VZCZCXRO4450
OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHBK #3747/01 3590956
ZNR UUUUU ZZH
O 240956Z DEC 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5501
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 6648
RUEHBY/AMEMBASSY CANBERRA IMMEDIATE 9312
RUEHLO/AMEMBASSY LONDON IMMEDIATE 1838
RUEHUL/AMEMBASSY SEOUL IMMEDIATE 5171
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 1279
RUEHCHI/AMCONSUL CHIANG MAI IMMEDIATE 6010
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHC/DEPT OF LABOR WASHDC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC IMMEDIATE

UNCLAS SECTION 01 OF 02 BANGKOK 003747 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MTS, EAP/RSP, EEB 
STATE PASS TO USTR (WEISEL/BISBEE) 
TREASURY FOR OASIA 
COMMERCE FOR EAP/MAC/OKSA 
SINGAPORE FOR FINATT BAKER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB ETRD PGOV TH
SUBJECT: NEW FINANCE MINISTER TELLS AMBASSADOR WE MUST 
FIGHT PROTECTIONISM IN A "NEW WORLD" 
 
REF: A. BANGKOK 3746 (NEW ECONOMIC TEAM) 
     ¶B. BANGKOK 3712 (NEW THAI CABINET APPOINTED) 
     ¶C. BANGKOK 3648 (ABHISIT ELECTED) 
 
BANGKOK 00003747  001.2 OF 002 
 
 
¶1. (SBU) Summary: New Finance Minister Korn told the 
Ambassador in a courtesy call December 24 that he hopes both 
the U.S. and Thailand will avoid protectionism, which would 
erode the reservoir of goodwill that the incoming U.S. 
administration now enjoys internationally. Thailand avoided 
fallout from the collapse of the financial industry, Korn 
said, but is reeling from the worldwide recession in the real 
economy, where even Toyota is a risk.  "It is a new world." 
Korn told the Ambassador that the Prime Minister will head a 
new Economic Cabinet that will provide "a guiding hand" to 
ministries lacking expertise in their leadership and 
coordinate all economic policy.  Korn says he will consult 
closely with the private sector, including foreign companies, 
in policy formulation. The Ambassador raised several items of 
concern to U.S. companies, including labor unrest at the Ford 
factory. Korn said he would raise the issue with the Prime 
Minister later the same day.  End Summary. 
 
¶2. (SBU) Comment: Finance Minister Korn is an impressive 
figure -- sharp on the range of economic issues and 
well-disposed toward the U.S.  In contrast to criticisms 
levied against other members of Prime Minister Abhisit's new 
economic team, Korn appears very much capable and clearly 
eager to get down to the task at hand -- softening the 
effects of the global economic downturn on Thailand.  We look 
forward to working closely with him.  End Comment. 
 
¶2. (SBU) In response to the Ambassador's query whether the 
new government was feeling pressure from domestic interests 
to consider protectionist measures, newly appointed Finance 
Minister Korn  Chatikavanij responded no.  He said that he 
had met earlier in the day to hear the concerns of a large 
group of Thai business people and did not hear any appeals 
for protectionism.  There is a common belief that 
liberalization of the Thai market tends to benefit China, he 
noted, but, "our real concern is whether protectionism will 
rise in the U.S."  Korn said that President-elect Obama 
enjoys a huge reservoir of goodwill internationally, but a 
shift toward protectionism in the U.S. would change that. 
Korn said he hopes that both sides will retain liberal 
attitudes toward economics and trade. 
 
¶3. (SBU) The Ambassador asked Korn whether Thailand was 
facing the possibility of deflation as part of the economic 
crisis.  The new Finance Minister said that, fortunately, 
Thailand had no asset price bubble burst and had avoided 
serious fallout from the financial industry meltdown.  He 
observed that many of the problems now facing the U.S. were 
experienced by Thailand during the 1997 financial crisis. 
However, the downturn in the real economy is a serious 
challenge.  "Suddenly even Toyota and Honda are risks.  It's 
a new world." 
 
¶4. (SBU) Korn told the Ambassador that his government can 
only be successful dealing with the economic crisis if it 
works closely with the private sector, "both foreign and Thai 
-- that's just the way it is." He said that he and his staff 
expect to spend a lot of time with businessmen to get their 
views on proposed policies before they are enacted.  The 
Ambassador suggested that the "Meet the Minister" program, 
which lapsed in 2006, be revitalized, so that American 
business people can have the chance to provide input and 
build confidence in the Thai investment climate. Korn 
responded, "We should do that." 
 
¶5. (SBU) Korn noted the serious economic challenges facing 
his government in the new year, as GDP growth is likely to be 
negative for the fourth quarter of 2008 and the first quarter 
 
BANGKOK 00003747  002.2 OF 002 
 
 
of 2009, and overall growth for 2009 is expected to be 
between 0 and 2 percent.  He said that his government is 
determined to re-build confidence.  He noted that the 
government worked hard to get its policy program ready for 
presentation to the Parliament in record time.  The Thai 
people will begin their first working day of the new year, he 
said, knowing exactly what their government's plan is to deal 
with the crisis. "The first three months will be critical." 
 
¶6. (SBU) Tacitly acknowledging criticism of the appointment 
of "unqualified" appointees to other economic ministries, 
Korn said that because of the large group of seasoned 
politicians who have been banned by the courts from serving 
in the government, some coalition parties have had to rely on 
outside business people to fill their allocated cabinet 
posts.  "But this could work better than the previous 
system," he argued, in which a Deputy Prime Minister would 
loosely oversee the economic ministries.  Now the Prime 
Minister himself will head an "Economic Cabinet" which will 
meet Mondays ahead of the regular Tuesday cabinet meeting and 
coordinate economic policy-making.  All decisions of the 
minister of commerce, for example, will have to first go 
through the Prime Minister who will provide "a guiding hand." 
 
¶7. (SBU) The Ambassador raised a number of U.S. business 
community concerns, including recently increased excise 
taxes, our desire for an opening of the beef market, 
compulsory licenses, and labor relations.  He noted in 
particular the puzzling difficulties that Ford is having with 
its labor force, where normal negotiations have broken down 
and workers are taking aggressive illegal actions such as 
closing the plant and neighboring public roads.  Korn said he 
had spoken with both the Ford management and the labor unions 
and had urged them to talk, noting to the labor unions the 
particular difficulties that auto companies are having 
worldwide.  Good labor relations have long been an attraction 
for foreign investors in Thailand, especially the Japanese 
car companies, which have a huge presence.  He told the 
Ambassador he would raise the issue with the Prime Minister 
when he saw him later in the day. 
 
¶8. (SBU) Korn acknowledged a number of other problems that he 
is wrestling with, including rising unemployment as 
export-oriented factories around Bangkok lay off workers, who 
then return to economically depressed rural areas in the 
Northeast.  He hopes that agricultural support programs will 
help out, but "there will be suffering."  Collapsing rubber 
and other commodity prices, and the sharp downturn in the 
tourism industry are also causing difficulties, particularly 
in the South. 
 
JOHN