Commentary: Umesh Pandey
Over the past few weeks I have grown tired of reading daily speculation about how much the government’s flagship populist policy has cost the country.
Has it lost 160 billion, 260 billion, or even 700 billion baht from buying rice at inflated prices and storing it, and how much more will it lose once it sells that rice for a loss? All I know is that it was my money that was blown away, for heaven’s sake. Every month people like us work our butts off and end up with nearly a third of our salaries going to fund politicians who waste it.
Well, let’s leave personal feelings aside and look at what the minimum losses meant, in my view.
I’m willing to accept 160 billion baht as the working figure, consistent with what the government has acknowledged it has lost so far. At 30 baht to the dollar that’s $5.3 billion, a staggering sum that could well be used in more meaningful ways, especially given current global economic conditions.
Over the years in this profession, I have had good opportunities to mingle with many people and organisations. Some of these meetings have triggered many questions, and one I have often pondered is why Thailand does not have a sovereign fund.
Countries across the world see the virtue in investing some of their national wealth, from oil-rich Middle Eastern economies to the likes of China, Singapore and Malaysia.
China is a relative newcomer but it aims to be a big investor as befits its size. China Investment Corp was set up in 2007 to help manage the county’s massive reserves, with an initial nest egg of $200 billion. Despite all the volatility since then, the fund has risen to about $500 billion.
Singapore’s Temasek Holdings was a pioneer, established in 1974 with S$354 million. Today its portfolio is worth S$215 billion (5.25 trillion baht).
Malaysia’s Khazanah Nasional started in 1993 but did little until a major revamp in 2004. Since then, its assets have risen to 122 billion ringgit (1.2 trillion baht) from RM 51 billion.
Clearly, sovereign funds have great potential to help countries generate wealth for their people.
People familiar with the workings of the Bank of Thailand have told me that with Thailand’s foreign-exchange reserves hovering around $175 billion, setting up a sovereign fund is worth looking into.
It may sound simple but it is not. In fact, after meeting commitments for money in circulation and taking into account an expected exodus of foreign funds, as well as technical factors, the country would have about $30 billion in excess funds at the central bank.
This may sound tempting, but strict regulations prevent the central bank from undertaking any investment in high-risk assets. Fair enough, and I’m glad such rules are in place to curb mismanagement; no one wants to see a repeat of the 1997 crisis.
That leaves the country with the option of using funds from other sources, and that’s where “my money” that I talked about earlier comes into play. We’re talking about a sovereign fund that could be financed by the government through budgetary savings.
Let’s say for argument’s sake that this money could have come from the 160 billion baht spent on rice pledging, or the perpetual diesel subsidy begun by the previous government, or the Thai Khem Kaeng stimulus project, another Democrat idea.
Come to think of it, the Pheu Thai and Democrat governments since 2008 have spent 510 billion baht on just two populist policies: rice pledging and Thai Khem Kaeng. That’s $17 billion. Imagine if one of these two parties only had the foresight to think about the nation ahead of its own political vote bank.
Well, as the Thai idiom goes, it’s playing music to a buffalo, and the jingle of coins and the rustle of banknotes is certainly music to politicians’ ears.
Sadly, whenever there is talk — and it’s always politicians doing the talking — about establishing a sovereign wealth fund, the Bank of Thailand is seen as the only source of the money. Is it heresy to suggest that some of the money could be taken from government revenues before politicians get their hands on it and waste it?
Maybe it’s time that Thailand started to think about these issues and look at how to set up a fund that would generate wealth for the people of the country and not drain it out, the way politicians are doing these days.
Of course, any such fund would need strict controls in place so that it would not become a political tool used to benefit those in power.