Prem’s economic model

16 08 2014

As PPT has pointed out more than once, the implicit political model for the current military dictatorship draws on the periods when General Sarit Thanarat was dictator and then a period when General Prem Tinsulanonda was unelected prime minister and palace favorite. The economic model for the junta looks increasingly like the Prem model.

The Wall Street Journal recently took this theme up and points to links to Prem’s economic model and approach.

In the 1980s, Thailand’s military-backed government oversaw a growth miracle, spurred by the development of heavy industry and Japanese investment. The generals who seized power in a military coup in May are staking their legitimacy on a similar renaissance—but they face a more complex economic backdrop.

Since the coup, the junta has made economic matters its priority. It has paid almost $3 billion in [politically] delayed subsidies to farmers. The generals have cleared around a third of a $22 billion backlog in investment projects. And they have announced plans to spend $75 billion over eight years to improve transport infrastructure, linking Thailand with China.

Their goal is to arrest a slump that has made Thailand one of Asia’s worst-performing economies this year.

In this, the WSJ states that the “model” adopted by the military dictatorship is from “the government of Prem Tinsulanonda, a former army commander who led Thailand as prime minister in the 1980s, backed by a cohort of technocrats. Gen. Prem, who at 93 years old still wields clout in the military, leveraged Japanese government loans to build roads, rail and industrial parks along Thailand’s eastern seaboard.

As one economist explains it, the “aim is to get back to the good old days of 1980 to 1988, when technocrats ran the country. There’s a belief, there’ll be government investment-led growth…”.

The same economist states that Thailand is so much changed since Prem’s era, that such a state-led growth model is “not as compelling as in the past…”. The WSJ points to Thailand’s problems: “Thailand lost low-end production” but has very limited investment “in education, research and infrastructure, stopping the country from moving into higher-end parts of the global electronics supply chain;” exports “have stagnated over the past three years”; “China is starting to eat away at Thailand’s market share in electronics;” infrastructure spending has been modest; there is weak domestic demand; and investment has stagnated:

Thailand’s economy, meanwhile, contracted 0.6% on year in the first quarter and is forecast to have slowed further between April and June, which would mark a technical recession. (Official data is due Monday.) Foreign investment applications, by number of projects, slumped by around a third on year during the first five months, and 10% by value. Applications by Japanese companies, the largest investors in Thailand, fell the most.

Can decades old models make a difference? It is doubtful. Unmentioned in the article, however, is another significant factor: the titans of Thailand’s domestic capitalist class have been more interested in crushing the lower classes than in developing an economy that is more robust. Their fetish for maintaining political and economic power has drained the economy of its growth.



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