14 July 2011.

Thailand is about to inaugurate its first female Prime Minister. Yingluck Shinawatra led her Pheu Thai party to victory in July’s general election winning 265 seats, and giving her party a majority vote in the 500 member parliament. Thailand’s current ruling government led by Abhisit’s Democrat Party will now take a backseat as the main opposition with only 159 seats in parliament.

14 July 2011.

Thailand is about to inaugurate its first female Prime Minister. Yingluck Shinawatra led her Pheu Thai party to victory in July’s general election winning 265 seats, and giving her party a majority vote in the 500 member parliament. Thailand’s current ruling government led by Abhisit’s Democrat Party will now take a backseat as the main opposition with only 159 seats in parliament.

Ms Yingluck prepares herself to lead Thailand out of its political standstill that began in 2006 when her brother, Thaksin was ousted in a military coup. But many wonder if she’s merely a surrogate Prime Minister, led by her brother behind the scenes.

Nevertheless, what she lacks in political experience, she makes up with her leadership and management capabilities.

Born in Chiang Mai, Yingluck attended Chiang Mai University and graduated with a Master’s Degree in public administration from Kentucky State University. She’s held top positions including CEO of Advanced Info Services (AIS); Thailand’s largest mobile operator, and Managing Director of SC Asset Co Ltd; a Shinawatra family-owned property development company.

Her current party, Pheu Thai Party was formed after the dissolution of the People’s Power Party in 2008. Yingluck was called to lead the party, but she declined, wanting to focus on her family business. As speculation about a possible election in early 2011 deepened, calls continued for Yingluck to lead the party to victory in the election.

Finally in May 2011, with endorsement from veteran politician and MP Charlem Ubumrung, Pheu Thai party voted Yingluck the party’s top candidate and its nominee for premier. [quote]Her brother, Thaksin, who lives in self-exile in Dubai, proudly declared his sister as ‘his clone’ in an exclusive interview. [/quote]

Indeed, Yingluck’s main message during the election was the reconciliation of the nation.

She also proposed certain measures opposed by the Democrats; general amnesty for all major politically-motivated incidents since the 2006 military coup – including overturning a court ruling that bans former Thai Rak Thai and People’s Power Party leaders from seeking office. Alas, a conviction that accused her brother, Thaksin, for the abuse of power.

Her proposal is seen by Democrat leaders and Thailand’s present Prime Minister Abhisit as a plot to bring Thakin back to the country and reprieve him of the political crimes he committed since the coup. However, Yingluck says that her move aims to reconcile all Thais.

She has proposed to eliminate poverty by 2020 by;

• Reducing corporate income tax from 30% to 23%, and then to 20% by 2013.
• Minimum wage will be raised to 300 baht per day, and 15,000 per month for university graduates.
• She plans to provide loans of up to 70% of expected income for farmers, based on a guaranteed rice price of 15,000 baht/ton.
• She also plans to provide free public Wi-Fi and a tablet PC to every school child, a plan that was abandoned during the 2006 coup.

Yingluck is widely considered by many as Thaksin’s proxy and expected rule the nation with her brother’s motivations. But do her proposed policies resemble to her brother’s during his 2001 – 2006 administration?

When Thaksin came to power in 2001, he implemented a set of economic policies, also known as ‘Thaksinomics’; a set of populist economic policies aimed at improving the lives of the country’s rural people.

His plans were to make Thailand a “domestic consumption-based” economy less reliant on exports. Populist measures were also implemented, such as subsidized housing, low-cost healthcare, debt moratorium for farmers, and most famously, disbursing one million baht to every village in the country.

Related: Thailand Exports, Imports and Trade

During Thaksin’s reign from 2001 to 2006, Thailand’s GDP (PPP) increased between 7.1 to 9.2 percent annually, and GDP (PPP) increased from US$5,192 in 2001 to US$7,689 in 2006. The Thai economy also recovered from the 1997 Asian Financial Crisis, repaying all its debts to the IMF incurred during the crisis – and became less dependent on its exports.

Thaksinomics propelled Thailand’s economy until 2005 when it took a huge setback and the economy experienced slow growth. While critics argued the ineffectiveness of Thaksinomics, supporters cited the Great Indian Ocean Tsunami in 2004 and rising global oil prices as reasons for slow growth.

It’s evident that Yingluck’s future plans for Thailand are similar to that of her brother’s; aiming to elevate income levels and standard of living of the Thais through implementation of populist policies.

However, unlike her brother, the effectiveness of her policies to boost economic growth and reconcile the politically-divided nation still remain a mystery.

To Yingluck’s opponents, she will remain labelled as Thaksin’s puppet, but time will tell if she’s serious about reconciling the nation. Her political path as Thailand’s first female prime minister may not be rosy, and she will find many ready to scrutinize her for every move she makes – regardless if it’s hers or her brother’s.

Ng Ding Neng, EconomyWatch.com

The post Yingluck Shinawatra: Thaksin’s Shadow Puppet? appeared first on Economy Watch.

 28 June 2011. 

 The Euro-zone is faltering. Bogged down by the ails of the PIIGS, the Euro-zone is fragile and susceptible to a potential economic meltdown. 

 28 June 2011. 

 The Euro-zone is faltering. Bogged down by the ails of the PIIGS, the Euro-zone is fragile and susceptible to a potential economic meltdown. 

With Greece heading towards an inevitable default, despite the recent announcement of a second bailout in just over a year, the word on the street is not about whether the other Euro-zone countries would once again leap to Greece’s rescue when this happens but rather on whether Greece would eventually be kicked out of the Euro-zone – a potential precursor to a dissolution of the Euro-zone.

But for the moment at least, the Euro-zone is putting on a united front. Speaking on the behalf of the German government, Steffen Seibert told the press that, [quote]“an exit from the euro zone by Greece is not the right way forward. That cannot be the solution.” [/quote] 

Seibert added that a Greek exit was never a consideration for the Euro-zone, even as a “Plan B” option to tackle the debt crisis.

This announcement by the German government does not come as a surprise for political and economic observers in Europe. Alongside France, Germany is one of the strongest advocates of the Euro-zone and has regularly stated its desire to keep the Euro-zone together.

As the largest economy in the Euro-zone, Germany is expected to be among the largest contributors for Greece’s upcoming second bailout, as well as being at the frontlines to tackle any of Europe’s future problems.

In 2010, Germany demonstrated astounding resilience to the global financial crisis – emerging as one of the strongest advanced economies in the world. Germany’s GDP (PPP) grew by 4.49 percent to US$2.81 trillion, while unemployment fell to 6.85 percent in 2010.

Related: Germany Economy

Related: Germany Economic Forecast

However, despite Germany’s strong economic performance, the Euro-zone has been marred by weak Euro-zone nations facing a sovereign debt crisis coupled with high unemployment rates more than double than that of Germany’s.

The German economy has also been affected. Due to the high levels of connectivity among the Euro-zone nations, it is likely that Germany would have seen better economic growth, if not for the weak currency as well as the constant provision of funds from its own taxpayers to bail out other Euro-zone nations.

Faced with the burden of fixing a seemingly unfixable problem, one might wonder why Germany and its policy makers persist in its convictions for the Eurozone, especially when a break-up could potentially solve some of the region’s problems as well lightening the load for the major economies.

Should Germany Stay in the Euro-Zone?

Yet, things are not often as straightforward as they may seem.

In fact, some economists have placed Germany’s strong economic growth down to the weakened Euro currency. In other words, Germany was growing at the expense of a weak euro and the weak economies in the Euro-zone.

Thanks to a low Euro exchange rate, Germany was the third largest exporter in the world for 2010 – exporting US$1.337 trillion worth of products compared to its 2009 figure of US$1.145 trillion. Germany’s current account balance also received a boost from US$166.968 billion in 2009 to US$176.084 billion the following year.

In the event that the Euro-zone is dissolved and Germany once again returns to the Deutschmark, the appreciation in its currency value would almost certainly have an impact on current competitively priced German exports. 

Another important factor for Germany to consider is the likelihood whereby the demise of the Euro may result in weaker Euro-zone nations converting their current debt to Germany from the Euro to their own currencies such as the drachma, escudo, punt…etc.

While the Deutschmark is likely to appreciate in value via the conversion from the Euro, currencies of the weaker Euro-zone nations may depreciate dramatically upon conversion. This would only result in weaker economies finding it harder to repay their debts, particularly those that they owe to Germany. 

Nevertheless, common sense dictates that Germany cannot continue financing other nations’ debts, especially when these debts appear to be getting worse in spite of the bailout money provided.

The constant provision of funds by the German government to bailout struggling Euro-zone economies will only serve towards creating unnecessary burden and liabilities on the German taxpayer. There will undoubtedly come a day when the German taxpayer gets fed up of paying more taxes to bailout other countries.

And it’s not as though German money has been put to good use. According to a recent European Commission report, the national debts of every single Euro-zone country increased from 2005 to 2011.

Greece and Ireland in particular experienced a 57 percent and 85 percent increase in its Debt/GDP ratio respectively, while prudent Germany saw its national debt to GDP ration increase by 14 percent.

Prominent Economist Nouriel Roubini told the Financial Times that, “Euro-zone debt reduction or ‘reprofiling’ will help to resolve the issue of excessive debt in some insolvent economies. But it will do nothing to restore economic convergence, which requires the restoration of competitiveness convergence. Without this the periphery will simply stagnate.”

Related: Euro-zone Divorce Imminent: Nouriel Roubini

As such, any insistence by Germany to keep the Euro-zone intact may inadvertently create a network of welfare economies heavily depended on German funding for survival.

Ng Ding Neng,

EconomyWatch.com

The post Money Matters: Why Germany Wants to Keep the EU Together appeared first on Economy Watch.