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Cablegate: Democrat Leader Lays Out Pro-Business Agenda

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TAGS: ECON EINV ETRD TH

SUBJECT: DEMOCRAT LEADER LAYS OUT PRO-BUSINESS AGENDA

REF: BANGKOK 4943

1. Summary: In an October 18 address to Thai business and
investment leaders, Democrat Party leader Abhisit Vejjajiva outlined
the challenges to Thailand in a globalized world, and the Party's
outward-looking plan of action to meet those challenges. Abhisit
presented a pro-business platform which he said sought to change the
government's role from one of economic controller to business
facilitator, cutting costs and improving business competitiveness.
Abhisit pledged action on a number of issues important to foreign
investors, including abolishment of capital controls, shelving
amendments to the Foreign Business Act, and a more business-friendly
attitude toward compulsory licensing of pharmaceutical products.
However, audience members expressed concern that as part of a likely
weak coalition government, a Democrat-led administration might not
be able to implement its bold proposals. End Summary.

2. In a forum entitled "Thailand - Back in Business," Democrat
Party leader and possible Prime Minister candidate Abhisit Vejjajiva
built on an earlier economic speech (reftel) and set forth a
pro-business platform that focused on meeting the challenges
presented by globalization. Abhisit laid out the competition for
markets by rising economic powers China and India in both low-wage
and high-tech sectors, and contrasted their successes with
Thailand's failure to keep pace. He pointed out Thailand's stagnant
rankings in business competitiveness indexes in comparison with
improvements by several of its neighbors in the region. Abhisit
opined that Thailand is in a regressive cycle, with low investor and
consumer confidence feeding off Thailand's economic doldrums. He
blamed this lack of confidence for recent investment decisions by
Seagate, Bridgestone and Intel to place major investments elsewhere
in the region.

3. Presumably in deference to the business-oriented audience,
Abhisit kept discussion of the Democrat Party's other populist
proposals to a minimum, and focused on the party's pro-business
proposals. Abhisit said the government needs to change its role as
a controller of the economy and become a facilitator for private
business, pledging to stay out of the way of business and cease
government being a burden rather than a help. He promised to change
rules and regulations that hinder business, including capital
controls and proposed amendments to the Foreign Business Act.

4. Abhisit said he did not want to see a Thai economy based on low
labor costs, and advocated policies to move the economy toward
higher-end manufacturing and services. He pushed for higher
value-added in Thai products and building Thai brands in the global
market. He also advocated greater educational focus on information
technology, math and sciences, and foreign languages to better
compete in a knowledge-based economy.

5. Abhisit noted that Thai competitiveness had suffered from a
lack of investment in infrastructure, and pledged to expend 300
billion baht in irrigation projects, 200 million baht in dual-track
railways to better link with neighboring countries, and 250 billion
baht over 10 years on improving mass transit. In so doing Abhisit
hoped to reduce transport and logistics costs by 25-30 percent,
increase farmers income by 40 to 50 percent within four years,
double tourism receipts over four years, and bring annual GDP growth
to the seven to eight percent range.

Abhisit on the issues du jour
-----------------------------

6. During his speech and in a following question and answer
session, Abhisit touched on a number of key issues important to
foreign investors. He pledged to end the 30 percent capital reserve
requirement imposed last December to stem the appreciation of the
baht, earning the biggest applause of the speech. Abhisit said the
policy had destroyed the bond and debt markets and he would act to
revive them. He continued that a Democrat Party administration
would not enforce a strong or weak baht policy, noting the
advantages to different parties of each policy. However, he
explained that scrapping capital controls would spur investment and
weaken the baht to help exporters.

7. Abhisit said he would not pursue controversial proposed
amendments to the Foreign Business Act that would further restrict
foreign ownership in certain business sectors. He stressed the need
to protect national interests, but said it would be done with
clearer rules and a mechanism that would be accepted
internationally.

8. In response to a question on compulsory licenses of
pharmaceutical products that the current government has pursued,
Abhisit said that the policy should only be used "as a last resort."
He said that if necessary he would invite pharmaceutical companies
to discuss any potential action, and noted that just the threat of

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doing a compulsory license often worked as well as its actual
implementation. As an alternative, Abhisit noted the Clinton
Foundation's success in driving down global medicine prices by
purchasing in bulk and suggested the RTG could pursue a similar
policy to help reduce medicine costs.

9. Comment: Abhisit hit all the right notes for his audience,
putting forward policies to modernize and advance the economy and
promoting ways to make doing business easier and cheaper. However,
if the Democrat Party takes power after the upcoming December
elections, it will almost certainly be as part of a coalition. Many
audience members questioned whether the Democrats would be able to
control key ministries and implement their proposals, and whether
they would be in office long enough to do so. Political analysts
have predicted that the next government will be a weak coalition,
and will find it difficult to push through bold proposals. End
Comment.
BOYCE

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