VZCZCXRO2076
PP RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHBK #2691 1340845
ZNR UUUUU ZZH
P 140845Z MAY 07 ZDK
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC PRIORITY 6867
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 4215
RUEHBY/AMEMBASSY CANBERRA PRIORITY 7128
RUEHUL/AMEMBASSY SEOUL PRIORITY 3104
RUEHKO/AMEMBASSY TOKYO PRIORITY 9257
RUEHCHI/AMCONSUL CHIANG MAI PRIORITY 3553
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY

UNCLAS BANGKOK 002691 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS AND EB 
TREASURY FOR OASIA 
COMMERCE FOR EAP/MAC/OKSA 
PASS TO USTR FOR WEISEL 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV TH
SUBJECT: THAI FINANCE MINISTER STILL SEARCHING FOR THE 
"MIDDLE GROUND" 
 
REF: A. BANGKOK 1399 
 
     ¶B. BANGKOK 1669 
 
¶1. (SBU) Finance Minister Dr. Chalongphob Sussangkarn told 
the Ambassador that the Thai government is working towards 
achieving a "middle ground" in its policies after being "too 
extremely moderate" in its initial attempts to unwind former 
PM Thaksin's populist economic policies. On the other hand, 
the Minister also said that certain aspects of Thai policy 
are now in the hands of government bureaucrats who care 
mostly about centralizing control in their own hands (as 
evident in the pending Retail Act) or one-issue activists who 
have taken over health policy. 
 
¶2. (SBU) Chalongphob believes that the government is now 
finding its way along a more moderate path as Ministers, the 
National Legislative Assembly and the Council for National 
Security have learned to better coordinate their activities 
and vet legislation and policy throughout government. That 
said, the Minister defended what many believe are the 
immoderate amendments to the Foreign Business Act, saying 
they were "necessary so that loopholes are closed and our 
investment policy is clear." He acknowledged, however, that 
the retrospective nature of the proposed amendments is a 
problem but he declined to offer any possible solution other 
than to strongly imply that the law itself would likely be 
changed by a new government and that the amended law would 
inevitably have its own loopholes to be exploited. 
 
¶3. (SBU) While acknowledging that the Thai economy continues 
to grow only because of the growth of exports (up 17.7 
percent Q1 in US$ terms, but about 11.6% in baht terms), with 
continued weakness in domestic consumption and private 
investment, he expressed hope (if not confidence) that with 
increased government infrastructure spending to come in Q3, 
the economy will soon begin to turn around. He noted that on 
a recent visit to Japan, Japanese portfolio investors 
expressed keen interest in Thai equities. The Minister 
expressed confidence that increased government and private 
sector spending on infrastructure would being by September 
and this would help stimulate the economy and improve 
confidence. 
 
¶4. (SBU) When the Ambassador remarked that declining foreign 
direct investment was still a problem and Vietnam was 
attracting much more of it than Thailand, Chalongphob replied 
that it was good that the region's economies all grow, noting 
that Thailand "has 1.5 million illegal workers." He also said 
that Thailand could not hope to retain industries such as 
garments and footwear and should focus on areas such as 
automotive where Thailand enjoys a comparative advantage. 
 
¶5. (SBU) On the political front, the Minister posited that 
perhaps the idea of a referendum on an unpopular constitution 
was a clever idea concocted by the coup-makers so that they 
could simply choose an old constitution off the shelf without 
being criticized as reactionary. The current political goal, 
he said, was to "return to square one" of the political 
process,  with square one meaning the days prior to Thaksin 
becoming PM. He acknowledged that this would probably result 
in weak coalition governments. 
 
¶6. (SBU) Comment: While Chalongphob was generally upbeat over 
the medium term economic and political outlook, he seemed in 
many ways to be playing the part of government loyalist; 
reluctant to criticize a government of which he is now part. 
We think that, given his various comments about the lack of 
popularity of the mooted constitution and criticism of the 
capital controls enacted in December, Chalongphob's 
short-term outlook is probably more negative than he let on. 
His goal seems to be to prevent the current government from 
proceeding with any more bad economic policies and hoping 
that a new government will somehow reverse the damage already 
done. 
BOYCE