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As much as I can appreciate what he's saying, it's sort of pointless, no?

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SHADOWBOXING The 99 days in which not much happened BKK Post, 3 June 08 KORN CHATIKAVANIJ I spent many minutes in front of my laptop trying to decide which issue I should highlight this week. The past few days have seen the shadow cabinet address so many important issues that it would be a shame to omit a single one. We summarised our thoughts as to what needs to be done to move the country forward in a presentation Khun Abhisit made to the press on Thursday, based on the theme of 99 days of rule under the current government. I think most people would agree that the first 99 days in power have been a big disappointment, even given the relatively low expectations people had for the current cabinet. As the government's shadow, we had, during the past 99 days, pressed the government into action on three main issues; the economy, through a 50-billion-baht supplementary budget; the food crisis, through the call for the government to monetise the windfall profit from the 2.1 million tonnes of rice stock that was inadvertently accumulated through the previous price guarantee schemes. Finally, the submission of a bill designed to help create a local vehicle through which the problems in the deep South could be better managed. The government ignored all three - despite direct sit-down talks between shadow ministers and their government counterparts in all three cases. As a result, Khun Samak was left wondering why education was still far from free - something we told him could have been solved had the government agreed to the 17.5-billion-baht supplementary budget allocation as part of the package proposed by us. In addition, the supplementary income proposed in that same package for the elderly would by now be directly helping those in greatest need at a time when the cost of living continues to accelerate. As for the South, the government chose not to consider our proposed law, even though Interior Minister Chalerm Yubamrung made a big show of acknowledging in parliament that it was a sensible proposition - mere lip service to a problem that is not going to just go away. The rice problem was addressed vigorously by the shadow cabinet and, other than repeated calls by us to the Commerce Minister that he should not try to interfere with a market he clearly did not understand, we suggested that the government sell the 2.1 million tonnes of stock so that the proceeds (estimated profits of 25 billion baht) could be used to ease the cost of raw materials needed by farmers - or indeed any other group in distress. This was ignored - and so far only 1,500 tonnes, a fraction of the stock, has been bagged and sold to a few lucky buyers. Meanwhile, farmers now are paying more than 20,000 baht a tonne for fertiliser, with every prospect that the selling price for their rice crop come harvest time at the end of the year will lower than it is today. So many opportunities - all frustratingly wasted. Yet the worst is probably still to come. The government, and especially the finance minister, seem not to have grasped that the world has moved on from the deflationary environment before the election to a much more harsh inflationary one. Put simply, before we were complaining that in terms of wealth we were standing still - now we are getting poorer by the day, because our income is not keeping pace with cost of living. In this environment, the government should be less concerned with growth than it is with stability, because, without the latter, consumers will not spend and firms won't invest. The government continues to run around trying to put out minor fires (increasingly determined by which "mob" arrives at the minister's front door) without taking time to understand and address the root causes of each problem. Take the response to the oil crisis - the kind-looking and good-humoured Minister of Energy Poonpirom Liptapanlop appears to have worked harder than most to deliver some relief to varied interest groups, but she is severely constrained by the structure of the industry, especially by the role of PTT. Everytime there is an energy crisis, anti-PTT feelings rise. This time around, a small concession valued at about two billion baht over six months was eked out of refineries owned by PTT. In the meantime, there was no attempt to address the root cause of why refinery margins for diesel have reportedly increased to more than US$40 per barrel - from an average of $15 per barrel in 2006 - while refinery costs remain relatively fixed at below $4 per barrel. I was once again having to give my opinions to the press regarding the Democrat position on the status of PTT and, again, I repeated that in my opinion we support the listed status of PTT. However, and this is also a long-standing opinion, many of the problems we face today are caused by the poor legal and corporate structure that all in all leads to the inevitable compromise of good governance. PTT is owned 52% by the government so the public has every right to demand that the company puts the interests of the public first. However, it is also listed on the stock exchange where the stated fiduciary duties of firms are to look after shareholders interests. Moreover, the PTT has for years enjoyed the best of three worlds - monopoly status, profit maximising mandate of a listed firm and the exemption from competition law as a State Enterprise. No wonder then that the general public as well as customers of PTT are intensely resentful of the firm. Worst still is the poor manner in which PTT was privatised. It has given privatisation a bad name in Thailand. The whole process went awry from the start because of the bad tradition in Thailand of the process of each privatisation being managed by the privatised SOE itself rather than the government. (hey kiddies, only 2% of Khun Thai are invested in the stock market) Urged on by investment bankers who want the privatised entity to be potentially as profitable as possible, it is no wonder that everything is done to serve the interest of the firms, rather than to ensure the protection of broad public interest. In the long term this is a net negative for the development of capital markets as governments are forced to intervene for small concessions from these firms, each time chipping away at the level of confidence of investors. Politicians are apt to ignore capital markets in favour of the broad public and, while the logic of this is inescapable, we do also understand that one of the reasons why Thai corporates are uncompetitive is that the cost of access to capital is too high. The recent announcement by a leading Thai bank to increase interest rates - naturally a bigger increase for loans than deposits - means that gross bank margins of almost 5% are much higher than our peer group benchmark. Meanwhile, higher political interference risk premiums means that the PE ratio (meaning share price) is one of the lowest in the region. So, instead of running around putting on a public show while essentially achieving nothing, the ministers need to look hard at their portfolios and ask the harder question of what it is that needs to be structurally altered in order for Thailand to become more efficient, with consumers as beneficiaries through lower prices and higher quality. I'll expand on this in my next installment. Korn Chatikavanij is shadow finance minister. He can be reached at [email protected]. *** I't readily apparent that Khun Korn has to much "common sense" to ever be appointed a Minister in Thailand's Gov.