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Cablegate: New Finance Minister Tells Ambassador We Must

VZCZCXRO4450
OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHBK #3747/01 3590956
ZNR UUUUU ZZH
O 240956Z DEC 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5501
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
RUEHBJ/AMEMBASSY BEIJING IMMEDIATE 6648
RUEHBY/AMEMBASSY CANBERRA IMMEDIATE 9312
RUEHLO/AMEMBASSY LONDON IMMEDIATE 1838
RUEHUL/AMEMBASSY SEOUL IMMEDIATE 5171
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 1279
RUEHCHI/AMCONSUL CHIANG MAI IMMEDIATE 6010
RUEAIIA/CIA WASHINGTON DC IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUEHC/DEPT OF LABOR WASHDC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC IMMEDIATE

UNCLAS SECTION 01 OF 02 BANGKOK 003747

SENSITIVE
SIPDIS

STATE FOR EAP/MTS, EAP/RSP, EEB
STATE PASS TO USTR (WEISEL/BISBEE)
TREASURY FOR OASIA
COMMERCE FOR EAP/MAC/OKSA
SINGAPORE FOR FINATT BAKER

E.O. 12958: N/A
TAGS: ECON EFIN ELAB ETRD PGOV TH
SUBJECT: NEW FINANCE MINISTER TELLS AMBASSADOR WE MUST
FIGHT PROTECTIONISM IN A "NEW WORLD"

REF: A. BANGKOK 3746 (NEW ECONOMIC TEAM)
B. BANGKOK 3712 (NEW THAI CABINET APPOINTED)
C. BANGKOK 3648 (ABHISIT ELECTED)

BANGKOK 00003747 001.2 OF 002


1. (SBU) Summary: New Finance Minister Korn told the
Ambassador in a courtesy call December 24 that he hopes both
the U.S. and Thailand will avoid protectionism, which would
erode the reservoir of goodwill that the incoming U.S.
administration now enjoys internationally. Thailand avoided
fallout from the collapse of the financial industry, Korn
said, but is reeling from the worldwide recession in the real
economy, where even Toyota is a risk. "It is a new world."
Korn told the Ambassador that the Prime Minister will head a
new Economic Cabinet that will provide "a guiding hand" to
ministries lacking expertise in their leadership and
coordinate all economic policy. Korn says he will consult
closely with the private sector, including foreign companies,
in policy formulation. The Ambassador raised several items of
concern to U.S. companies, including labor unrest at the Ford
factory. Korn said he would raise the issue with the Prime
Minister later the same day. End Summary.

2. (SBU) Comment: Finance Minister Korn is an impressive
figure -- sharp on the range of economic issues and
well-disposed toward the U.S. In contrast to criticisms
levied against other members of Prime Minister Abhisit's new
economic team, Korn appears very much capable and clearly
eager to get down to the task at hand -- softening the
effects of the global economic downturn on Thailand. We look
forward to working closely with him. End Comment.

2. (SBU) In response to the Ambassador's query whether the
new government was feeling pressure from domestic interests
to consider protectionist measures, newly appointed Finance
Minister Korn Chatikavanij responded no. He said that he
had met earlier in the day to hear the concerns of a large
group of Thai business people and did not hear any appeals
for protectionism. There is a common belief that
liberalization of the Thai market tends to benefit China, he
noted, but, "our real concern is whether protectionism will
rise in the U.S." Korn said that President-elect Obama
enjoys a huge reservoir of goodwill internationally, but a
shift toward protectionism in the U.S. would change that.
Korn said he hopes that both sides will retain liberal
attitudes toward economics and trade.

3. (SBU) The Ambassador asked Korn whether Thailand was
facing the possibility of deflation as part of the economic
crisis. The new Finance Minister said that, fortunately,
Thailand had no asset price bubble burst and had avoided
serious fallout from the financial industry meltdown. He
observed that many of the problems now facing the U.S. were
experienced by Thailand during the 1997 financial crisis.
However, the downturn in the real economy is a serious
challenge. "Suddenly even Toyota and Honda are risks. It's
a new world."

4. (SBU) Korn told the Ambassador that his government can
only be successful dealing with the economic crisis if it
works closely with the private sector, "both foreign and Thai
-- that's just the way it is." He said that he and his staff
expect to spend a lot of time with businessmen to get their
views on proposed policies before they are enacted. The
Ambassador suggested that the "Meet the Minister" program,
which lapsed in 2006, be revitalized, so that American
business people can have the chance to provide input and
build confidence in the Thai investment climate. Korn
responded, "We should do that."

5. (SBU) Korn noted the serious economic challenges facing
his government in the new year, as GDP growth is likely to be
negative for the fourth quarter of 2008 and the first quarter

BANGKOK 00003747 002.2 OF 002


of 2009, and overall growth for 2009 is expected to be
between 0 and 2 percent. He said that his government is
determined to re-build confidence. He noted that the
government worked hard to get its policy program ready for
presentation to the Parliament in record time. The Thai
people will begin their first working day of the new year, he
said, knowing exactly what their government's plan is to deal
with the crisis. "The first three months will be critical."

6. (SBU) Tacitly acknowledging criticism of the appointment
of "unqualified" appointees to other economic ministries,
Korn said that because of the large group of seasoned
politicians who have been banned by the courts from serving
in the government, some coalition parties have had to rely on
outside business people to fill their allocated cabinet
posts. "But this could work better than the previous
system," he argued, in which a Deputy Prime Minister would
loosely oversee the economic ministries. Now the Prime
Minister himself will head an "Economic Cabinet" which will
meet Mondays ahead of the regular Tuesday cabinet meeting and
coordinate economic policy-making. All decisions of the
minister of commerce, for example, will have to first go
through the Prime Minister who will provide "a guiding hand."

7. (SBU) The Ambassador raised a number of U.S. business
community concerns, including recently increased excise
taxes, our desire for an opening of the beef market,
compulsory licenses, and labor relations. He noted in
particular the puzzling difficulties that Ford is having with
its labor force, where normal negotiations have broken down
and workers are taking aggressive illegal actions such as
closing the plant and neighboring public roads. Korn said he
had spoken with both the Ford management and the labor unions
and had urged them to talk, noting to the labor unions the
particular difficulties that auto companies are having
worldwide. Good labor relations have long been an attraction
for foreign investors in Thailand, especially the Japanese
car companies, which have a huge presence. He told the
Ambassador he would raise the issue with the Prime Minister
when he saw him later in the day.

8. (SBU) Korn acknowledged a number of other problems that he
is wrestling with, including rising unemployment as
export-oriented factories around Bangkok lay off workers, who
then return to economically depressed rural areas in the
Northeast. He hopes that agricultural support programs will
help out, but "there will be suffering." Collapsing rubber
and other commodity prices, and the sharp downturn in the
tourism industry are also causing difficulties, particularly
in the South.

JOHN

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