VZCZCXYZ2620
RR RUEHWEB

DE RUEHBK #0670/01 0630958
ZNR UUUUU ZZH
R 030958Z MAR 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC 2038
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/USDOC WASHINGTON DC

UNCLAS BANGKOK 000670 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR 
USDOC FOR 4430/EAP/MAC/OKSA 
 
E.O. 12958:N/A 
TAGS: ECON ETRD EINV TH
 
SUBJECT:  ECONOMIC MINISTERS PUSH INVESTMENT, MEGAPROJECTS TO DRIVE 
ECONOMY 
 
REF:  BANGKOK 657 
 
¶1.  Summary:  Thailand's new economic ministers laid out their 
priorities for economic growth at a recent forum, presenting their 
plans to boost investment, consumption and exports.  The Ministers 
were attuned to foreign interests and alleviated concerns over 
capital controls and investment restrictions that had unnerved the 
business community during the previous government.  The Finance and 
Transport Ministers outlined a broad strategy of investment in 
public infrastructure in transportation and logistics that could 
total as much as 1.5 trillion baht (USD 47 billion).  Confidence in 
the abilities of the new economic team is still low, but Finance 
Minister Surapong impressed as a quick study.  End Summary. 
 
¶2.  On February 25, Prime Minister Samak opened a half-day forum 
hosted by the Bangkok Post newspaper featuring speeches from Samak's 
top economic ministers, including Minister of Commerce Mingkwan 
Sangsuwan, Minister of Finance Surapong Suebwonglee, Minister of 
Industry Suwit Khunkitti, and Minister of Transport Santi Prompat. 
PM Samak described his cabinet as the "ugly duckling" cabinet 
(referring more to their qualifications than looks), but said that 
they would transform into beautiful swans.  "My cabinet is not good 
looking, but our policies are not bad looking," he insisted.  Samak 
made a number of references to the determination of his cabinet's 
members from disparate parties to work together, a pointed reference 
to the previous government's inability to coordinate among 
Ministries. 
 
Investment, megaprojects to lead economic growth 
--------------------------------------------- --- 
 
¶3.  Finance Minister Dr. Surapong Suebwonglee gave the keynote 
speech over a gala dinner attended by the business and diplomatic 
community.  Although he provided no new major policy pronouncements, 
he pressed his theme of improving investor confidence and keeping up 
with regional competitors.  Surapong explained that of the four 
principal drivers of Thailand's economic growth, exports, public 
investment, private investment and consumption, only exports had 
performed well in recent years.  He emphasized the need for expanded 
public investment, insisting that the government could afford to 
raise its debt level to boost spending.  Surapong said that public 
debt-to-GDP ratio is at a reasonably health 38 percent (compared to 
over 80 percent ten years ago).  He suggested that the RTG could 
lift its debt/GDP ratio up to 50 percent, implying an additional 1.5 
trillion baht (USD 47 billion) would be available for infrastructure 
investment and other programs.  The RTG would focus its spending on 
reviving the Thaskin-era "megaprojects", large public infrastructure 
projects in transportation and logistics. 
 
¶4.  Surapong stressed the need to reenergize private investment by 
attending to foreign investment concerns.  He promised a quick and 
definitive decision on the 30 percent reserve requirement on capital 
instituted in late 2006 (and since lifted on March 3, see reftel). 
He also promised to keep foreign investment interests paramount 
relative to the Foreign Business Act.  The previous government had 
proposed amendments to the Act that would have further restricted 
foreign investment; Surapong said any future changes would focus on 
providing additional clarity to the rules rather than applying new 
restrictions retroactively.  Surapong noted that while the threat of 
recession was not on the horizon, Thai industries were operating at 
near full capacity and more investment was crucial to continue 
growth. 
 
¶5.  Minister of Industry Suwit Khunkitti promoted stronger private 
investment as well, but noted that Thailand had not lived up to its 
potential as a production hub.  Thailand was surrounded by important 
markets in ASEAN, India and China, he said, but had underutilized 
its position and needed better transportation routes to regional 
capitals to move its products.  Suwit promised to promote more 
investment in the heavily industrialized Eastern Seaboard, and 
discussed development of a future Southern Seaboard that could focus 
on petrochemical and chemical industries. 
 
¶6.  To boost consumption Surapong announced that he would present a 
new economic stimulus package to the Cabinet for approval on March 
¶4.  The package would focus on stimulating consumption at the 
grassroots level.  Surapong denied the stimulus would be a populist 
measure aimed at gaining more support for the current government, 
but rather explained that getting money into the hands of the poor 
was the most efficient means to quickly boost consumption. 
 
¶7.  Although exports have been the key driver of Thailand's economy 
for the last couple years, Surapong downplayed its importance, 
telling the mostly business crowd that the domestic market should be 
their most important.  He said that he was not overly concerned 
about the strength of the baht (which has appreciated in value by 20 
percent in the last two years).  Surapong said he preferred that the 
 
baht not skyrocket in value, but would not be alarmed if the 
currency rose in line with other currencies in the region. 
 
¶8.  Surapong admitted that Thailand's challenge was great, 
possessing neither the lowest labor costs in the region, nor the 
most advanced science and technology base to spur economic growth. 
He said Thailand had little room for more political instability, 
government inaction, or ill-advised legislation that would 
negatively affect investment.  Surapong, Suwit, and Commerce 
Minister Mingkwan all pointed out the economic rise of Vietnam and 
the competition for export markets that it posed. 
 
Megaprojects to drive public investment 
--------------------------------------- 
 
¶9.  Minister of Transport Santi Prompat expounded on the proposed 
megaprojects -- investments in water, logistics and transportation 
infrastructure that the RTG would use to not only boost growth but 
also invest in the country's economic future.  Santi focused 
primarily on logistics, promising to decrease logistics costs and 
increase transport capacity while reducing pollution.  Santi 
lamented Thailand's over reliance on road transport, raising costs 
in a time of spiraling oil prices.  Santi compared Thailand's high 
logistics costs of 16 percent of GDP to Japan's at half the cost, 
and promised to reduce costs to 13 percent by building capacity in 
maritime, rail and air transport.  Santi's plans for rail include 
800 more kilometers in double track rail and new high-speed 
passenger rail links that would cut transport time to Chiang Mai in 
half. 
 
¶10.  Santi also laid out plans for nine more subway and SkyTrain 
routes within Bangkok, plus a new link to Suvarnabhumi airport.  The 
new lines would include 300 kilometers of line to connect Bangkok 
with the surrounding provinces.  Santi emphasized the need to 
develop transportation into the suburbs to allow greater migration 
of people into outlying areas of Bangkok where land prices were 
lower.  Santi also linked Bangkok's notoriously abysmal traffic to 
the city's pollution problems and proposed converting Bangkok's 
buses to cheaper and cleaner natural gas. 
 
¶11.  Comment:  PM Samak's "ugly duckling" Cabinet has been widely 
derided as a group of political hacks (or nominees for other pols), 
but his economic ministers did a reasonable job of laying out their 
priorities for growth.  Finance Minister Surapong, a doctor by 
training, managed to impress most of all.  Despite his almost 
complete lack of financial experience, Surapong gave a strong 
presentation without notes and showed he had a clear idea of where 
he wanted the economy to go.  An economist with Siam Commercial Bank 
told econoff, "Who cares if he's a medical doctor?  We've had plenty 
of economic PhDs and got nowhere.  People want someone who can get 
things done, and this guy is in that mold." 
JOHN