Keynote Speech

“Towards the Enhancement of an Open Economic Partnership”

H.E. Mr. Korn Chatikavanij,

Finance Minister of the Kingdom of Thailand

 
16^th Nikkei International Conference on “The Future of Asia”

21 May 2010, Tokyo

Opening Remarks

     It is a great honour for me to deliver the keynote speech at the 16^th Nikkei International Conference. My Prime Minister, H.E. Abhisit Vejjajiva sends his deepest regrets that he cannot be here with you today. I am sure I have no need to tell you why. Furthermore, if my speech this morning is a little fuzzy, it will certainly be because of the 4 hour sleep on the red-eye flight arriving just this morning, as well as the fact that myself and few other Bangkokians have had much sleep in recent days.

Ladies and Gentlemen,

     As the first decade of the 21^st century draws to a close, it is more urgent than ever to build a stronger and more resilient Asia as a significant driving force of the world economy. The Nikkei International Conference, as a gathering of Asia’s most distinguished political and business leaders, can be a vital catalyst for this goal, as it has been highly successful in promoting discussions on new ideas and current thinking concerning our shared future and prospects for deeper cooperation in Asia.

Political Developments in Thailand

     We are asked today to talk about the future of Asia, but back home my Prime Minister, as well as over 60 million other Thai’s are addressing the very immediate issue of the Future of Thailand.  I believe what has happened in Thailand provides critical lessons for the rest of developing Asia.  Whether I like it or not, therefore, this is the subject I need to discuss with all of you.

     My objective in coming to Japan to represent my government and the Thai people  at the Nikkei International Conference is not to come here to sugar-coat the situation back home by saying that the recent political crisis in my country is insignificant.  Nor will I downplay what had transpired by claiming that the events were not as disruptive, violent nor disturbing as was portrayed in the international media, because the events were indeed disruptive, violent and  extremely disturbing.

     Ladies and Gentlemen, this is not a “welcome back to the land of smiles, let’s go shopping and invest in Thailand” speech. No doubt there will be a time soon when I will come back to Tokyo to make that speech. But today the purpose of my visit is to explain the truth of what happened to you – our friends and partner. An honest and uncensored explanation of what happened, because as long-term political and economic partners, we at least owe you the truth.  The truth is, as of yesterday independent bodies reported that the total human toll of Thailand’s political crisis amounted to over 400 casualties and close to 80 deaths, including Mr. Hiroyuki MURAMOTO, a Japanese cameraman with the Reuters news service. 

     A little over two months ago, the court had found former Prime Minister Thaksin Shinawatra guilty of corruption and seized a portion of his assets.  What he then engineered was to rally political supporters and pay gang members to come to Bangkok for a large-scale protest. Using messages of anger and hate to enrage the crowd, the former Prime Minister video-linked to the crowd on a nightly basis and asked them to fight to bring the government down and beat a path for his triumphant return.

     Many of you, including government leaders have seen at first hand what the Red Shirts are capable of, when they violently stormed the ASEAN leaders’ summit in Pattaya last year.

     But still, in order to understand better what transpired thereafter in Bangkok for the next two months, allow me to put things into perspective ffor you in a Japanese context. Now, please imagine this…

     As the crowd swells, 30,000 people and sometimes more,  many armed, sets up camp in the middle of Ginza Road right in front Mitsu Koshi Department Store and blocking all traffic for two months and affecting the jobs of 65,000 workers. In the meantime the crowd moves in convoys randomly blocking all traffic in Tokyo beating up displeased passersby in Roppongi, along the way they storm Parliament threatening to lynch the PM, they go to the Sori Daijin Kantei (PM’s residence) and throw excrement at the house and threaten to kill the PM.

     Then when authorities move in to disperse they fire M79 rockets and grenades at them and had snipers use laser guidance to pick off officers. Separately they use C4 to bomb power lines to cut off electricity into Tokyo. They demand the PM to dissolve parliament straightaway. All of this took place, not in Tokyo, of course, but in Bangkok. 

So, coming back to Thailand…

     To minimize further losses on both sides, Prime Minister Abhisit Vejjajiva offers an olive branch by agreeing to dissolve parliament more than one year before his term officially ends, and agrees to endeavor on a comprehensive path of national reconciliation and reform to do away with injustices in the economic and political structures. As part of the process, the government also agrees to improve social welfare, education and healthcare for the masses. 

     The act of reconciliation splits the protestors in two, the doves agreed but the hawks under the supervision of former Prime Minister Thaksin Shinawatra kept shifting the terms of negotiation, making settlement difficult, if not impossible. 

     After two weeks of stalling and when it was assessed by all sides that the protestors were unwilling or incapable of coming to the negotiation table, coupled with a thoughtless move by the red shirts to storm a public hospital and threats of rape against hospital staff, public sentiments overwhelmingly turns against the protestors and the government moved to secure the streets, causing the leadership of the protestors to surrender.

     It was a different story however, for hundreds of hardcore armed protestors who refused to believe that the ride had ended. Armed with everything from home made Molotov cocktail bombs to military grenade launchers they began to senselessly loot and burn Bangkok one building at a time – 36 buildings in all, ranging from banks, shopping malls to government offices. Sites which includes: 

     -      Central World Plaza, formerly known as the World Trade Center, the second largest shopping complex in Southeast Asia, an equivalent to Tokyo’s Mitsu Koshi

     -      CH3 building, One of Thailand’s biggest TV networks, equivalent to Tokyo’s NHK in Shibuya

     -      Nine branches of Bangkok Bank, equivalent to Japan’s Bank of Tokyo Mitsubishi UFJ

So what if any lesson, can we derive from this very very expensive experience?

     The trick of telling a big lie successfully is to attach it to a big truth. The Big Lie of the leaders and of ex-Prime Minister Thaksin was that this fight was about Democracy and Income Inequality.  Not once did the Red shirts offer any solutions or suggestions as to how they would address these issues. The Opposition party in parliament who openly supports the red shirts meanwhile boycotted parliamentary activities in order to allow the continuation of the street protests, thus crucially and cynically giving up the chances of a democratic and parliamentary solution to the conflict.  Having said that, by attaching a Big Truth to the lie, they were able to build on a critical base of moral support. That Big Truth is that in Thailand there remains poverty and there remains income inequality. Is it worse than other developing economies? I doubt it, but nevertheless it is a problem.

       In fact, we have made great progress in reducing those below the poverty line from 45% of the population 25 years ago to just under 9% today. However, in that time the top 20% earners earned 12.8 times the bottom 20% 25 years ago and 12.7 times today. Effectively no change at all.

        What has happened at the bottom end is interesting. The agricultural work force has declined since the last crisis in 1997 from 45% of the working population to 39% - but still a large total number of 15 million people.

       But the working population in the unskilled labour sector has risen from 24% to 29%, essentially this means that millions of rural poor have now become urban poor.   

        I believe this trend is true in much of Asia and I believe it is a social as well as an economic challenge. In short, in Thailand at least, being a rural poor is absolutely and definitely relatively better than being an urban poor. Quality of life is better and there is no one much richer  to compare yourself to.

        The main challenge to the developing economies of Asia is, I believe to address this task. Recent political events in Thailand has proved that you ignore this issue at your own peril. How then to address this problem? In my opinion this will involve:

1. Improvement of the budget process. This means making the government more accountable to the needs of the people, not determined, as they still are, largely by civil servants and political interests.
2. Reformation of the tax system in Thailand, this means the improving the balance between taxation of income and taxation of wealth.
3. Strengthening the welfare system,
4. Tackling governance and corruption issues
5. Doing away with nepotism, monopolies and other anti-competitive behaviour.

        Looking at Thailand, indeed looking at several other Asian countries, it would be easy to conclude that democracy has served us poorly. Indeed, in Thailand, we now often refer to our own political system as “Demo-Crazy” to reflect our apparent fondness of demonstrations.

        But in asking the question of the future of Asia and reflecting on current events, one is reminded that political and social developments is just as important as economic development. Or, perhaps more precisely, economic developments must be consistent with democratic principles of equality and fairness. 

       Perhaps that is why many successful Asian economies can sustain their success even without full western-style democracies. Essentially, they enabled their citizens to enjoy their fair share of economic opportunities and resources, if not necessarily equal share of political power.      

       If there is a lesson for Asia on this issue therefore, and at the risk of being too simplistic, the lesson might be that open, competitive and relatively equal access to resources and opportunities is more important than the need to follow strict western models of democracy. 

       But then another important lesson from Asia also is that we are a diverse continent and with a diverse culture. This means what works for one isn’t necessarily best for another.      

       Thailand is committed to making our democracy work. We believe that building on giving equal rights to all of our citizens is essential to sustainable economic development in the long term.  Democracy can be hard work, and can be even painful at times. The key is not that political crisis doesn’t occur, the key is that when it does, how does society deal with it.  The challenge over the past two months for Thailand has been: how does a democratic government deal with an armed insurgency and rebellion that so successfully uses innocent citizens as a human shield? 

       I will not give ourselves high marks in terms of implementation, but I would give our government the highest marks for intent.  And that intent has been to ensure that we give a negotiated outcome that causes the least damage to society the chance it deserves, even at the expense of strictly exercising the right to uphold the rule of law. 

      Indeed, we believe the five point plan in the Prime Minister’s road-map will help ensure that our society can work together under a new social contract; a contract essentially that will allow our citizens to be able to agree to disagree.

       Of course, in truth, we had actually been making great progress. Our GDP grew for four consecutive quarters, through the worst of the economic crisis. Indeed, Q1 GDP will show double digit YoY improvements. And amidst this growth, the foundations for a more equitable economy was laid. The government was concerned that agriculture, an essentially risky enterprise given the unpredictability of the weather and disease, needs to provide more of a return and thus we introduced an income guarantee scheme that provides over four million households with an improved quality of life. We are using our improved government finances to invest in irrigation and the provision of basic infrastructure for our farmers. Those and other policies are intended to ensure that when our economy shows high rates of growth, we can be confident that all our citizens are enjoying the benefits. 

       But despite our domestic political problems and economic priorities, Thailand still endeavours to maintain its role and commitment to ASEAN. For we believe that only by working together can the individual countries of ASEAN fulfill their individual potential.. 

ASEAN Centrality 

     In 1997, ASEAN leaders gathered to pledge their determination and commitment to bring about the ASEAN Vision 2020, envisaged as a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies. 

     Today, we are fast approaching that goal.  ASEAN is moving towards an ASEAN Community in 2015, which includes the establishment of the ASEAN Economic Community as a single market and production base.  We already have Free Trade Agreements with Japan, China, South Korea, India, Australia and New Zealand.  I believe that the next logical step is to implement a region-wide FTA, and the ideas of establishing an East Asia Free Trade Area (EAFTA) under the ASEAN+3 framework and a Comprehensive Economic Partnership in East Asia (CEPEA) under the EAS are being explored in parallel. 

     ASEAN is also determined to enhance regional financial stability through such regional initiatives as the Chiang Mai Initiative Multilateralisation (CMIM), the Asian Bond Markets Initiative (ABMI) and the Credit Guarantee Investment Facility (CGIF).  This will help deepen financial integration and enhance intra-regional trade and investment.  We also have extensive cooperation with our dialogue partners in various social and economic areas that have reinforced our capability to tackle issues of common interest. 

     Therefore, any efforts toward East Asian integration must have ASEAN at its heart.  In this regard, Thailand appreciates Japan’s continued support for the community-building process in ASEAN and the central role of ASEAN in regional integration. 

     I therefore consider Prime Minister Hatoyama’s initiative on an East Asian community (EAc) to be a thought-provoking proposal, and I applaud his intention to forge partnership to address common challenges in such areas as environment and climate change, natural disasters and infectious diseases.

1.  In my view, the East Asian community to be a long-term goal that can be achieved through an evolutionary process based on the principle of forward-looking engagement and open regionalism.  Thailand is therefore pleased to see that the United States and Russia have indicated their intention to engage more with Asia.  I believe that closer cooperation with such global major players will further contribute to a stronger and more prosperous Asia.

What’s Next?

     As we plan for the future, under my Government Thailand will continue to pursue open economic partnerships to achieve balanced, sustainable growth and social stability.  This people-centred approach has always been the cornerstone of our development policy, and has been successful in contributing significantly to the improvement in the livelihood of the Thai people. 

     In the short term, we will continue to pay close attention to the effects of the economic and social problems caused by the global financial crisis of the past two years. 

     In retrospect, at the beginning of 2009, a long recession had been predicted for Thailand.  Until the protests began and even now, our economy has a completely different outlook.  Economic growth in the fourth quarter of 2009 grew by 5.8%, marking the third consecutive positive quarter-on-quarter growth and the first expansion since the beginning of the year.  I already mentioned that we expect formal Q1 growth numbers in the double-digits. 

     In spite of our political problems, I foresee positive growth for 2010 as a whole. More importantly, our overall financial standing is sound. We have consistent current account surplus, record foreign exchange reserves and good fiscal space. We can thus be confident that with a return to political stability, and even to a degree, in spite of some instability, prospects for Thailand remain sound. 

Conclusions

     In closing, I wish to reiterate that we have within our grasp the seeds of a new dawn for Asia.  Increasingly, the eyes of the world are upon us and the developing and developed economies that the make up the East Asia region.  We have the opportunity to strive towards greater integration and regional prosperity, if only we can join hands to move in concert towards this goal.   

     Thailand has as yet not come close to fulfilling its potential. I do not underestimate the challenge that we must face or underestimate the responsibility to our Asian partners to put our house in order. 

     The Thai people appreciate all of your support and good wishes. We are keen to remain a key member of the Asian Century and to making our full contribution in making our dream of the Asian Century come true. 

     Together, with ASEAN and its dialogue partners at its core, I believe that we can make the 21^st century truly an “Asian Century.”

Thank you very much.