesday, Wiang and 100 others from Loei blocked Rama VI road in front of the Finance Ministry to protest the ministry's reluctance to agree with their demands.
The protesters wanted the lottery quota for Loei Government Lottery Vendor Cooperative to be raised from 4,000 tickets to 6,000.
"The road blockade caused serious inconvenience to motorists," Wichai said.
He said he and his deputy, Pol Colonel Weerawit Janjamroen talked to the protesters but they refused to lift the blockade.
"So, it was necessary to invoke laws and take action against them," Wichai said.
Wiang was identified from available photos and video recordings.
Wichai said all protesters should express their opinions within a constitutional framework.
"Don't do anything illegal, police will be watching you. If you do wrong, we will take legal action right away," Wichai added.
Plans get vote of confidence
Local analysts have mixed views on whether the government's second stimulus package will be able to meet its timetable.
About 48% of the analysts surveyed by the Securities Analysts Association (SAA) expressed confidence that the "Thailand: Investing from Strength to Strength" programme would meet its 2012 timetable, with another 4% expressing strong confidence.
But 43% said they were only cautiously optimistic, with 4% expressing no confidence. The SAA sampled views of 23 analysts following a briefing earlier this month on the stimulus programme by Finance Minister Korn Chatikavanij.
More optimistically, 91% said they were confident about the overall programme, with 9% expressing strong confidence.
The 1.45-trillion-baht programme, also known as Thai Khem Kaeng , covers thousands of infrastructure projects aimed at stimulating short-term economic growth and supporting productivity and efficiency gains in the medium term.Projects include new light-rail mass transit systems in Bangkok, irrigation, road and rail improvements nationwide, and the expansion and improvement of health and education facilities across the country.
More than one-third of the analysts said they were very confident that the stimulus would result in higher private investment, with another 65% expressing moderate confidence.
Some 78% of the analysts in the survey also expressed confidence that Thai Khem Kaeng would support the economic recovery, with another 22% offering strong confidence.
Seventy percent said they were moderately or very confident that the stimulus programme would help support political stability, with only 22% saying the investments would have little impact and 4% seeing no impact on stability. Analysts were also overwhelmingly optimistic at 90% that the government could raise the funds to finance the programme.
About 48% of the analysts surveyed by the Securities Analysts Association (SAA) expressed confidence that the "Thailand: Investing from Strength to Strength" programme would meet its 2012 timetable, with another 4% expressing strong confidence.
But 43% said they were only cautiously optimistic, with 4% expressing no confidence. The SAA sampled views of 23 analysts following a briefing earlier this month on the stimulus programme by Finance Minister Korn Chatikavanij.
More optimistically, 91% said they were confident about the overall programme, with 9% expressing strong confidence.
The 1.45-trillion-baht programme, also known as Thai Khem Kaeng , covers thousands of infrastructure projects aimed at stimulating short-term economic growth and supporting productivity and efficiency gains in the medium term.Projects include new light-rail mass transit systems in Bangkok, irrigation, road and rail improvements nationwide, and the expansion and improvement of health and education facilities across the country.
More than one-third of the analysts said they were very confident that the stimulus would result in higher private investment, with another 65% expressing moderate confidence.
Some 78% of the analysts in the survey also expressed confidence that Thai Khem Kaeng would support the economic recovery, with another 22% offering strong confidence.
Seventy percent said they were moderately or very confident that the stimulus programme would help support political stability, with only 22% saying the investments would have little impact and 4% seeing no impact on stability. Analysts were also overwhelmingly optimistic at 90% that the government could raise the funds to finance the programme.
Finance Ministry predicts 4% Q4 growth revival
Economic growth is expected to rise to at least 4% year-on-year by the fourth quarter, said Ekniti Nitithanprapat, a spokesman for the Finance Ministry.
The economy is still projected to contract in the third quarter, with the ministry forecasting a 4% year-on-year decline.
But Dr Ekniti said there were clear signs that the economy had turned the corner, whether it be in terms of exports,tax revenues or manufacturing activity.
The economy contracted 7.1% yearon-year for the first quarter and 4.9%year-on-year in the second. The Fiscal Policy Office, a unit of the Finance Ministry, in June projected a contraction of 2.5-3.5% for 2009.
Dr Ekniti acknowledged that low-base effects is one factor for the sharp jump in year-on-year growth projected for the fourth quarter.
A sustainable economic recovery meanwhile would depend largely on domestic political stability, he added.
The fourth quarter of 2008 represented the worst of the global crisis, marked by the collapse of Lehman Brothers, AIG and other financial institutions. But massive stimulus measures by governments restarted global economic growth.
The Fiscal Policy Office plans to release updated economic forecasts on Monday,with its full-year projections likely to be upgraded in light of the improvements in the global and domestic economy.
Dr Ekniti noted that value-added tax revenue, a proxy for domestic consumption, had rebounded to 36-37 billion baht per month compared with 31-32 billion earlier this year.
Auto sales have also shown improvement, while unemployment has dropped from 800,000 in the first quarter to only 500,000, or 1.2% of the labour force.
Dr Ekniti said in addition to political stability, other risk factors for the econ-omy included crude oil price trends and the efficiency of the government in managing budget disbursements and implementation of the Thai Khem Kaeng stimulus programme.
He said the first stimulus programme,a 116-billion-baht package approved in March, has seen disbursements of just 80% to date, with unreleased funds primarily coming from construction projects such as a programme to build new housing flats for the police force.
The economy is still projected to contract in the third quarter, with the ministry forecasting a 4% year-on-year decline.
But Dr Ekniti said there were clear signs that the economy had turned the corner, whether it be in terms of exports,tax revenues or manufacturing activity.
The economy contracted 7.1% yearon-year for the first quarter and 4.9%year-on-year in the second. The Fiscal Policy Office, a unit of the Finance Ministry, in June projected a contraction of 2.5-3.5% for 2009.
Dr Ekniti acknowledged that low-base effects is one factor for the sharp jump in year-on-year growth projected for the fourth quarter.
A sustainable economic recovery meanwhile would depend largely on domestic political stability, he added.
The fourth quarter of 2008 represented the worst of the global crisis, marked by the collapse of Lehman Brothers, AIG and other financial institutions. But massive stimulus measures by governments restarted global economic growth.
The Fiscal Policy Office plans to release updated economic forecasts on Monday,with its full-year projections likely to be upgraded in light of the improvements in the global and domestic economy.
Dr Ekniti noted that value-added tax revenue, a proxy for domestic consumption, had rebounded to 36-37 billion baht per month compared with 31-32 billion earlier this year.
Auto sales have also shown improvement, while unemployment has dropped from 800,000 in the first quarter to only 500,000, or 1.2% of the labour force.
Dr Ekniti said in addition to political stability, other risk factors for the econ-omy included crude oil price trends and the efficiency of the government in managing budget disbursements and implementation of the Thai Khem Kaeng stimulus programme.
He said the first stimulus programme,a 116-billion-baht package approved in March, has seen disbursements of just 80% to date, with unreleased funds primarily coming from construction projects such as a programme to build new housing flats for the police force.
EXPORTERS URGED TO COVER RISK
Exporters have been advised to cover their currency risk, with the baht likely to remain volatile against the greenback toward yearend and both the euro and yen having strengthened in recent months. The Thai unit is however expected to remain strong at around 33-33.50 per dollar.
The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
"It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
"It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
"The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
However, the rubber products, rice and sugar sectors will experience difficulties.
Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.
The US dollar yesterday weakened for the first time in three days against the euro on speculation that Group-of-20 leaders this week will call for gains in other currencies to help reduce global trade imbalances.
The baht rose toward a 13-month high as losses in the dollar led to speculation the Bank of Thailand will tolerate gains in the currency as the economy recovers. Amid capital inflows, Thai stocks yesterday jumped 1.57 per cent or 11.21 points to close at a 14month high of 724.37, while the bluechip SET50 gained 8.64 points to close at 517.04.
"It [US dollar] has been oversold over the medium term. Thus, it will be volatile toward the year's end …We still maintain our forecast at Bt33.5 a dollar within this year," said Usara Wilaipich, senior economist of Standard Chartered Bank (Thai).
The baht rose 0.2 per cent to 33.64 per dollar as of 5pm yesterday in Bangkok, according to data compiled by Bloomberg. The currency reached 33.61, the strongest level since August 2008. It has gained 3 per cent so far this year, the thirdbest performance among the region's 10 mosttraded currencies.
However, Usara warned that aside from US dollar, exporters and importers should also monitor the euro and yen, which have been much stronger over the past seven months. They are therefore recommended to cover their currency risk for these two currencies as well.
The US currency dropped to $1.4714 per euro as of 1.31pm in Tokyo, from $1.4680 the previous day in New York. It declined to 91.75 yen from 91.93 yen and weakened to $1.6237 per pound sterling from $1.6217. The yen was little changed at 135.01 versus the euro from 134.96.
Usara said the US dollar was likely to remain weak as greenback liquidity was still flooding the market, as with a threemonth LIBOR low for the dollar at lower than 0.3 per cent, it had become a carrytrade currency. Moreover, the market believes the greenback could continue to remain weak.
Today, the US Federal Open Market Committee will announce its stance on whether to maintain the quantitative easing or to announce an "exit plan". If easing is maintained, the dollar will continue weakening, she added.
Nitinai Sirismatthakarn, senior vice president, Research Group, SCB Securities, believes the baht will remain at around 33 per dollar or slightly weaker over the next three to four months.
He said the Bank of Thailand is expected to keep the baht level moving in tandem with the Kingdom's trading peers.
Last week, he said, the baht had weakened by 30 satang, which means the central bank intervened slightly more than other regional central banks had done in their currencies. Otherwise, the baht would have strengthened by 50 satang, he added.
The baht's value, Nitinai said, also depended more on capital inflows, which are expected to be significant but not as huge as in the past.
"It's just a dollar play," said Tetsuo Jerry Yoshikoshi, a senior economist with Sumitomo Mitsui Banking Corp in Singapore. "The Bank of Thailand has allowed the baht to strengthen a bit. Some traders must be convinced that the central bank is now more tolerant."
Sukit Udomsirikul, assistant managing director at Siam City Research Institute, said the baht was tending to appreciate to 33 to 32 per dollar on the back of the continuous capital inflow, which is likely to result in the SET Index reaching the 800-point mark.
However, he warned that if foreign investors' net buying on the stock market was Bt30 billion a month, it would be an alarming sign because such a level would indicate excessive cash flow.
Since the beginning of this month, foreign investors have bought Thai shares with a net amount of Bt18 billion.
Sukit voiced concern that the global economy, including Asia, could face a fresh round of economic bubble due to the flood of capital inflow to speculate in stock markets and currencies amid the trend of a weak US dollar.
Stock markets will drop sharply in the second quarter next year on anticipation that central banks will change to a hawkish mode by jacking up their policy rates. This is expected to be seen in the first quarter at the earliest following rising inflationary pressure, he said.
"The further the world travels along the road to economic recovery, the greater the amount of fund flows, particularly to the region, pushing up the baht. While appreciation of the baht favours industries with high import content, it harms export industries," SCB Securities said in a note released yesterday.
The brokerage said petroleum refineries and the motor vehicle and industrial machinery sectors would take advantage of the trend of a stronger baht.
However, the rubber products, rice and sugar sectors will experience difficulties.
Overseas investors bought US$549 million (Bt18.5 billion) more Thai equities than they sold this month through yesterday, while the SET Index of shares climbed 9 per cent in the same period.
Finance Minister Korn Chatikavanij said on September 18 that there was "no overt policy" for a targeted baht rate. The Dollar Index, which ICE uses to track the greenback against its six major trading partners, fell 0.3 per cent yesterday before the Federal Reserve met to set interest rates this week.
According to all 93 economists surveyed by Bloomberg News, the Fed will keep its target rate for overnight loans within a range of zero to 0.25 per cent at its twoday policy meeting.
PROSPECTS FOR ASIAN ECONOMIES LOOK BRIGHTER
Asian economies will expand at a faster-than-expected pace this year and next as growth in China, India and Indonesia strengthens, the Asian Development Bank said.
Asia, excluding Japan, will grow 3.9 per cent this year, faster than a March estimate of 3.4 per cent, the Manila-based institution said in a report yesterday. Growth may strengthen in 2010 to 6.4 per cent, it said.
The region is leading the world's emergence from its deepest recession since the 1930s after governments boosted spending, cut taxes and slashed interest rates, averting a spiral into another Great Depression. Withdrawing these measures too early may derail the global recovery and lead to a protracted slowdown, the ADB said.
"This is not the time for an exit from expansionary policies-the recovery remains fragile and subject to serious downside risks," the bank said in its Asian Development Outlook 2009 Update.
"Once impetus from fiscal stimulus packages wears off, it will be essential that domestic consumption and private investment take over as drivers of growth."
Confidence in the world economy held at a record high this month after reports suggested the recession was over and officials said they wouldn't rush to withdraw stimulus, a Bloomberg survey of users on six continents showed on September 17.
EXPORT ECONOMIES
Recovery in Asia also hinges on the revival of growth in Europe and the US, as this will affect the region's export-dependent economies, the ADB said. Federal Reserve Chairman Ben Bernanke said last week that the recession in the US had probably ended.
"Any slippage in the major industrial economies' recovery would delay the region's return to its long-term growth path," the ADB said.
Inflation in Asia may average 1.5 per cent this year compared with a March forecast of 2.4 per cent, the bank said. It forecast inflation to accelerate to 3.4 per cent next year as growth strengthens.
"Central banks in the region will therefore want to put a tight watch on monetary policies so as not to encourage asset bubbles that would inflate prices to levels that are no longer justified by fundamentals," it added.
South Korea's financial regulator said earlier this month it would tighten restricitons on mortgages for people buying homes in the capital and surrounding areas to slow the increase in lending.
CHINA AND INDIA
China will expand 8.2 per cent this year, compared with the March forecast of 7 per cent, the ADB said. India's economy will grow 6 per cent, up one percentage point from the earlier estimate, it said.
China's August industrial production increased 12.3 per cent from a year earlier, the most since the same month in 2008, while India's industrial production increased for a seventh straight month in July. China's expansion follows a 4-trillion-yuan (Bt19.7 trillion) stimulus package, record lending and a rebound in property investment and sales that have countered a slump in exports.
The ADB forecast Indonesia's economy will expand 4.3 per cent this year, compared with the March estimate of 3.6 per cent. South Korea's economy will shrink 2 per cent this year, compared with the earlier predicted 3-per-cent contraction, it said.
In Southeast Asia, the ADB forecasts the economies of Thailand, Malaysia and Singapore will shrink this year, dragging growth in the region to 0.1 per cent in 2009. The East Asian economies of Taiwan and Hong Kong will also contract, it said.
Asia, excluding Japan, will grow 3.9 per cent this year, faster than a March estimate of 3.4 per cent, the Manila-based institution said in a report yesterday. Growth may strengthen in 2010 to 6.4 per cent, it said.
The region is leading the world's emergence from its deepest recession since the 1930s after governments boosted spending, cut taxes and slashed interest rates, averting a spiral into another Great Depression. Withdrawing these measures too early may derail the global recovery and lead to a protracted slowdown, the ADB said.
"This is not the time for an exit from expansionary policies-the recovery remains fragile and subject to serious downside risks," the bank said in its Asian Development Outlook 2009 Update.
"Once impetus from fiscal stimulus packages wears off, it will be essential that domestic consumption and private investment take over as drivers of growth."
Confidence in the world economy held at a record high this month after reports suggested the recession was over and officials said they wouldn't rush to withdraw stimulus, a Bloomberg survey of users on six continents showed on September 17.
EXPORT ECONOMIES
Recovery in Asia also hinges on the revival of growth in Europe and the US, as this will affect the region's export-dependent economies, the ADB said. Federal Reserve Chairman Ben Bernanke said last week that the recession in the US had probably ended.
"Any slippage in the major industrial economies' recovery would delay the region's return to its long-term growth path," the ADB said.
Inflation in Asia may average 1.5 per cent this year compared with a March forecast of 2.4 per cent, the bank said. It forecast inflation to accelerate to 3.4 per cent next year as growth strengthens.
"Central banks in the region will therefore want to put a tight watch on monetary policies so as not to encourage asset bubbles that would inflate prices to levels that are no longer justified by fundamentals," it added.
South Korea's financial regulator said earlier this month it would tighten restricitons on mortgages for people buying homes in the capital and surrounding areas to slow the increase in lending.
CHINA AND INDIA
China will expand 8.2 per cent this year, compared with the March forecast of 7 per cent, the ADB said. India's economy will grow 6 per cent, up one percentage point from the earlier estimate, it said.
China's August industrial production increased 12.3 per cent from a year earlier, the most since the same month in 2008, while India's industrial production increased for a seventh straight month in July. China's expansion follows a 4-trillion-yuan (Bt19.7 trillion) stimulus package, record lending and a rebound in property investment and sales that have countered a slump in exports.
The ADB forecast Indonesia's economy will expand 4.3 per cent this year, compared with the March estimate of 3.6 per cent. South Korea's economy will shrink 2 per cent this year, compared with the earlier predicted 3-per-cent contraction, it said.
In Southeast Asia, the ADB forecasts the economies of Thailand, Malaysia and Singapore will shrink this year, dragging growth in the region to 0.1 per cent in 2009. The East Asian economies of Taiwan and Hong Kong will also contract, it said.
CLEAR-CUT GOVT MEASURES KEY TO TOURISM RECOVERY
The government must come up with clear-cut and proactive measures for the tourism industry to cash in on the global economic recovery next year, the University of the Thai Chamber of Commerce said yesterday.
"The government must urgently stimulate the domestic economy, solve the prolonged political conflict and promote clear measures, including public relations, the creative economy and the Asean Economic Community (AEC), to ensure the Thai tourism industry can grow smoothly," said Thanavath Phonvichai, director of the UTCC Economic and Business Forecasting Centre.
He said the global economic recovery is a major factor for growth in the Kingdom's tourism industry.
However, the UTCC survey showed most enterprises in the tourism industry still do not understand how a creative economy and the AEC can help tourism businesses prosper.
This is crucial for the sustainable growth of the industry, he said.
Out of the 400 respondents to the centre's survey, 60.5 per cent do not know about the creative economy or how it will promote the growth of the industry. Only 39.5 per cent recognise the policy.
But only 27 per cent of those who recognised the creative economy policy know how to adapt the policy to develop their business.
Clear explanations of both the creative economy and the AEC are needed, because they will be major factors promoting growth in the industry, he said.
Although most respondents - 63 per cent - recognise the AEC, only a few understand how the integration can benefit their growth.
UTCC lecturer Wachira Khuntaweetep pointed out that about half of the respondents realised the AEC could help promote the industry, because Asean would become a destination for travellers.
Yajai Chuwicha, head of the university's Chamber Business Poll, said most businesses in the sector had a positive outlook for the fourth quarter and next year.
"The recovering global economy and diminishing concerns about type-A(H1N1) influenza have increased the confidence of enterprises that the industry will generate better returns in the fourth quarter," he said.
The poll also showed most enterprises in the industry, including restaurants, hotels and travel agencies, were likely to hire more staff soon once tourism revived.
UTCC predicts the number of visitors to Thailand will grow 10-15 per cent next year to between 14.5 million and 15 million, thanks to the economic recovery. It also expects the industry to generate higher income, in line with the rising number of tourists. Tourism revenue should increase 10-15 per cent to between Bt500 billion and Bt530 billion.
The sector is on the path to recovery after a 10-15-per-cent plunge in tourist arrivals this year, the centre said. It estimates visitor numbers will fall to between 12.5 million and 13 million this year, with revenue will drop to between Bt420 billion and Bt450 billion.
Arrivals are expected to rise 3-7 per cent in the fourth quarter after falling 10-15 per cent this quarter.
"The government must urgently stimulate the domestic economy, solve the prolonged political conflict and promote clear measures, including public relations, the creative economy and the Asean Economic Community (AEC), to ensure the Thai tourism industry can grow smoothly," said Thanavath Phonvichai, director of the UTCC Economic and Business Forecasting Centre.
He said the global economic recovery is a major factor for growth in the Kingdom's tourism industry.
However, the UTCC survey showed most enterprises in the tourism industry still do not understand how a creative economy and the AEC can help tourism businesses prosper.
This is crucial for the sustainable growth of the industry, he said.
Out of the 400 respondents to the centre's survey, 60.5 per cent do not know about the creative economy or how it will promote the growth of the industry. Only 39.5 per cent recognise the policy.
But only 27 per cent of those who recognised the creative economy policy know how to adapt the policy to develop their business.
Clear explanations of both the creative economy and the AEC are needed, because they will be major factors promoting growth in the industry, he said.
Although most respondents - 63 per cent - recognise the AEC, only a few understand how the integration can benefit their growth.
UTCC lecturer Wachira Khuntaweetep pointed out that about half of the respondents realised the AEC could help promote the industry, because Asean would become a destination for travellers.
Yajai Chuwicha, head of the university's Chamber Business Poll, said most businesses in the sector had a positive outlook for the fourth quarter and next year.
"The recovering global economy and diminishing concerns about type-A(H1N1) influenza have increased the confidence of enterprises that the industry will generate better returns in the fourth quarter," he said.
The poll also showed most enterprises in the industry, including restaurants, hotels and travel agencies, were likely to hire more staff soon once tourism revived.
UTCC predicts the number of visitors to Thailand will grow 10-15 per cent next year to between 14.5 million and 15 million, thanks to the economic recovery. It also expects the industry to generate higher income, in line with the rising number of tourists. Tourism revenue should increase 10-15 per cent to between Bt500 billion and Bt530 billion.
The sector is on the path to recovery after a 10-15-per-cent plunge in tourist arrivals this year, the centre said. It estimates visitor numbers will fall to between 12.5 million and 13 million this year, with revenue will drop to between Bt420 billion and Bt450 billion.
Arrivals are expected to rise 3-7 per cent in the fourth quarter after falling 10-15 per cent this quarter.
Thailand's economy on a roll, PM tells US
Thailand's economic recovery has begun,Prime Minister Abhisit Vejjajiva has told US investors.
The prime minister, who is in the US to attend the 64th Session of the United Nations General Assembly and the G-20 Pittsburgh Summit until Sunday, yesterday met with representatives of securities companies that trade in the US.
Mr Abhisit said he told executives the Stock Exchange of Thailand index had bounced back by almost 60% over the past nine months and the country's economic growth had turned positive.
He also told executives about the government's medium- and long-term plans to stimulate the economy under the "Thailand: Investing from Strength to Strength" scheme, particularly the water supply, communications and service sector projects.
This message sends the right signal to US investors and it should result in new investment in Thailand, Mr Abhisit said.
"Over the past several years, Thailand has had more economic competitors,but the country's infrastructure has been ignored over the past seven to eight years," he said.
"We only had a new airport."He said if Thailand did not invest in new infrastructure the country would lose its competitive advantage. The gov-ernment's clear development plan would boost investor confidence, he said.
Mr Abhisit said US executives asked about Thailand's political stability over the past few years.
He said he told them the government had a tangible plan for reconciliation which includes political reform.
"I believe foreign investors understand democracy, that people can view things differently ... the [United Front for Democracy against Dictatorship] rally that took place [on Saturday] and went well which should have positive effects on the country," he said.
Major US investors, including some of the world's top 10 investors, showed interest in the "Thailand: Investing from Strength to Strength" scheme as it would involve 140 billion baht in government spending, said Deputy Commerce Minister Alongkorn Ponlaboot who accompanied Mr Abhisit on the trip.
The prime minister told executives the worst point of Thailand's economic crisis had passed. All economic indices are showing signs of recovery.
The positive trend will revitalise ThaiUS business activities, Mr Alongkorn quoted Mr Abhisit as saying.
Mr Alongkorn said next year the volume of Thailand's exports to the US was expected to rise by 10%.
The prime minister, who is in the US to attend the 64th Session of the United Nations General Assembly and the G-20 Pittsburgh Summit until Sunday, yesterday met with representatives of securities companies that trade in the US.
Mr Abhisit said he told executives the Stock Exchange of Thailand index had bounced back by almost 60% over the past nine months and the country's economic growth had turned positive.
He also told executives about the government's medium- and long-term plans to stimulate the economy under the "Thailand: Investing from Strength to Strength" scheme, particularly the water supply, communications and service sector projects.
This message sends the right signal to US investors and it should result in new investment in Thailand, Mr Abhisit said.
"Over the past several years, Thailand has had more economic competitors,but the country's infrastructure has been ignored over the past seven to eight years," he said.
"We only had a new airport."He said if Thailand did not invest in new infrastructure the country would lose its competitive advantage. The gov-ernment's clear development plan would boost investor confidence, he said.
Mr Abhisit said US executives asked about Thailand's political stability over the past few years.
He said he told them the government had a tangible plan for reconciliation which includes political reform.
"I believe foreign investors understand democracy, that people can view things differently ... the [United Front for Democracy against Dictatorship] rally that took place [on Saturday] and went well which should have positive effects on the country," he said.
Major US investors, including some of the world's top 10 investors, showed interest in the "Thailand: Investing from Strength to Strength" scheme as it would involve 140 billion baht in government spending, said Deputy Commerce Minister Alongkorn Ponlaboot who accompanied Mr Abhisit on the trip.
The prime minister told executives the worst point of Thailand's economic crisis had passed. All economic indices are showing signs of recovery.
The positive trend will revitalise ThaiUS business activities, Mr Alongkorn quoted Mr Abhisit as saying.
Mr Alongkorn said next year the volume of Thailand's exports to the US was expected to rise by 10%.
US indicators point to signs of recovery
A measure of the US economys prospects scaled a 11-year high in August but a record rise in home loan defaults cast doubts on the durability of the apparent recovery from recession.
The Conference Board said on Monday its index of leading economic indicators rose 0.6% to 102.5, the highest level since January 2008. It had advanced 0.9% in July.
It was the fifth straight month that the gauge, which is supposed to forecast economic trends six to nine months ahead, had increased.
The gain was a touch below the 0.7%rise economists had forecast. The index has risen 4.4% during the past six months.
The indicators are designed to project economic activity in the next three to six months.
These data add further evidence to the growing view and our long-held belief that the official end date of the recession is likely to be sometime in the third quarter, said Michelle Girard, an economist at RBS in Greenwich, Connecticut.
However, separate monthly data from credit bureau Equifax Inc showed a record 7.58% of US homeowners with mortgages were at least 30 days late on payments in August, up from 7.32% in July.
US financial markets were mute to the data and analysts said investors were awaiting the outcome of the Federal Reserves two-day policy meeting on Tuesday and Wednesday.
The Fed is expected to leave benchmark overnight lending rates unchanged near zero, but the statement accompanying the rate decision will be scrutinised for clues as to when the US central bank will start withdrawing some of the support it is lending to the economy.
While economists agree the United States is starting to emerge from its worst recession since the 1930s with a solid rebound seen in the third quarter there are concerns that stubbornly high unemployment could undermine the recovery.
The unemployment rate raced to a 26-year high of 9.7% last month and is expected to peak just above 10% early next year.
A restocking of inventories, which were drawn down to record lows to adjust to sluggish demand, and government programmes including incentives for firsttime homebuyers and some motor vehicle buyers, are expected to drive growth in the third quarter.
In August, the US economys prospects were lifted by rising supplier deliveries,stock market prices, building permits and consumer expectations, according to the Conference Board, a private sector research group.
Analysts said separate indexes in the report also offered some encouragement.The coincident economic index was unchanged at 99.8 in August, while the lagging index slipped 0.1% to 110.2 pushing up the so-called coincidentto-lagging ratio for a fifth straight month.
The coincident-to-lagging ratio, which tends to trough and turn up well before the official ending of recessions, has a good track record of foreshadowing an economic recovery, according to economists.
This continues to suggest strongly that this recession is over. But whether or not the economy can keep grinding forward and at what speed is still a big question mark, said Jennifer Lee, an economist at BMO Capital Markets in Toronto.
Real money supply, average weekly initial claims for unemployment insurance and manufacturers new orders for non defence capital goods were a drag on the main leading index in August.Weekly manufacturing hours and manufacturers new orders for consumer goods and materials were steady.
Our view is that its not a sustainable (recovery) because thats a lot of special factors ... By the end of the year we should see slower momentum, said Brian Bethune, US economist with IHS Global Insight in Waltham, Massachusetts.
The Conference Board said on Monday its index of leading economic indicators rose 0.6% to 102.5, the highest level since January 2008. It had advanced 0.9% in July.
It was the fifth straight month that the gauge, which is supposed to forecast economic trends six to nine months ahead, had increased.
The gain was a touch below the 0.7%rise economists had forecast. The index has risen 4.4% during the past six months.
The indicators are designed to project economic activity in the next three to six months.
These data add further evidence to the growing view and our long-held belief that the official end date of the recession is likely to be sometime in the third quarter, said Michelle Girard, an economist at RBS in Greenwich, Connecticut.
However, separate monthly data from credit bureau Equifax Inc showed a record 7.58% of US homeowners with mortgages were at least 30 days late on payments in August, up from 7.32% in July.
US financial markets were mute to the data and analysts said investors were awaiting the outcome of the Federal Reserves two-day policy meeting on Tuesday and Wednesday.
The Fed is expected to leave benchmark overnight lending rates unchanged near zero, but the statement accompanying the rate decision will be scrutinised for clues as to when the US central bank will start withdrawing some of the support it is lending to the economy.
While economists agree the United States is starting to emerge from its worst recession since the 1930s with a solid rebound seen in the third quarter there are concerns that stubbornly high unemployment could undermine the recovery.
The unemployment rate raced to a 26-year high of 9.7% last month and is expected to peak just above 10% early next year.
A restocking of inventories, which were drawn down to record lows to adjust to sluggish demand, and government programmes including incentives for firsttime homebuyers and some motor vehicle buyers, are expected to drive growth in the third quarter.
In August, the US economys prospects were lifted by rising supplier deliveries,stock market prices, building permits and consumer expectations, according to the Conference Board, a private sector research group.
Analysts said separate indexes in the report also offered some encouragement.The coincident economic index was unchanged at 99.8 in August, while the lagging index slipped 0.1% to 110.2 pushing up the so-called coincidentto-lagging ratio for a fifth straight month.
The coincident-to-lagging ratio, which tends to trough and turn up well before the official ending of recessions, has a good track record of foreshadowing an economic recovery, according to economists.
This continues to suggest strongly that this recession is over. But whether or not the economy can keep grinding forward and at what speed is still a big question mark, said Jennifer Lee, an economist at BMO Capital Markets in Toronto.
Real money supply, average weekly initial claims for unemployment insurance and manufacturers new orders for non defence capital goods were a drag on the main leading index in August.Weekly manufacturing hours and manufacturers new orders for consumer goods and materials were steady.
Our view is that its not a sustainable (recovery) because thats a lot of special factors ... By the end of the year we should see slower momentum, said Brian Bethune, US economist with IHS Global Insight in Waltham, Massachusetts.
ADB raises growth outlook
The Asian Development Bank yesterday raised its regional growth outlook for this year but warned that recovery signs were not yet strong enough for Asian governments to remove the stimulus prop.
The Manila-based bank said that a huge dose of spending put Asia on course to lead the world out of its economic slump, updating its 2009 forecast for gross domestic product (GDP) to 3.9%growth from 3.4% in March.
It also upgraded its 2010 estimate to 6.4% from 6.0%.
"Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown," said ADB chief economist Lee Jong-wha.
The region's growth prospects were enhanced by "firm action by many governments and central banks, the relatively healthy state of financial systems prior to the global crisis" and a quick turnaround in "larger, less exportdependent economies", the report said.
Lee added that economic activity in the larger developing Asian economies had rebounded and output looked set for a so-called V-shaped comeback.
However, he cautioned central governments and banks against any hasty withdrawal of stimulus packages.
"This is not the timing for implementation of exit policy," Lee told a press conference in Hong Kong.
The economist also warned against reliance on external demand as the global recovery "is still very slow."
He said Asian economies should instead focus on domestic demand and encourage intra-regional trade by removing trade barriers and protectionist policies on the labour force.
The report looked at prospects for countries stretching from the former Soviet states of Central Asia to some of the tiny Pacific islands, excluding developed countries such as Japan, Australia and New Zealand.
The ADB said it boosted China's GDP outlook by 1.2 percentage points to 8.2% this year thanks to huge pump-priming in the world's third-biggest economy.
Beijing has targeted growth of 8.0%to keep unemployment at bay and avoid social unrest. The ADB has forecast 8.9% growth next year, up from 6.5%projected in March.
It highlighted a $585-billion stimulus late last year, a massive surge in bank lending in the first half of this year and "aggressive monetary easing".
Export-dependent China announced its huge spending policy last year to boost domestic consumption and infrastructure projects, as key overseas markets in the United States, Japan and the euro zone went into recession.
The move led to a surge in imports,which in turn helped regional exporters.
India was tipped by the ADB to grow 6.0% in 2009, up from a previous forecast of 5.0%. Next year the ADB estimates the South Asian giant will expand 7%,0.5%age points up from March's estimate.
The report said despite weak exports and a poor agricultural outlook,"adroit economic management" by New Delhi had minimised the impact of the global downturn.
The improved economic outlook is reflected in stock markets regionally,which have surged from troughs recorded in March, just weeks before the last ADB report.
It said a strong financial sector had helped Asia through the downturn, while high savings rates and low household debt meant consumers were also able to absorb some of the shock.
South Korea was still predicted to contract, albeit at a slower pace due to government intervention.
But the heavily export-reliant economies of Hong Kong, Singapore and Taiwan were expected to shrink sharply this year as demand for their goods stays quiet and their markets only slowly regain strength.
The ADB said despite a positive outlook for Indonesia and Vietnam, a deteriorating path ahead for Malaysia and Thailand had forced it to cut Southeast Asia's outlook to 0.1% growth, from 0.7% in March.
Central Asia, which is grappling a banking crisis and a fall in the price of its key export oil, is seen growing just 0.5% now, compared with a previous forecast of 3.9%.
The Manila-based bank said that a huge dose of spending put Asia on course to lead the world out of its economic slump, updating its 2009 forecast for gross domestic product (GDP) to 3.9%growth from 3.4% in March.
It also upgraded its 2010 estimate to 6.4% from 6.0%.
"Despite worsening conditions in the global economic environment, developing Asia is poised to lead the recovery from the worldwide slowdown," said ADB chief economist Lee Jong-wha.
The region's growth prospects were enhanced by "firm action by many governments and central banks, the relatively healthy state of financial systems prior to the global crisis" and a quick turnaround in "larger, less exportdependent economies", the report said.
Lee added that economic activity in the larger developing Asian economies had rebounded and output looked set for a so-called V-shaped comeback.
However, he cautioned central governments and banks against any hasty withdrawal of stimulus packages.
"This is not the timing for implementation of exit policy," Lee told a press conference in Hong Kong.
The economist also warned against reliance on external demand as the global recovery "is still very slow."
He said Asian economies should instead focus on domestic demand and encourage intra-regional trade by removing trade barriers and protectionist policies on the labour force.
The report looked at prospects for countries stretching from the former Soviet states of Central Asia to some of the tiny Pacific islands, excluding developed countries such as Japan, Australia and New Zealand.
The ADB said it boosted China's GDP outlook by 1.2 percentage points to 8.2% this year thanks to huge pump-priming in the world's third-biggest economy.
Beijing has targeted growth of 8.0%to keep unemployment at bay and avoid social unrest. The ADB has forecast 8.9% growth next year, up from 6.5%projected in March.
It highlighted a $585-billion stimulus late last year, a massive surge in bank lending in the first half of this year and "aggressive monetary easing".
Export-dependent China announced its huge spending policy last year to boost domestic consumption and infrastructure projects, as key overseas markets in the United States, Japan and the euro zone went into recession.
The move led to a surge in imports,which in turn helped regional exporters.
India was tipped by the ADB to grow 6.0% in 2009, up from a previous forecast of 5.0%. Next year the ADB estimates the South Asian giant will expand 7%,0.5%age points up from March's estimate.
The report said despite weak exports and a poor agricultural outlook,"adroit economic management" by New Delhi had minimised the impact of the global downturn.
The improved economic outlook is reflected in stock markets regionally,which have surged from troughs recorded in March, just weeks before the last ADB report.
It said a strong financial sector had helped Asia through the downturn, while high savings rates and low household debt meant consumers were also able to absorb some of the shock.
South Korea was still predicted to contract, albeit at a slower pace due to government intervention.
But the heavily export-reliant economies of Hong Kong, Singapore and Taiwan were expected to shrink sharply this year as demand for their goods stays quiet and their markets only slowly regain strength.
The ADB said despite a positive outlook for Indonesia and Vietnam, a deteriorating path ahead for Malaysia and Thailand had forced it to cut Southeast Asia's outlook to 0.1% growth, from 0.7% in March.
Central Asia, which is grappling a banking crisis and a fall in the price of its key export oil, is seen growing just 0.5% now, compared with a previous forecast of 3.9%.
RECOVERY WILL TAKE LONGER, ADB WARNS
Though Thailand's economic recovery is expected to be V-shaped, the upward side will be shorter and take longer to reach its peak than in the past owing to economic concerns, the Asian Development Bank said.
ADB country manager Jean-Pierre Verbiest said at a press conference yesterday that the slow recovery could be attributed to lingering concerns among Thai consumers, which have resulted in no immediate rise in spending, and the slow pace of global recovery.
He also remarked that nothing should stop the government from carrying out its Bt1.4-trillion stimulus package.
"The budget accounts for 5 per cent of GDP [gross domestic product]. If the project is interrupted, the country's economy will recover much more slowly than estimated," he warned.
Public debt is expected to rise to 58 per cent of GDP by 2012, which should be manageable if economic growth is on track, he added.
According to the Asian Development Outlook 2009 Update, Thailand has been recommended to avoid asset bubbles caused by rate cuts, while fiscal spending should be kept prudent to avert a rapid rise in debt and ensure efficient resource allocation.
Finance Minister Korn Chatikavanij, however, rebutted yesterday by saying that an asset bubble was out of the question because land-price movement is under control while bank lending is lower than last year's level. A bubble could only burst when bank lending is extraordinarily high, he said.
The ADB, while revising downward the Kingdom's economic growth estimate from minus 2 per cent to minus 3.2 per cent this year, expects the economy to resume expansion in 2010 with 3-per-cent growth, the lowest among Asean countries. Vietnam's growth rate is expected to be the highest at 6.5 per cent.
To the bank, Asia is leading the world's emergence from its deepest recession thanks to government spending, tax cuts and rate reduction.
The Thai government injected a total of Bt251.4 billion into the economy between last October and this June, or 2.8 per cent of GDP, according to the Finance Ministry. Meanwhile, it is set to spend another Bt1.4 trillion under the Thai Khemkhaeng (TKK) scheme from 2010 to 2012.
"It's not a common thing. Thailand's growth rate should be higher than this, but the lack of confidence in the country before the global economic crisis partly caused such small growth," Verbiest said.
At the NIDA Business School seminar yesterday, lecturer Ekkachai Nittayasetrawat said that a year after the 'Hamburger' crisis started, Thailand had shown the slowest rate of recovery, mainly in terms of domestic consumption.
Though he commended the TKK scheme, he suggested the budget be earmarked for revenue-creating projects such as transportation, irrigation systems and alternative energy.
Sukit Udomsirikul of the SCIB Research Institute said the pace of recovery remained uncertain because it was unclear as to how long orders would keep returning.
The ADB report predicted that Singapore and Malaysia would grow by 3.5 per cent and 4.2 per cent respectively next year, thanks mainly to their effective stimulus packages and higher capital income.
Since 70 per cent of the Thai economy relies on exports, it has been hit harder than countries that depend on the domestic market.
"Fortunately, Thailand has diversified its export structure by expanding into new markets such as the Middle East, Russia and Africa. Also, Thailand's geography provides a lot of opportunities because it is located between two emerging countries - China and India - where the markets have been growing rapidly," Verbiest said.
ADB country manager Jean-Pierre Verbiest said at a press conference yesterday that the slow recovery could be attributed to lingering concerns among Thai consumers, which have resulted in no immediate rise in spending, and the slow pace of global recovery.
He also remarked that nothing should stop the government from carrying out its Bt1.4-trillion stimulus package.
"The budget accounts for 5 per cent of GDP [gross domestic product]. If the project is interrupted, the country's economy will recover much more slowly than estimated," he warned.
Public debt is expected to rise to 58 per cent of GDP by 2012, which should be manageable if economic growth is on track, he added.
According to the Asian Development Outlook 2009 Update, Thailand has been recommended to avoid asset bubbles caused by rate cuts, while fiscal spending should be kept prudent to avert a rapid rise in debt and ensure efficient resource allocation.
Finance Minister Korn Chatikavanij, however, rebutted yesterday by saying that an asset bubble was out of the question because land-price movement is under control while bank lending is lower than last year's level. A bubble could only burst when bank lending is extraordinarily high, he said.
The ADB, while revising downward the Kingdom's economic growth estimate from minus 2 per cent to minus 3.2 per cent this year, expects the economy to resume expansion in 2010 with 3-per-cent growth, the lowest among Asean countries. Vietnam's growth rate is expected to be the highest at 6.5 per cent.
To the bank, Asia is leading the world's emergence from its deepest recession thanks to government spending, tax cuts and rate reduction.
The Thai government injected a total of Bt251.4 billion into the economy between last October and this June, or 2.8 per cent of GDP, according to the Finance Ministry. Meanwhile, it is set to spend another Bt1.4 trillion under the Thai Khemkhaeng (TKK) scheme from 2010 to 2012.
"It's not a common thing. Thailand's growth rate should be higher than this, but the lack of confidence in the country before the global economic crisis partly caused such small growth," Verbiest said.
At the NIDA Business School seminar yesterday, lecturer Ekkachai Nittayasetrawat said that a year after the 'Hamburger' crisis started, Thailand had shown the slowest rate of recovery, mainly in terms of domestic consumption.
Though he commended the TKK scheme, he suggested the budget be earmarked for revenue-creating projects such as transportation, irrigation systems and alternative energy.
Sukit Udomsirikul of the SCIB Research Institute said the pace of recovery remained uncertain because it was unclear as to how long orders would keep returning.
The ADB report predicted that Singapore and Malaysia would grow by 3.5 per cent and 4.2 per cent respectively next year, thanks mainly to their effective stimulus packages and higher capital income.
Since 70 per cent of the Thai economy relies on exports, it has been hit harder than countries that depend on the domestic market.
"Fortunately, Thailand has diversified its export structure by expanding into new markets such as the Middle East, Russia and Africa. Also, Thailand's geography provides a lot of opportunities because it is located between two emerging countries - China and India - where the markets have been growing rapidly," Verbiest said.
Thai recovery lags most Asian peers
While Asian economies have mostly emerged from the global economic recession, Thailand's recovery remains weak, according to Ekachai Nitayakasetwat, dean of the business school of the National Institute for Development Administration (Nida).
Nida and the Siam City Research Institute yesterday presented findings of a joint study on the global recession and the impact on the G3 leading economies as well as Asian economies.
The downturn in the US and Europe was rooted primarily in the financial sector, with the collapse of the US subprime mortgage market in mid-2008 ravaging bank balance sheets and undermining the overall economy.
Asian economies meanwhile faced no problems with their financial sectors but were affected by sharply declining exports and external demand.
Researchers said that within the region,Singapore posted the strongest turnaround while Korea benefited from strong domestic demand and stimulus measures. Taiwan, while posting a similar turnaround in gross domestic product growth as Singapore, continues to be affected by relatively weaker domestic demand.
"Thailand and Malaysia are two of the countries posting the weakest recoveries, with domestic demand still weak.In this sense, Malaysia is doing better than Thailand," Mr Ekachai said.
Employment and weak domestic consumption remained problems for the economy. Policy should focus on building domestic demand through new investment."We don't recommend using [stimulus] funds to boost domestic demand directly, given the possibility of creating a bubble" Mr Ekachai said.
"Right now, we face certain risks by using borrowed money to use today.These funds have to go to projects that will create wealth in the future, such as logistics and mass transit programmes that can help reduce operating costs,irrigation or alternative energy programmes that can help reduce our risk from volatile fuel prices."
The government plans to invest 1.45 trillion baht through 2012 on thousands of infrastructure projects nationwide under the "Thailand: Investing from Strength to Strength" programme, including hundreds of billions of baht for newmass transit, logistics, power, education and health services facilities.
Sukit Udomsirikul, an assistant managing director for the Siam City Research Institute, cautioned that it was too early to say that the recovery would be sustainable.
He said within the next six months,the overall picture would become clearer about how each country recovered based on the different amounts of stimulus applied."We expect that Asia will definitely recover faster than Europe and the US, as regional banks are quite able to resume lending quickly. Asian countries can also rely on domestic funds as well, albeit at higher funding costs,"Mr Sukit said.
Investors, however, should note that current valuations have climbed well beyond historical trends, with the Thai market now trading at 13 times forward earnings. Mr Sukit said the SET index,up nearly 60% for the year to date, should be trading at 600 points based on fundamentals and a price-to-earnings valuation of 10 times.
The Siam City Research Institute projects the Thai economy will contract by 3.2% this year, with average growth of 2.5% for 2010.
Nida and the Siam City Research Institute yesterday presented findings of a joint study on the global recession and the impact on the G3 leading economies as well as Asian economies.
The downturn in the US and Europe was rooted primarily in the financial sector, with the collapse of the US subprime mortgage market in mid-2008 ravaging bank balance sheets and undermining the overall economy.
Asian economies meanwhile faced no problems with their financial sectors but were affected by sharply declining exports and external demand.
Researchers said that within the region,Singapore posted the strongest turnaround while Korea benefited from strong domestic demand and stimulus measures. Taiwan, while posting a similar turnaround in gross domestic product growth as Singapore, continues to be affected by relatively weaker domestic demand.
"Thailand and Malaysia are two of the countries posting the weakest recoveries, with domestic demand still weak.In this sense, Malaysia is doing better than Thailand," Mr Ekachai said.
Employment and weak domestic consumption remained problems for the economy. Policy should focus on building domestic demand through new investment."We don't recommend using [stimulus] funds to boost domestic demand directly, given the possibility of creating a bubble" Mr Ekachai said.
"Right now, we face certain risks by using borrowed money to use today.These funds have to go to projects that will create wealth in the future, such as logistics and mass transit programmes that can help reduce operating costs,irrigation or alternative energy programmes that can help reduce our risk from volatile fuel prices."
The government plans to invest 1.45 trillion baht through 2012 on thousands of infrastructure projects nationwide under the "Thailand: Investing from Strength to Strength" programme, including hundreds of billions of baht for newmass transit, logistics, power, education and health services facilities.
Sukit Udomsirikul, an assistant managing director for the Siam City Research Institute, cautioned that it was too early to say that the recovery would be sustainable.
He said within the next six months,the overall picture would become clearer about how each country recovered based on the different amounts of stimulus applied."We expect that Asia will definitely recover faster than Europe and the US, as regional banks are quite able to resume lending quickly. Asian countries can also rely on domestic funds as well, albeit at higher funding costs,"Mr Sukit said.
Investors, however, should note that current valuations have climbed well beyond historical trends, with the Thai market now trading at 13 times forward earnings. Mr Sukit said the SET index,up nearly 60% for the year to date, should be trading at 600 points based on fundamentals and a price-to-earnings valuation of 10 times.
The Siam City Research Institute projects the Thai economy will contract by 3.2% this year, with average growth of 2.5% for 2010.
ADB forecast brightens
The Thai economy is expected grow by 3% next year in line with higher public spending and an improved global economy, compared with a contraction of 3.2% this year, according to the Asian Development Bank.
The ADB cut its forecast for 2009 from an earlier estimate of a 2% contraction, citing the worse-than-expected global downturn in the first half and domestic political unrest.
But growth forecasts for Asia were increased for 2009 and 2010, with the ADB saying that the region had proved to be more resilient to the global recession than previously thought.
Asia is expected to see a "V-shaped"recovery, Thailand included, though its recovery would be slower than in other countries in the region, the ADB said. Developing Asian economies are projected to post growth of 3.9% this year, compared with a 3.4% growth projection made in March.
For 2010, developing Asian economies should post average growth of 6.4%, up from previous forecasts of 6%,helped by fiscal and monetary stimulus provided by governments and central banks, healthy financial systems prior to the crisis, and a rapid turnaround in larger regional economies.
Jean-Pierre Verbiest, country director of the ADB's Thailand office, said the Thai economy should pick up slightly in the fourth quarter.
"We have to be careful when looking at economic figures during the abnormal economic times," he said.
"All institutions have the same view that the economy will grow in the last quarter this year, but very slightly, considering that last year the economy shrunk considerably."
Mr Verbiest said Thailand's consumption and private investment will improve if there is no disruption in government stimulus programmes and people have confidence in state policy and projects.
The government's second stimulus programme, known as "Thailand:Investing from Strength to Strength"or Thai Kem Kaeng , will commit 1.45 trillion baht through 2012. Authorities expect the programme, equal to 5% of GDP, to create 1.5 million jobs, stimulating private consumption and a recovery in industries such as metal, cement and construction materials.
Mr Verbiest said that to avoid asset bubbles, policymakers needed to keep a close watch on monetary policy and interest rates, which have been reduced to very low levels in many countries.
While this should not be a problem for Thailand, it was a concern for countries such as China or Indonesia.The Bank of Thailand's policy rate, now at 1.25%, has likely bottomed out.
Mr Verbiest said the Thai government also needed to ensure that fiscal stimulus was carried out prudently and efficiently given the rise in debt.
Public debt is expected to peak at 58% of GDP by 2012, a manageable level considering the country's strong financial status. The ADB said authorities needed to manage future financing needs closely, and avoid a concentration in bond maturity periods to minimise the impact on future budgets.
Mr Verbiest cautioned that if the global economy recovers more slowly than expected, it could affect exportreliant Asian economies."You have to have better balance toward domestic demand to reduce over-reliance on external markets," he said.
Mr Verbiest noted that Indonesia,which is projected to post GDP growth of 4.3% this year, depends on exports for only 20% to 25% of its economy,compared with 70% for Thailand.
Thailand should take advantage of its geography as it is well positioned between China and India whose markets are predicted to drive world's economic growth in the future, he added.
The ADB is in talks with the Thai government to lend $500 million to support spending programmes for fiscal 2010. It has approved a $77.1-million loan for a highway construction programme connecting Thailand to the Greater Mekong River region.
Charl Kengchon, senior economist and managing director at Kasikorn Research Center, agreed Thailand would lag the region in economic recovery.
"Economic growth in Thailand next year would be among the slowest in the Asian region," Dr Charl said."We expect to see about 2.5-3.5% growth [in 2010], which is not too good when compared with 5% growth predicted for Singapore or Indonesia."
Kasikorn Research Center maintains a forecast for an economic contraction of 3.5% to 4.1% for 2009.
Thailand's major risk, Dr Charl said,remains political uncertainties, a factor that is unique when compared with other regional countries.
"The Thai Kem Kaeng project will be a test for the government. Businesses are watching to see how well the government can weather through the political storm and whether it is able to fully implement the stimulus programmes," he said.
"If the government is able to deliver,it will help to establish strong confidence among the private sector and stimulate spending."
The ADB cut its forecast for 2009 from an earlier estimate of a 2% contraction, citing the worse-than-expected global downturn in the first half and domestic political unrest.
But growth forecasts for Asia were increased for 2009 and 2010, with the ADB saying that the region had proved to be more resilient to the global recession than previously thought.
Asia is expected to see a "V-shaped"recovery, Thailand included, though its recovery would be slower than in other countries in the region, the ADB said. Developing Asian economies are projected to post growth of 3.9% this year, compared with a 3.4% growth projection made in March.
For 2010, developing Asian economies should post average growth of 6.4%, up from previous forecasts of 6%,helped by fiscal and monetary stimulus provided by governments and central banks, healthy financial systems prior to the crisis, and a rapid turnaround in larger regional economies.
Jean-Pierre Verbiest, country director of the ADB's Thailand office, said the Thai economy should pick up slightly in the fourth quarter.
"We have to be careful when looking at economic figures during the abnormal economic times," he said.
"All institutions have the same view that the economy will grow in the last quarter this year, but very slightly, considering that last year the economy shrunk considerably."
Mr Verbiest said Thailand's consumption and private investment will improve if there is no disruption in government stimulus programmes and people have confidence in state policy and projects.
The government's second stimulus programme, known as "Thailand:Investing from Strength to Strength"or Thai Kem Kaeng , will commit 1.45 trillion baht through 2012. Authorities expect the programme, equal to 5% of GDP, to create 1.5 million jobs, stimulating private consumption and a recovery in industries such as metal, cement and construction materials.
Mr Verbiest said that to avoid asset bubbles, policymakers needed to keep a close watch on monetary policy and interest rates, which have been reduced to very low levels in many countries.
While this should not be a problem for Thailand, it was a concern for countries such as China or Indonesia.The Bank of Thailand's policy rate, now at 1.25%, has likely bottomed out.
Mr Verbiest said the Thai government also needed to ensure that fiscal stimulus was carried out prudently and efficiently given the rise in debt.
Public debt is expected to peak at 58% of GDP by 2012, a manageable level considering the country's strong financial status. The ADB said authorities needed to manage future financing needs closely, and avoid a concentration in bond maturity periods to minimise the impact on future budgets.
Mr Verbiest cautioned that if the global economy recovers more slowly than expected, it could affect exportreliant Asian economies."You have to have better balance toward domestic demand to reduce over-reliance on external markets," he said.
Mr Verbiest noted that Indonesia,which is projected to post GDP growth of 4.3% this year, depends on exports for only 20% to 25% of its economy,compared with 70% for Thailand.
Thailand should take advantage of its geography as it is well positioned between China and India whose markets are predicted to drive world's economic growth in the future, he added.
The ADB is in talks with the Thai government to lend $500 million to support spending programmes for fiscal 2010. It has approved a $77.1-million loan for a highway construction programme connecting Thailand to the Greater Mekong River region.
Charl Kengchon, senior economist and managing director at Kasikorn Research Center, agreed Thailand would lag the region in economic recovery.
"Economic growth in Thailand next year would be among the slowest in the Asian region," Dr Charl said."We expect to see about 2.5-3.5% growth [in 2010], which is not too good when compared with 5% growth predicted for Singapore or Indonesia."
Kasikorn Research Center maintains a forecast for an economic contraction of 3.5% to 4.1% for 2009.
Thailand's major risk, Dr Charl said,remains political uncertainties, a factor that is unique when compared with other regional countries.
"The Thai Kem Kaeng project will be a test for the government. Businesses are watching to see how well the government can weather through the political storm and whether it is able to fully implement the stimulus programmes," he said.
"If the government is able to deliver,it will help to establish strong confidence among the private sector and stimulate spending."
Tuesday, September 22, 2009
Govt at odds with Senate over loan bill
A legal battle is brewing between the two houses of parliament that could hold up the government's efforts to borrow 400 billion baht to pay for its economic stimulus schemes.
The Senate has demanded that it be allowed to scrutinise a bill on the loans,but the government insists the Senate only has to be informed about the bill.
A majority of senators yesterday voted to support a special committee's recommendation that the Senate be allowed to vet the bill.
The government wanted the Senate to be informed about the bill but did not ask for it to be vetted.
The Senate plans to ask the Constitution Court to rule on whether the bill would be constitutional if the government does not give it to the upper house for scrutiny or to change some details.
Finance Minister Korn Chatikavanij yesterday said the government had consulted the Council of State as to whether the Senate could vet the bill and make changes. The council ruled the Senate could not do so because it would be a violation of Article 171 of the constitution.
If the Senate insisted on approaching the Constitution Court, the government would lodge its own complaint with the court against the authority of the Senate,Mr Korn said.
If the Constitution Court blocks parliament's approval of the bill, the government will be unable to access the 400 billion baht in loans that it needs to stimulate the economy.
Mr Korn said the government really needed the bill to be passed into law to provide funding for the "Thailand: Investing from Strength to Strength" stimulus scheme and for investment in the private sector.
He insisted the government would spend the 400 billion baht with transparency and in the best interest of the public. He expected the funds to be disbursed early next year.
The Senate has demanded that it be allowed to scrutinise a bill on the loans,but the government insists the Senate only has to be informed about the bill.
A majority of senators yesterday voted to support a special committee's recommendation that the Senate be allowed to vet the bill.
The government wanted the Senate to be informed about the bill but did not ask for it to be vetted.
The Senate plans to ask the Constitution Court to rule on whether the bill would be constitutional if the government does not give it to the upper house for scrutiny or to change some details.
Finance Minister Korn Chatikavanij yesterday said the government had consulted the Council of State as to whether the Senate could vet the bill and make changes. The council ruled the Senate could not do so because it would be a violation of Article 171 of the constitution.
If the Senate insisted on approaching the Constitution Court, the government would lodge its own complaint with the court against the authority of the Senate,Mr Korn said.
If the Constitution Court blocks parliament's approval of the bill, the government will be unable to access the 400 billion baht in loans that it needs to stimulate the economy.
Mr Korn said the government really needed the bill to be passed into law to provide funding for the "Thailand: Investing from Strength to Strength" stimulus scheme and for investment in the private sector.
He insisted the government would spend the 400 billion baht with transparency and in the best interest of the public. He expected the funds to be disbursed early next year.
Reunited Korea could outrank Japan
A united Korea - combining Asia's fourth biggest economy with one of its poorest - could surpass that of Germany or Japan in economic might in the next 30-40 years, US investment bank Goldman Sachs said yesterday.
Though North Korea's planned economy system looks to be on the edge of collapse, it offers a large and cheap workforce, a wealth of minerals that the resource-poor South currently has to import to feed its industry and the likelihood of gains in productivity and its currency once economic reforms take hold.
"We project that a united Korea could overtake France, Germany and possibly Japan in 30-40 years in terms of GDP in US dollar terms," it said in a report.
Thw two Koreas have been separated for more than half a century and have yet to sign a peace treaty to formally end the 1950-53 Korean War.
The Goldman Sachs report was published just as the communist North has shown signs of being willing to reengage with the outside world, from which it has been all but cut off after a series of nuclear and missile tests this year.
It also comes as the conservative government in Seoul has turned increasingly hard-nosed in dealings with its prickly neighbour, ending years of aid until Pyongyang starts to dismantle its nuclear weapons programme.
The cost of reunification has long been seen as one of the biggest risks facing the South Korean economy.
Many analysts warn the South's rise to an economic powerhouse in the region could be undone by the burden of absorbing its neighbour, whose per capita income is about 5% the size.
But Goldman Sachs said it could be affordable by having the appropriate policies and by following the China/Hong Kong reunification model which allows two political and economic systems to co-exist, with limited interKorean migration.
The report was written by the bank's South Korea economist, Goohoon Kwon,and included input from one of the economists who co-authored the bank's influential prediction earlier this decade that the economies of Brazil, Russia,India and China - the so-called BRICs - would turn dominant by the midcentury.
It argued that there remained a spirit of reconciliation despite the hardening in Seoul and that the political backdrop in the region was supportive of peaceful and gradual integration.
North Korea's increasing lag behind other former planned economies, such as Russia, China and Vietnam,"could eventually spark powerful political and economic changes in North Korea which,with the recent political changes in the US and Japan, could transform the nature and magnitude of North Korea risks."
Though North Korea's planned economy system looks to be on the edge of collapse, it offers a large and cheap workforce, a wealth of minerals that the resource-poor South currently has to import to feed its industry and the likelihood of gains in productivity and its currency once economic reforms take hold.
"We project that a united Korea could overtake France, Germany and possibly Japan in 30-40 years in terms of GDP in US dollar terms," it said in a report.
Thw two Koreas have been separated for more than half a century and have yet to sign a peace treaty to formally end the 1950-53 Korean War.
The Goldman Sachs report was published just as the communist North has shown signs of being willing to reengage with the outside world, from which it has been all but cut off after a series of nuclear and missile tests this year.
It also comes as the conservative government in Seoul has turned increasingly hard-nosed in dealings with its prickly neighbour, ending years of aid until Pyongyang starts to dismantle its nuclear weapons programme.
The cost of reunification has long been seen as one of the biggest risks facing the South Korean economy.
Many analysts warn the South's rise to an economic powerhouse in the region could be undone by the burden of absorbing its neighbour, whose per capita income is about 5% the size.
But Goldman Sachs said it could be affordable by having the appropriate policies and by following the China/Hong Kong reunification model which allows two political and economic systems to co-exist, with limited interKorean migration.
The report was written by the bank's South Korea economist, Goohoon Kwon,and included input from one of the economists who co-authored the bank's influential prediction earlier this decade that the economies of Brazil, Russia,India and China - the so-called BRICs - would turn dominant by the midcentury.
It argued that there remained a spirit of reconciliation despite the hardening in Seoul and that the political backdrop in the region was supportive of peaceful and gradual integration.
North Korea's increasing lag behind other former planned economies, such as Russia, China and Vietnam,"could eventually spark powerful political and economic changes in North Korea which,with the recent political changes in the US and Japan, could transform the nature and magnitude of North Korea risks."
Senate scrutiny for stimulus plan
The Senate yesterday voted to insert a key clause requiring parliamentary scrutiny of the government's plan to spend Bt400 billion to revitalise the economy.
The vote is seen as a snub to the government, which wants to treat the package as an off-the-budget measure to avoid scrutiny by citing an urgency to fight the economic downturn.
Finance Minister Korn Chatikavanij returned from London early to defend authorising the public debt, but failed to convince the upper chamber to approve the House-version of the bill allowing the spending to proceed without scrutiny.
"The government has deemed it necessary to quickly inject funds into the economy, hence the reason to cut short the parliamentary vetting process to just an acknowledgement of the spendings," he said.
Korn later added that after consulting legal authorities, including the Council of State, he found out that it was legal, constitutional and appropriate to exclude the vetting for off-the-budget spendings.
Since the funds were not part of the national budget, the legislative meddling might be construed as unconstitutional because it transgresses on executive power, he warned, prompting fiery protests from several Senators.
Senator Kamnoon Sithisaman said he was preparing to seek a Constitution Court review on the leeway to authorise spending plans without parliamentary scrutiny.
Kamnoon's colleagues, including Manoch Kraiwong and Tuang Antachai, said the Senate would not bow to pressure from the finance minister.
Though Korn apologised for his remarks about transgression on executive power, the upper chamber insisted on its version of the bill by the majority of 51-to-34 votes.
The Senate meeting last night approved the third reading of bill by a majority of 76-to-6 votes.
The vote is seen as a snub to the government, which wants to treat the package as an off-the-budget measure to avoid scrutiny by citing an urgency to fight the economic downturn.
Finance Minister Korn Chatikavanij returned from London early to defend authorising the public debt, but failed to convince the upper chamber to approve the House-version of the bill allowing the spending to proceed without scrutiny.
"The government has deemed it necessary to quickly inject funds into the economy, hence the reason to cut short the parliamentary vetting process to just an acknowledgement of the spendings," he said.
Korn later added that after consulting legal authorities, including the Council of State, he found out that it was legal, constitutional and appropriate to exclude the vetting for off-the-budget spendings.
Since the funds were not part of the national budget, the legislative meddling might be construed as unconstitutional because it transgresses on executive power, he warned, prompting fiery protests from several Senators.
Senator Kamnoon Sithisaman said he was preparing to seek a Constitution Court review on the leeway to authorise spending plans without parliamentary scrutiny.
Kamnoon's colleagues, including Manoch Kraiwong and Tuang Antachai, said the Senate would not bow to pressure from the finance minister.
Though Korn apologised for his remarks about transgression on executive power, the upper chamber insisted on its version of the bill by the majority of 51-to-34 votes.
The Senate meeting last night approved the third reading of bill by a majority of 76-to-6 votes.
EX-FINANCE MINISTER SOUNDS PUBLIC-DEBT WARNING
Former finance minister Thanong Bidaya has expressed concern about the level of public investment under the government's Thai Khemkhaeng (TKK) project, saying it might be investing too much over a very short period.
Expenditure under TKK is expected to amount to Bt1.4 trillion over the next three years.
Thanong told a seminar hosted by the National Economic and Social Development Board yesterday that he was concerned about rising public debt, which could cause high inflation and erode Thailand's sovereign credit rating.
While he was speaking, the Finance Ministry was preparing to propose today that the Cabinet approve borrowing of Bt801 billion for the new fiscal year starting October 1. The ministry plans to raise the funds to finance a budget deficit of Bt350 billion, public investment next year worth Bt270 billion and the restructuring of Financial Institutions Development Fund debt worth Bt181 billion. The ministry plans to issue long-term and savings bonds, plus borrow directly from banks.
Thanong said the government might not need to invest too much over the next three years. In any case, the government's plan could be delayed by red tape in the budgeting procedure, which has seen public investment in the past take several years to implement.
The former finance minister said the government had not yet set a clear plan of how public debts would be repaid. The level of public debt is expected to rise to about 60 per cent of gross domestic product by 2012, from 40 per cent now.
Thanong said the government was being too optimistic in predicting the economy would expand about 5 per cent in years to come. At best, economic growth will be 2-3 per cent, which will create difficulty for the next government in serving public debts, he said.
Although the government is not borrowing abroad, domestic borrowing can create trouble.
"It will be all right if the government borrows from the market or those having ample liquidity. But if it simply prints more money, it will cause high inflation," he said.
He also attacked the government's policy of boosting consumption, which he said would not be sustainable. The government should instead be providing support, such as deregulation, to help exporters. It should also find new markets for them.
While economists continue to debate the "shape" of the global economic recovery - whether its graph form will be L- or U-shaped - Thanong said a high risk remained.
He believes the recovery will be U-shaped, or a gradual recovery.
However, if the world's private sectors do not recover after many governments have injected huge amounts of liquidity into their economies, then recovery will be delayed, he said.
Thanong also said the government might need to centralise supervision of financial institutions. He said it should learn a lesson from the United States, which failed to prevent the financial crisis because there were many regulators supervising financial institutions, and their efforts were not coordinated.
In the face of such a crisis, developed countries like the US and those in Europe could take care of themselves, but small countries like Thailand would face great difficulty rescuing their economies.
Expenditure under TKK is expected to amount to Bt1.4 trillion over the next three years.
Thanong told a seminar hosted by the National Economic and Social Development Board yesterday that he was concerned about rising public debt, which could cause high inflation and erode Thailand's sovereign credit rating.
While he was speaking, the Finance Ministry was preparing to propose today that the Cabinet approve borrowing of Bt801 billion for the new fiscal year starting October 1. The ministry plans to raise the funds to finance a budget deficit of Bt350 billion, public investment next year worth Bt270 billion and the restructuring of Financial Institutions Development Fund debt worth Bt181 billion. The ministry plans to issue long-term and savings bonds, plus borrow directly from banks.
Thanong said the government might not need to invest too much over the next three years. In any case, the government's plan could be delayed by red tape in the budgeting procedure, which has seen public investment in the past take several years to implement.
The former finance minister said the government had not yet set a clear plan of how public debts would be repaid. The level of public debt is expected to rise to about 60 per cent of gross domestic product by 2012, from 40 per cent now.
Thanong said the government was being too optimistic in predicting the economy would expand about 5 per cent in years to come. At best, economic growth will be 2-3 per cent, which will create difficulty for the next government in serving public debts, he said.
Although the government is not borrowing abroad, domestic borrowing can create trouble.
"It will be all right if the government borrows from the market or those having ample liquidity. But if it simply prints more money, it will cause high inflation," he said.
He also attacked the government's policy of boosting consumption, which he said would not be sustainable. The government should instead be providing support, such as deregulation, to help exporters. It should also find new markets for them.
While economists continue to debate the "shape" of the global economic recovery - whether its graph form will be L- or U-shaped - Thanong said a high risk remained.
He believes the recovery will be U-shaped, or a gradual recovery.
However, if the world's private sectors do not recover after many governments have injected huge amounts of liquidity into their economies, then recovery will be delayed, he said.
Thanong also said the government might need to centralise supervision of financial institutions. He said it should learn a lesson from the United States, which failed to prevent the financial crisis because there were many regulators supervising financial institutions, and their efforts were not coordinated.
In the face of such a crisis, developed countries like the US and those in Europe could take care of themselves, but small countries like Thailand would face great difficulty rescuing their economies.
Annual growth of 2-3% foreseen
Thailand is expected to post modest annual growth of 2% to 3% over the next several years, according to former finance minister Thanong Bidaya.
Dr Thanong, who served briefly as finance minister during the 1997 economic crisis and again during the Thaksin Shinawatra government, cautioned that low growth rates would put pressure on the government to raise adequate revenues for investment and debt repayment.
"Thailand will face the risk of rising liabilities over the next three years, with public debt likely to hit an all-time high of as much as 60% of gross domestic product due to larger budget deficits and other negative factors that are dampening economic growth," he said.
"The Thai economy is likely to return to positive annual growth in 2010, with growth averaging 2% to 3% per year over the next several years. But this marginal growth will not generate enough funds to support investment and debt repayments."
Dr Thanong, speaking at an economics conference hosted by the National Economic and Social Development Board,said the economy needs to see consistent annual growth rates of about 4% to 6%over the next few years to ensure the government can repay its debts.
The Thai economy contracted by 4.9%year-on-year in the second quarter, compared with a 7.1% year-on-year decline in the first quarter. For the first half, the Thai economy shrank by 6% compared with the same period last year.
But the economy posted 2.3% growth from April to June, compared with a 1.8% contraction quarter-on-quarter for the first three months and a 5.9% decline in the fourth quarter of 2008.
The NESDB estimates the Thai economy will this year contract by 3% to 3.5% compared with 2008.
The Finance Ministry currently projects annual economic growth of 2.5%for 2010, rising to 4.5% to 5% in 2012 thanks to added infrastructure investments under the "Thailand: Investing from Strength to Strength" programme.The Public Debt Management Office, a unit of the ministry, expects public debt to peak at 57% of GDP in 2013 before falling steadily through the rest of the decade, with the annual budget returning to a balanced position by 2015.
But Dr Thanong said the government has yet to come up with a clear plan on how to repay debts over the period when the world economy might not recover as expected.
"Economists have different perspectives over the world's economy, with some predicting the global economy has bottomed out and started recovering while many argue the economy remains fragile," he said."In my personal view,the real economic recovery relies mainly on private investment and public consumption, and from what we've seen the two indicators have yet to recover."
The government's previous fiscal stimulus package mainly focused on stimulating short-term spending, not on supporting the real sector. The second spending plan would go mainly to infrastructure investment, he said.
The second stimulus package was unlikely to be disbursed within three years as planned, due to red tape and complicated investment regulations, he said.
He said the government should help the real sector reduce costs, increase competitiveness and facilitate investment, as well as help restore tourism,to boost the economy in the short term.
The government is also being urged to set up an independent body, the financial services authority, to control the financial-service industry and manage financial liquidity for local industries.
Dr Thanong, who served briefly as finance minister during the 1997 economic crisis and again during the Thaksin Shinawatra government, cautioned that low growth rates would put pressure on the government to raise adequate revenues for investment and debt repayment.
"Thailand will face the risk of rising liabilities over the next three years, with public debt likely to hit an all-time high of as much as 60% of gross domestic product due to larger budget deficits and other negative factors that are dampening economic growth," he said.
"The Thai economy is likely to return to positive annual growth in 2010, with growth averaging 2% to 3% per year over the next several years. But this marginal growth will not generate enough funds to support investment and debt repayments."
Dr Thanong, speaking at an economics conference hosted by the National Economic and Social Development Board,said the economy needs to see consistent annual growth rates of about 4% to 6%over the next few years to ensure the government can repay its debts.
The Thai economy contracted by 4.9%year-on-year in the second quarter, compared with a 7.1% year-on-year decline in the first quarter. For the first half, the Thai economy shrank by 6% compared with the same period last year.
But the economy posted 2.3% growth from April to June, compared with a 1.8% contraction quarter-on-quarter for the first three months and a 5.9% decline in the fourth quarter of 2008.
The NESDB estimates the Thai economy will this year contract by 3% to 3.5% compared with 2008.
The Finance Ministry currently projects annual economic growth of 2.5%for 2010, rising to 4.5% to 5% in 2012 thanks to added infrastructure investments under the "Thailand: Investing from Strength to Strength" programme.The Public Debt Management Office, a unit of the ministry, expects public debt to peak at 57% of GDP in 2013 before falling steadily through the rest of the decade, with the annual budget returning to a balanced position by 2015.
But Dr Thanong said the government has yet to come up with a clear plan on how to repay debts over the period when the world economy might not recover as expected.
"Economists have different perspectives over the world's economy, with some predicting the global economy has bottomed out and started recovering while many argue the economy remains fragile," he said."In my personal view,the real economic recovery relies mainly on private investment and public consumption, and from what we've seen the two indicators have yet to recover."
The government's previous fiscal stimulus package mainly focused on stimulating short-term spending, not on supporting the real sector. The second spending plan would go mainly to infrastructure investment, he said.
The second stimulus package was unlikely to be disbursed within three years as planned, due to red tape and complicated investment regulations, he said.
He said the government should help the real sector reduce costs, increase competitiveness and facilitate investment, as well as help restore tourism,to boost the economy in the short term.
The government is also being urged to set up an independent body, the financial services authority, to control the financial-service industry and manage financial liquidity for local industries.
GOOD...I PRAISE DOUBTFUL...I RAISE: IT'S HUGE, BUT DO MANY KNOW HOW THIS NEW BUDGET WILL BE SPENT?
I CAME ACROSS a piece of news saying that the permanent secretary of Finance had explained to the National Economic and Social Development Board's (NESDB) advisory council that, in the coming year, about Bt1.06 trillion under the 'Thai Khemkhaeng' [Invest for Strength] budget would be invested in various areas that would benefit the Thai people nationwide.
He clearly indicated the implementation of this budget would result in: 1) an increase in arable land with proper irrigation by one million rai; 2) a reduction in logistics costs from 19-20 per cent to 16 per cent; 3) all public roads paved with asphalt; 4) the improvement of 2,900 substandard schools to the required standard and the reduced ratio of students to computers from 38:1 to 20:1; and 5) many more hospital beds for Thai people across the nation.
I found this was the most meaningful way to provide information about the Thai Khemkhaeng budget as it pointed to the concrete benefits of how Thai people would gain from this budget, which can be considered a measurable target.
From this good outset, I would request the ministry of Finance, be it by the minister or the permanent secretary, to provide additional details for clearer pictures which would make the public perceive the good intentions of this government.
At the same time, it would help create a proper method of informing the public on what can be expected from the government budget in a measurable form, easily followed by the general public and members of parliament (MPs).
Additional information I suggested should be provided includes: 1) where the additional one million rai with proper irrigation would be - exactly which districts or provinces, so people and MPs of these constituencies can follow up what is intended for them; 2) the reduction of logistics costs from 19-20 per cent to 16 per cent was quite difficult to comprehend and can easily be manipulated. Why not provide easier targets such as the length of dual track railroads to be constructed, facilities for waterway transportation and any other logistic projects that can be identified? 3) the whereabouts and the length of roads to be paved by asphalt, allowing people in each locality and their MPs to keep track; 4) the lifting of substandard schools to a desirable standard is quite subjective. It would be easier to understand if details were provided like the number of classrooms to be built, teaching equipment to be provided, and additional budgets for certain improvement work. The student to computer ratio is an example of a good target; 5) the number of beds to be increased should be announced as well as the number of buildings and medical equipment to be provided out of this budget.
This information is normally available in the process of budget preparation. The announcement of these details would assure the public that this government is doing things in a transparent manner. People and their MPs can then give a hand in monitoring the construction and the procurement of various items announced in the budget for their localities.
Among the five targets indicated by the permanent secretary of Finance, I believe : the increase of additional land with proper irrigation would likely be achieved, the asphalt pavement of all public roads could possibly be completed, the increase in hospital beds as planned would likely be successful, and the construction of a dual track railroad and other logistic projects would also be implemented as planned.
EDUCATION THE WEAK POINT
The very target I doubt as achievable is the uplift of about 2,900 substandard schools to standard ones.
The improvement of a school does not depend only upon the addition of buildings, classrooms, teaching equipment, and other physical facilities.
It also depends on the improvement of teaching talent and the textbooks used for each subject.
Among a large number of teachers countrywide, there are normally gaps in teaching talent.
Under the existing administrative system of the minister of Education, only teachers with higher ability are selected to teach in schools in Bangkok and urban areas while schools in remote areas are left with those of lower talent.
Such a gap in teaching talent between schools in big cities and those in remote areas is quite worrisome.
The Thai Khemkhaeng budget would provide more budgets for school buildings, classrooms, improvement of libraries, purchase of more computers and other needed educational equipment.
However, I have never heard of a project to effectively uplift the talent of school teachers in remote areas.
The normally offered training program to improve teaching skills does help, but it is not enough to close such a big gap among teaching talent. Some gurus who follow the movement in the ministry of Education told me the administration system measuring teachers' performance, the reward system, and the promotion system, including job rotation for teachers, have changed a lot from the good old days and gradually led to the widening talent gap between teachers in urban areas and remote areas. This may partly be true.
Those who know well the cause of this talent gap are the government officials now in the driving seat in the ministry of Education.
I would be grateful if the Minister of Education would take a lead in working with high ranking officials in the ministry to find proper solutions for narrowing the talent gap rapidly, as the situation now is almost beyond rescue.
Beside the teaching talent, another factor that affects the education standard is the textbook used for each subject.
Up until 1999, every school used the same principle textbook for each core subject as determined by the Ministry of Education. There was no difference between schools on this issue of textbook.
The 1999 Education Act introduced the free choice system for textbooks, under which teachers in each school area are allowed to choose textbooks and extract lessons from various books produced and published by various commercial firms.
However, as teachers' talent varies, those with high ability in Bangkok and urban area schools are able to choose the right textbooks and extract proper lessons from various textbooks to produce additional reading material for students. Teachers with limited talent in remote areas cannot do the same.
Worse is the fact that in various remote areas, teachers are not the ones who choose the textbooks.
Some schools still have to depend on the budget of the local administrative bodies and, in many cases, it is the administrator of such local bodies who selects the textbooks.
Many times, textbooks are chosen by the price criteria or even worse by the special relation with the selling companies.
As a consequence, many schools in remote areas are now using textbooks of inferior quality.
No one has ever seriously attempted to solve this problem. That is the main reason why I do not believe that an uplift of standard among the 2,900 substandard schools countrywide can be achieved.
Until next Monday.
He clearly indicated the implementation of this budget would result in: 1) an increase in arable land with proper irrigation by one million rai; 2) a reduction in logistics costs from 19-20 per cent to 16 per cent; 3) all public roads paved with asphalt; 4) the improvement of 2,900 substandard schools to the required standard and the reduced ratio of students to computers from 38:1 to 20:1; and 5) many more hospital beds for Thai people across the nation.
I found this was the most meaningful way to provide information about the Thai Khemkhaeng budget as it pointed to the concrete benefits of how Thai people would gain from this budget, which can be considered a measurable target.
From this good outset, I would request the ministry of Finance, be it by the minister or the permanent secretary, to provide additional details for clearer pictures which would make the public perceive the good intentions of this government.
At the same time, it would help create a proper method of informing the public on what can be expected from the government budget in a measurable form, easily followed by the general public and members of parliament (MPs).
Additional information I suggested should be provided includes: 1) where the additional one million rai with proper irrigation would be - exactly which districts or provinces, so people and MPs of these constituencies can follow up what is intended for them; 2) the reduction of logistics costs from 19-20 per cent to 16 per cent was quite difficult to comprehend and can easily be manipulated. Why not provide easier targets such as the length of dual track railroads to be constructed, facilities for waterway transportation and any other logistic projects that can be identified? 3) the whereabouts and the length of roads to be paved by asphalt, allowing people in each locality and their MPs to keep track; 4) the lifting of substandard schools to a desirable standard is quite subjective. It would be easier to understand if details were provided like the number of classrooms to be built, teaching equipment to be provided, and additional budgets for certain improvement work. The student to computer ratio is an example of a good target; 5) the number of beds to be increased should be announced as well as the number of buildings and medical equipment to be provided out of this budget.
This information is normally available in the process of budget preparation. The announcement of these details would assure the public that this government is doing things in a transparent manner. People and their MPs can then give a hand in monitoring the construction and the procurement of various items announced in the budget for their localities.
Among the five targets indicated by the permanent secretary of Finance, I believe : the increase of additional land with proper irrigation would likely be achieved, the asphalt pavement of all public roads could possibly be completed, the increase in hospital beds as planned would likely be successful, and the construction of a dual track railroad and other logistic projects would also be implemented as planned.
EDUCATION THE WEAK POINT
The very target I doubt as achievable is the uplift of about 2,900 substandard schools to standard ones.
The improvement of a school does not depend only upon the addition of buildings, classrooms, teaching equipment, and other physical facilities.
It also depends on the improvement of teaching talent and the textbooks used for each subject.
Among a large number of teachers countrywide, there are normally gaps in teaching talent.
Under the existing administrative system of the minister of Education, only teachers with higher ability are selected to teach in schools in Bangkok and urban areas while schools in remote areas are left with those of lower talent.
Such a gap in teaching talent between schools in big cities and those in remote areas is quite worrisome.
The Thai Khemkhaeng budget would provide more budgets for school buildings, classrooms, improvement of libraries, purchase of more computers and other needed educational equipment.
However, I have never heard of a project to effectively uplift the talent of school teachers in remote areas.
The normally offered training program to improve teaching skills does help, but it is not enough to close such a big gap among teaching talent. Some gurus who follow the movement in the ministry of Education told me the administration system measuring teachers' performance, the reward system, and the promotion system, including job rotation for teachers, have changed a lot from the good old days and gradually led to the widening talent gap between teachers in urban areas and remote areas. This may partly be true.
Those who know well the cause of this talent gap are the government officials now in the driving seat in the ministry of Education.
I would be grateful if the Minister of Education would take a lead in working with high ranking officials in the ministry to find proper solutions for narrowing the talent gap rapidly, as the situation now is almost beyond rescue.
Beside the teaching talent, another factor that affects the education standard is the textbook used for each subject.
Up until 1999, every school used the same principle textbook for each core subject as determined by the Ministry of Education. There was no difference between schools on this issue of textbook.
The 1999 Education Act introduced the free choice system for textbooks, under which teachers in each school area are allowed to choose textbooks and extract lessons from various books produced and published by various commercial firms.
However, as teachers' talent varies, those with high ability in Bangkok and urban area schools are able to choose the right textbooks and extract proper lessons from various textbooks to produce additional reading material for students. Teachers with limited talent in remote areas cannot do the same.
Worse is the fact that in various remote areas, teachers are not the ones who choose the textbooks.
Some schools still have to depend on the budget of the local administrative bodies and, in many cases, it is the administrator of such local bodies who selects the textbooks.
Many times, textbooks are chosen by the price criteria or even worse by the special relation with the selling companies.
As a consequence, many schools in remote areas are now using textbooks of inferior quality.
No one has ever seriously attempted to solve this problem. That is the main reason why I do not believe that an uplift of standard among the 2,900 substandard schools countrywide can be achieved.
Until next Monday.
Behind the racist rhetoric is a bleak picture for US
If only it were just about the colour of his skin. With all due respect to Jimmy Carter, the racist component of Obama-hatred has been undeniable since the summer of 2008,when Sarah Palin rallied all-white mobs to the defence of the "real America".Joe Wilson may or may not be in that camp, but, either way, that's not the news. As we watched and rewatched the South Carolina congressman's star turn, what grabbed us was the act itself.
What made the lone, piercing cry of "You lie!" shocking was that it breached a previously secure barrier. It was the first time that the violent rage surging in town-hall meetings all summer blasted into the same room as the president. Mr Wilson's televised shout was tantamount to yelling "Fire!" in a crowded theatre.When he later explained that his behaviour was "spontaneous" rather than premeditated, that was even more disturbing. It's not good for the country that a lawmaker can't control his anger at Barack Obama. It gives permission to crazy people.
The White House was right not to second Mr Carter's motion and cue another "national conversation about race".No matter how many teachable moments we have, some people won't be taught.(Though how satisfying it would have been for Mr Obama to dismiss Mr Wilson,like the boorish Kanye West, as a "jackass".) But there is a national conversation we must have right now - the one about what, in addition to race, is driving this anger and what can be done about it. We are kidding ourselves if we think it's only about bigotry, or health care, or even Mr Obama. The growing minority that feels disenfranchised by Washington can't be so easily ghettoised and dismissed.
Many of those Americans may hate Mr Obama, but they don't love the Republican establishment either. Michael Steele, who was declared persona non grata at one of the mad "tea parties" in April, was not invited to that right-wing 9/12 march on Washington last weekend.There were no public encomiums for Mr McCain or Mr Bush. No Senate leader spoke to the gathering, and perhaps only Ms Palin and Ron Paul would have been welcome from the ranks of what passes for GOP presidential timbre. If there was a real hero to this crowd, it was the protest's most prominent promoter, the radio and TV talker Glenn Beck.
Time put Mr Beck on its cover this week."Man of the Year" may not be far behind. Mr Beck is not, as many liberals assume, merely the latest incarnation of Rush Limbaugh. He is something different. That's why he is gaining on his antecedents - and gaining traction in the country's angrier precincts.
Though Mr Beck's daily Fox News show is in the sleepy slot of 5pm, his ratings are increasingly neck and neck with the prime-time tag team of Bill O'Reilly and Sean Hannity, and he has beaten them in the prized 25-to-54 demographic. It's not just because he is younger (45). This self-described "rodeo clown", who wells up with tears for dramatic effect, doesn't come across as cranky or pompous, like Mr Limbaugh and Mr O'Reilly. A fervent Mormon convert and proselytiser, he is untainted by association with the old Dobson-Robertson-Reed religious right.Unlike Mr Limbaugh, he bonds with his fallible listeners by openly and repeatedly owning up to his own mistakes, including his history of drug and alcohol abuse.Unlike Mr Hannity, he is not a Republican apparatchik .Mr Beck has notoriously defamed Mr Obama as a "racist", but the race card is just one in his deck. His ideology, if it can be called that, mixes idolatrous Ayn Rand libertarianism with bumper-sticker slogans about "freedom", self-help homilies and lunatic conspiracy theories.(He fanned internet rumours that FEMA was establishing concentration camps before tardily beating a retreat.) It's the same crazy-quilt cosmology that could be found in last weekend's Washington protest, where the marchers variously called Mr Obama a fascist, a communist and a socialist, likening him to Hitler,Stalin, Castro and Pol Pot. They may not know that some of these libels are mutually exclusive. But what they do know is that they need a scapegoat for what ails them, and there is no one handier than a liberal, all-powerful president (who just happens to be black).
Mr Beck captures this crowd's common emotional denominator - with appropriately overheated capital letters - in his best-selling book portraying himself as a latter-day Tom Paine,"Glenn Beck's Common Sense". Americans "know that SOMETHING JUST DOESN'T FEEL RIGHT", he writes,"but they don't know how to describe it or, more importantly, how to stop it". This is rightwing populism in the classic American style, as inchoate and paranoid as that hawked by Father Coughlin during the Great Depression and George Wallace in the late 1960s. Mr Wallace is most remembered for his racism, but he, like Mr Beck, also played on the class and cultural resentment of those sharing his view that there wasn't "a dime's worth of difference" between the two parties.
Now, as then, a Dixie-oriented movement like this won't remotely capture the White House. Now, unlike then, it is a catastrophe for the Republicans. The old GOP southern strategy is gone with the wind. The more the party is identified with nasty name-calling, freak-show protesters, immigrant-bashing (the proximate cause of Mr Wilson's outburst at Mr Obama) and, yes, racism, the faster it will commit demographic suicide as America becomes ever younger and more diverse. But Democrats shouldn't be cocky. Over the short term, the real economic grievances lurking beneath the extremism of the Beck brigades can do damage to both parties. A stopped clock is right twice a day. The recessionspawned anger that Mr Beck has tapped into on the right could yet find a more mainstream outlet in a populist revolt from the left and centre.
Too many Americans are impatiently waiting for results. It's hard to argue that the stimulus package reviled by big government-loathers is a success when unemployment continues to rise and most Americans feel none of the incipient "recovery" spotted by Ben Bernanke.The potential dividends to be gained at the end of the protracted health care debate also remain, for now, an abstraction to many who have lost and are continuing to lose their jobs, their savings and their homes.
Nor has Mr Obama succeeded in persuading critics on the left or right that he will do as much for those Americans who are suffering as he has for the corporations his administration and his predecessor rushed to rescue. To mark the anniversary of Lehman's fall, the president gave a speech on Wall Street last Monday again vowing reform. But everyone's back to business as usual:The Wall Street Journal reported that not a single CEO from a top bank attended. The speech sank with scant notice because there has been so little action to back it up and because its conciliatory stance was tone-deaf to the anger beyond the financial district.
That same day a United States District Court judge in New York, Jed S Rakoff,scathingly condemned the Obama Securities and Exchange Commission for letting Bank of America skate away with what Mr Rakoff called an immoral and unjust wrist tap to settle charges that it covered up US$3.6 billion paid out in bonuses when it purchased Merrill Lynch.How is this SEC a change from the Clinton-Bush SEC that ignored all the red flags on Bernie Madoff?
Mr Beck frequently strikes the pose of an apocalyptic prophet, even insisting that he predicted 9/11. This summer he also started warning of domestic terrorism in the form of a new Timothy McVeigh.On this, one fears he knows whereof he speaks.
For all our nation's unfinished business on race, racism is not Mr Obama's biggest challenge during our unfinished Great Recession.
He - and our political system - are being seriously tested by a rage that is no less real for being shouted by a demagogue from Fox and a backbencher from South Carolina.
What made the lone, piercing cry of "You lie!" shocking was that it breached a previously secure barrier. It was the first time that the violent rage surging in town-hall meetings all summer blasted into the same room as the president. Mr Wilson's televised shout was tantamount to yelling "Fire!" in a crowded theatre.When he later explained that his behaviour was "spontaneous" rather than premeditated, that was even more disturbing. It's not good for the country that a lawmaker can't control his anger at Barack Obama. It gives permission to crazy people.
The White House was right not to second Mr Carter's motion and cue another "national conversation about race".No matter how many teachable moments we have, some people won't be taught.(Though how satisfying it would have been for Mr Obama to dismiss Mr Wilson,like the boorish Kanye West, as a "jackass".) But there is a national conversation we must have right now - the one about what, in addition to race, is driving this anger and what can be done about it. We are kidding ourselves if we think it's only about bigotry, or health care, or even Mr Obama. The growing minority that feels disenfranchised by Washington can't be so easily ghettoised and dismissed.
Many of those Americans may hate Mr Obama, but they don't love the Republican establishment either. Michael Steele, who was declared persona non grata at one of the mad "tea parties" in April, was not invited to that right-wing 9/12 march on Washington last weekend.There were no public encomiums for Mr McCain or Mr Bush. No Senate leader spoke to the gathering, and perhaps only Ms Palin and Ron Paul would have been welcome from the ranks of what passes for GOP presidential timbre. If there was a real hero to this crowd, it was the protest's most prominent promoter, the radio and TV talker Glenn Beck.
Time put Mr Beck on its cover this week."Man of the Year" may not be far behind. Mr Beck is not, as many liberals assume, merely the latest incarnation of Rush Limbaugh. He is something different. That's why he is gaining on his antecedents - and gaining traction in the country's angrier precincts.
Though Mr Beck's daily Fox News show is in the sleepy slot of 5pm, his ratings are increasingly neck and neck with the prime-time tag team of Bill O'Reilly and Sean Hannity, and he has beaten them in the prized 25-to-54 demographic. It's not just because he is younger (45). This self-described "rodeo clown", who wells up with tears for dramatic effect, doesn't come across as cranky or pompous, like Mr Limbaugh and Mr O'Reilly. A fervent Mormon convert and proselytiser, he is untainted by association with the old Dobson-Robertson-Reed religious right.Unlike Mr Limbaugh, he bonds with his fallible listeners by openly and repeatedly owning up to his own mistakes, including his history of drug and alcohol abuse.Unlike Mr Hannity, he is not a Republican apparatchik .Mr Beck has notoriously defamed Mr Obama as a "racist", but the race card is just one in his deck. His ideology, if it can be called that, mixes idolatrous Ayn Rand libertarianism with bumper-sticker slogans about "freedom", self-help homilies and lunatic conspiracy theories.(He fanned internet rumours that FEMA was establishing concentration camps before tardily beating a retreat.) It's the same crazy-quilt cosmology that could be found in last weekend's Washington protest, where the marchers variously called Mr Obama a fascist, a communist and a socialist, likening him to Hitler,Stalin, Castro and Pol Pot. They may not know that some of these libels are mutually exclusive. But what they do know is that they need a scapegoat for what ails them, and there is no one handier than a liberal, all-powerful president (who just happens to be black).
Mr Beck captures this crowd's common emotional denominator - with appropriately overheated capital letters - in his best-selling book portraying himself as a latter-day Tom Paine,"Glenn Beck's Common Sense". Americans "know that SOMETHING JUST DOESN'T FEEL RIGHT", he writes,"but they don't know how to describe it or, more importantly, how to stop it". This is rightwing populism in the classic American style, as inchoate and paranoid as that hawked by Father Coughlin during the Great Depression and George Wallace in the late 1960s. Mr Wallace is most remembered for his racism, but he, like Mr Beck, also played on the class and cultural resentment of those sharing his view that there wasn't "a dime's worth of difference" between the two parties.
Now, as then, a Dixie-oriented movement like this won't remotely capture the White House. Now, unlike then, it is a catastrophe for the Republicans. The old GOP southern strategy is gone with the wind. The more the party is identified with nasty name-calling, freak-show protesters, immigrant-bashing (the proximate cause of Mr Wilson's outburst at Mr Obama) and, yes, racism, the faster it will commit demographic suicide as America becomes ever younger and more diverse. But Democrats shouldn't be cocky. Over the short term, the real economic grievances lurking beneath the extremism of the Beck brigades can do damage to both parties. A stopped clock is right twice a day. The recessionspawned anger that Mr Beck has tapped into on the right could yet find a more mainstream outlet in a populist revolt from the left and centre.
Too many Americans are impatiently waiting for results. It's hard to argue that the stimulus package reviled by big government-loathers is a success when unemployment continues to rise and most Americans feel none of the incipient "recovery" spotted by Ben Bernanke.The potential dividends to be gained at the end of the protracted health care debate also remain, for now, an abstraction to many who have lost and are continuing to lose their jobs, their savings and their homes.
Nor has Mr Obama succeeded in persuading critics on the left or right that he will do as much for those Americans who are suffering as he has for the corporations his administration and his predecessor rushed to rescue. To mark the anniversary of Lehman's fall, the president gave a speech on Wall Street last Monday again vowing reform. But everyone's back to business as usual:The Wall Street Journal reported that not a single CEO from a top bank attended. The speech sank with scant notice because there has been so little action to back it up and because its conciliatory stance was tone-deaf to the anger beyond the financial district.
That same day a United States District Court judge in New York, Jed S Rakoff,scathingly condemned the Obama Securities and Exchange Commission for letting Bank of America skate away with what Mr Rakoff called an immoral and unjust wrist tap to settle charges that it covered up US$3.6 billion paid out in bonuses when it purchased Merrill Lynch.How is this SEC a change from the Clinton-Bush SEC that ignored all the red flags on Bernie Madoff?
Mr Beck frequently strikes the pose of an apocalyptic prophet, even insisting that he predicted 9/11. This summer he also started warning of domestic terrorism in the form of a new Timothy McVeigh.On this, one fears he knows whereof he speaks.
For all our nation's unfinished business on race, racism is not Mr Obama's biggest challenge during our unfinished Great Recession.
He - and our political system - are being seriously tested by a rage that is no less real for being shouted by a demagogue from Fox and a backbencher from South Carolina.
China outlook rosy, central bank happy
China's central bank said on Saturday it had done a good job promoting economic growth and would keep implementing pro-growth policies as set by the country's top leadership at a meeting this week.
"We have sent timely signals for ensuring economic growth and stabilising market confidence, and we have forcefully promoted the stable and rapid growth of the national economy," the People's Bank of China said in a statement on its website (www.pbc.gov.cn).
The statement did not give details about future monetary policy moves but said it would follow guidelines from China's leadership.
The ruling Communist Party said on Friday at the end of a key political meeting that China would continue to implement an "appropriately relaxed" monetary policy as the economic recovery was still on shaky ground.
Separately, Yao Jingyuan, the National Bureau of Statistics' chief economist,said China's economy would be able to achieve a growth target of 8% this year,but the country should not rest on its laurels as problems remained.
Yao told a forum in Shanghai that the basis for China's economic recovery were still not stable, and many uncertainties existed.
Authorities have set a target of 8%gross domestic product growth this year,something most economists think is in sight since annual growth reached 7.9%in the second quarter and appears set to accelerate in year-on-year terms in the second half.
Yao said the 8% target will "be difficult but is not a problem," according to a report by the China News Service.
Figures for August showed industrial output, investment and money supply growth all accelerated, prompting many economists to say the recovery is now solid. Officials have been more circumspect, though.
Yao said the slide in China's economic performance which began in the second half of last year had already been arrested.
"But we cannot be blindly optimistic about these achievements, as the basis for China's economic recovery is still not firm, and there exist many uncertainties," he was paraphrased as saying.
As for the possible threat of resurgent inflation, Yao said that at least for this year it would not be a worry.
"We have sent timely signals for ensuring economic growth and stabilising market confidence, and we have forcefully promoted the stable and rapid growth of the national economy," the People's Bank of China said in a statement on its website (www.pbc.gov.cn).
The statement did not give details about future monetary policy moves but said it would follow guidelines from China's leadership.
The ruling Communist Party said on Friday at the end of a key political meeting that China would continue to implement an "appropriately relaxed" monetary policy as the economic recovery was still on shaky ground.
Separately, Yao Jingyuan, the National Bureau of Statistics' chief economist,said China's economy would be able to achieve a growth target of 8% this year,but the country should not rest on its laurels as problems remained.
Yao told a forum in Shanghai that the basis for China's economic recovery were still not stable, and many uncertainties existed.
Authorities have set a target of 8%gross domestic product growth this year,something most economists think is in sight since annual growth reached 7.9%in the second quarter and appears set to accelerate in year-on-year terms in the second half.
Yao said the 8% target will "be difficult but is not a problem," according to a report by the China News Service.
Figures for August showed industrial output, investment and money supply growth all accelerated, prompting many economists to say the recovery is now solid. Officials have been more circumspect, though.
Yao said the slide in China's economic performance which began in the second half of last year had already been arrested.
"But we cannot be blindly optimistic about these achievements, as the basis for China's economic recovery is still not firm, and there exist many uncertainties," he was paraphrased as saying.
As for the possible threat of resurgent inflation, Yao said that at least for this year it would not be a worry.
Officials rub up taxpayers for B300m in massages
Life in the civil service certainly is no bed of roses, what with the low pay,cumbersome bureaucracy and constant pressure to avoid stepping on the wrong toes.
But the perks can be attractive, including job security, health care and,yes, massage services.
Civil servants last year evidently were quite sore indeed. They billed taxpayers for 300 million baht worth of massage services in fiscal 2008.
Pruektichai Damrongrut, a deputy finance minister, said it was even more shocking that one-third of the expense claims were in violation of state regulations.
According to a report by the Comptroller-General's Office, improper claims include expenses for spa services by civil servants and their families,"health tours" as well as massage services ostensibly to help kidney function and other ailments.
"State regulations clearly state that one can claim expenses only for genuine medical ailments," Mr Pruektichai said sternly.
He acknowledged that the total taxpayer bill for massage services was high,particularly when considering the amounts claimed in violation of state regulations.
Mr Pruektichai said he would direct the Comptroller-General's Office to scrutinise claims more carefully. Authorities also plan to retain the Health Systems Research Institute, an agency under the Public Health Ministry, to work with provincial treasury offices to monitor spending and expense claims.
Mr Pruektichai added that authorities also needed to better communicate with civil servants the current rules and regulations, and cautioned that officials submitting improper claims would have to repay the money or even face disciplinary action.
Manas Jamveha, an adviser to the Finance Ministry and spokesman for the Comptroller-General's Office, said the office had previously sent out a notice stipulating that claims for massage services may be made only for medical reasons.
Civil servants may submit a claim of up to 250 baht per time with a limit of no more than three sessions per week.The regulation came into effect on March 16 this year.
But the perks can be attractive, including job security, health care and,yes, massage services.
Civil servants last year evidently were quite sore indeed. They billed taxpayers for 300 million baht worth of massage services in fiscal 2008.
Pruektichai Damrongrut, a deputy finance minister, said it was even more shocking that one-third of the expense claims were in violation of state regulations.
According to a report by the Comptroller-General's Office, improper claims include expenses for spa services by civil servants and their families,"health tours" as well as massage services ostensibly to help kidney function and other ailments.
"State regulations clearly state that one can claim expenses only for genuine medical ailments," Mr Pruektichai said sternly.
He acknowledged that the total taxpayer bill for massage services was high,particularly when considering the amounts claimed in violation of state regulations.
Mr Pruektichai said he would direct the Comptroller-General's Office to scrutinise claims more carefully. Authorities also plan to retain the Health Systems Research Institute, an agency under the Public Health Ministry, to work with provincial treasury offices to monitor spending and expense claims.
Mr Pruektichai added that authorities also needed to better communicate with civil servants the current rules and regulations, and cautioned that officials submitting improper claims would have to repay the money or even face disciplinary action.
Manas Jamveha, an adviser to the Finance Ministry and spokesman for the Comptroller-General's Office, said the office had previously sent out a notice stipulating that claims for massage services may be made only for medical reasons.
Civil servants may submit a claim of up to 250 baht per time with a limit of no more than three sessions per week.The regulation came into effect on March 16 this year.
DEVELOPERS ASSURED ON REVAMP
The Finance Ministry has assured land developers they will not face an unreasonably high tax burden under a planned property tax revamp.
The ministry is revamping the property-tax structure in an effort to plug legal loopholes that allow owners of some lands and buildings to escape paying taxes.
An informed source at the Finance Ministry involved in drawing up the new property-tax rules said provisions in the latest draft reflected advice from parties likely to be affected by the new measures.
One is that the ministry will offer a tax grace period, probably of two to five years, to land developers who accumulate plots for development. This land would be subjected to a tax rate of up to 0.5 percent of the land price and would double every three years if the land is left undeveloped.
Also, newly built homes awaiting buyers would be taxed at the same rate as residential units; no more than 0.1 percent per year.
Moreover, land and buildings used for many purposes - business, farming and residential, for example - would see each portion taxed accordingly, leading to payment of several tax rates by one landowner. Land used solely for farming would be taxed at no more than 0.05 per cent, the source said.
In addition, residential units worth less than Bt500,000 may be tax-exempt altogether.
Land developers have raised concerns that the revised property taxes would increase their business costs and adversely affect the property industry as a whole.
Some local governments may need to set up funds to buy land or provide loans or other financial support to those who can't afford to pay the newly required taxes, the source said. The central government is unlikely to set up such a fund, since property tax will be collected and managed by the local governments. However, this issue has not been finalised.
Finance Ministry officials expect to finalise drafting the new property tax rules by the end of this month, before submitting them to Finance Minister Korn Chatikavanij and the Cabinet, according to the source. If approved by the Cabinet, the bill will be considered by Parliament. If Parliament approves the bill, the ministry plans to enforce the new tax laws within two years.
Under the new tax rules, residence owners would pay up to 0.1 percent of the land price. Rates could vary depending on the local administration's rules. Land used for agricultural purposes would be taxed at no more than 0.05 percent. Undeveloped land would be subject to a high tax rate of 0.5 per cent, to be doubled every three years.
Also on the horizon are a 2-percent transfer fee on property changing hands; progressive rates of income tax; a 1.5-percent stamp duty; and a 3.3-percent specific business tax that are currently exempted under the government's economic stimulus package. Homebuyers and land developers have expressed fears that the tax-code revisions would add to an already-high tax burden.
The ministry is revamping the property-tax structure in an effort to plug legal loopholes that allow owners of some lands and buildings to escape paying taxes.
An informed source at the Finance Ministry involved in drawing up the new property-tax rules said provisions in the latest draft reflected advice from parties likely to be affected by the new measures.
One is that the ministry will offer a tax grace period, probably of two to five years, to land developers who accumulate plots for development. This land would be subjected to a tax rate of up to 0.5 percent of the land price and would double every three years if the land is left undeveloped.
Also, newly built homes awaiting buyers would be taxed at the same rate as residential units; no more than 0.1 percent per year.
Moreover, land and buildings used for many purposes - business, farming and residential, for example - would see each portion taxed accordingly, leading to payment of several tax rates by one landowner. Land used solely for farming would be taxed at no more than 0.05 per cent, the source said.
In addition, residential units worth less than Bt500,000 may be tax-exempt altogether.
Land developers have raised concerns that the revised property taxes would increase their business costs and adversely affect the property industry as a whole.
Some local governments may need to set up funds to buy land or provide loans or other financial support to those who can't afford to pay the newly required taxes, the source said. The central government is unlikely to set up such a fund, since property tax will be collected and managed by the local governments. However, this issue has not been finalised.
Finance Ministry officials expect to finalise drafting the new property tax rules by the end of this month, before submitting them to Finance Minister Korn Chatikavanij and the Cabinet, according to the source. If approved by the Cabinet, the bill will be considered by Parliament. If Parliament approves the bill, the ministry plans to enforce the new tax laws within two years.
Under the new tax rules, residence owners would pay up to 0.1 percent of the land price. Rates could vary depending on the local administration's rules. Land used for agricultural purposes would be taxed at no more than 0.05 percent. Undeveloped land would be subject to a high tax rate of 0.5 per cent, to be doubled every three years.
Also on the horizon are a 2-percent transfer fee on property changing hands; progressive rates of income tax; a 1.5-percent stamp duty; and a 3.3-percent specific business tax that are currently exempted under the government's economic stimulus package. Homebuyers and land developers have expressed fears that the tax-code revisions would add to an already-high tax burden.
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