ThailandThailand

IMF: Sit down, you’re IMF: Sit down, you’re rocking the baht rocking the baht

Issue 1Issue 1

Whether privatization of Thailand’s Whether privatization of Thailand’s state owned enterprises should be state owned enterprises should be included as part of the structural included as part of the structural reforms Thailand undertakes as reforms Thailand undertakes as

part of its IMF Programpart of its IMF Program

What is the What is the IMFIMF Program? Program?

IMF ArgumentIMF Argument

– The IMF seeks privatization of our The IMF seeks privatization of our country’s State Owned Enterprises country’s State Owned Enterprises (SOEs)(SOEs)

– Under their conditions this has to Under their conditions this has to occur for the IMF to lend Thailand occur for the IMF to lend Thailand moneymoney

Thailand’s ArgumentThailand’s Argument

The appropriate thing for Thailand at The appropriate thing for Thailand at this juncture would be for us NOT to this juncture would be for us NOT to include a privatization clause in the include a privatization clause in the Letter of IntentLetter of Intent

Why an IMF Program?Why an IMF Program?

IMF ArgumentIMF Argument

The IMF believes this is a long term The IMF believes this is a long term problem that will not be fixed unless problem that will not be fixed unless the actual structure of the economy the actual structure of the economy is changedis changed

Thailand ArgumentThailand Argument

– We believe the problem is short We believe the problem is short term and therefore privatization is term and therefore privatization is unnecessary unnecessary

– The focus should be on correcting The focus should be on correcting the current devaluation of the bahtthe current devaluation of the baht

Privatization was unsuccessfully Privatization was unsuccessfully attempted in 1988 in the electricity attempted in 1988 in the electricity and port sectorsand port sectors

Protests from labor unions quickly Protests from labor unions quickly halted the attempt to privatizehalted the attempt to privatize

Thailand’s continued opposition to Thailand’s continued opposition to privatizationprivatization– Large scale privatization would lead to Large scale privatization would lead to

job lossesjob losses– Danger of sparking labor unrestDanger of sparking labor unrest– Privatizing utilities would make it harder Privatizing utilities would make it harder

for the poor to have access to themfor the poor to have access to them– Who would Thailand sell to?Who would Thailand sell to?

•Only wealthy Thai citizens could afford to buy, Only wealthy Thai citizens could afford to buy, sparking speculation of political interferencesparking speculation of political interference

•Selling to Foreigners would provoke a Selling to Foreigners would provoke a backlash of national sentimentsbacklash of national sentiments

What is program ownership?What is program ownership?

IMF ArgumentIMF Argument

– The IMF’s role would be as an The IMF’s role would be as an external “financial cop”external “financial cop”

– IMF is seeking as much control as IMF is seeking as much control as possiblepossible

Thailand ArgumentThailand Argument

– The program should be our The program should be our country’s own so that partnership country’s own so that partnership will work betterwill work better

– We know our country better than We know our country better than you doyou do

What is conditionality’s role?What is conditionality’s role?

Conditionality can be a method of Conditionality can be a method of monitoring, or it can be the program monitoring, or it can be the program itself.itself.

IMF ArgumentIMF Argument

– Privatization is a condition of Privatization is a condition of lending us moneylending us money

– To make sure the program is being To make sure the program is being carried out to their specificationscarried out to their specifications

Thailand ArgumentThailand Argument

– There should be some consideration There should be some consideration of the IMF for us to run our own of the IMF for us to run our own countrycountry

– The government had been running The government had been running budget surpluses for nearly a budget surpluses for nearly a decadedecade

Issue 2Issue 2

Whether privatization should be Whether privatization should be extensive and include strategic extensive and include strategic

sectors such as telecommunications, sectors such as telecommunications, electricity and oil and gaselectricity and oil and gas

Privatization should specifically Privatization should specifically notnot be in the strategic sectors such as be in the strategic sectors such as electricity and gas electricity and gas – Already attempted in 1988 Already attempted in 1988

unsuccessfullyunsuccessfully– Private sectors will not look out for the Private sectors will not look out for the

citizens like the government doescitizens like the government does– These are essential to the livelihood of These are essential to the livelihood of

the people, not just the economythe people, not just the economy

Issue 3Issue 3

The time frame over which to reach The time frame over which to reach privatization goalsprivatization goals

IMF ArgumentIMF Argument

Extensive privatization as soon as Extensive privatization as soon as possible as a condition to obtaining a possible as a condition to obtaining a loanloan

Thailand ArgumentThailand Argument

Immediate privatization is unrealistic Immediate privatization is unrealistic and would not address the current and would not address the current problems facing the economyproblems facing the economy

Stabilization before privatizationStabilization before privatization

Thailand’s Optimal OutcomeThailand’s Optimal Outcome

– To leave out privatization as a condition to To leave out privatization as a condition to receive IMF’s loans.receive IMF’s loans.

– Possible draft of joint statement to set up a Possible draft of joint statement to set up a committee to study implications of a long committee to study implications of a long term privatization of the SOEs in Thailandterm privatization of the SOEs in Thailand