The Thai parliament will be dissolved next week, setting the stage for a July election that will judge whether prime minister Abhisit Vejjajiva’s government has succeeded in tackling the issues that led to violent protests last year.
Areepong Bhoocha-oom, permanent secretary at the Ministry of Finance, told Emerging Markets that the final cabinet meeting was held on Tuesday and that formal dissolution of parliament is waiting on the signature of the king, who is in hospital. Once parliament is dissolved, the election will be held in 60 days, probably in early July.
“Up to now the main issue is about the wealth of the people and inequality of income,” Areepong said. “The government is attacking this issue to narrow the gap.” He said that specific measures included reducing the influence of loan sharks so as to lower people’s debt burdens, and widening the country’s social safety net.
The new laws aim to broaden coverage of social security: currently, only 10-15 million of Thailand’s 40 million labour force are covered by unemployment benefits and retirement funds.
Areepong also highlighted the development of microfinance to increase financial inclusion, and investment in irrigation to support the farmers who were the backbone of last year’s protest movement. “A massive amount of money needs to be put in,” he said. “Thailand is already the top exporter of rice; in the future, if we do this, we can do alternative agricultural products and be much more productive.”
The question is whether these measures are enough, or in time, to convince the doubters who will go to the polls in July. “It takes time,” Areepong said. “There are definitely certain groups of people where the message has not got through enough.”
While Thailand is volatile socially, its finances have rarely looked better and it remains well-regarded by foreign investors. Its stock market was up 34.3% in the 12 months to May 3, the best in the Asian region and the best of any significant market worldwide bar Argentina.
As a food exporter Thailand was on the right side of commodity price rises, although oil price hikes have had to be insulated through a subsidizing oil fund. Also, crucially for Thailand, tourist numbers have revived. “If this peace keeps going on, this year we will register good growth,” Areepong said.
The oil fund is not, though, a sustainable measure in its current form. “At inflationary times, this kind of mechanism is helpful. But the fund will run out if this keeps going on. Hopefully by that time the Middle East will settle down and the oil price come down.” If not, a new government would have to consider oil product price increases.
Analyst attention on Thailand has focused less on the election, or Thai-Cambodia border conflict, than on the Japan tsunami. Thailand’s automotive industry is closely linked with Japan’s. Nomura analyst Tomo Kinoshita said he had worked out a simulation of the impact of a 50% reduction of automobile production by Japanese auto manufacturers in the second quarter and found that it would result in a 1.3% reduction in Thailand’s real GDP.
Areepong acknowledged that car manufacturing would be hit: he expects 1.8 million cars to be built this year, compared to a previous target of 2 million.