Cablegate: Northerners Remain Loyal to "Thaksinomics"

VZCZCXRO3486
PP RUEHCN RUEHDT RUEHHM
DE RUEHCHI #0187/01 3270341
ZNR UUUUU ZZH
P 230341Z NOV 07
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0610
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHCHI/AMCONSUL CHIANG MAI 0664

UNCLAS SECTION 01 OF 02 CHIANG MAI 000187

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON KDEM TH
SUBJECT: NORTHERNERS REMAIN LOYAL TO "THAKSINOMICS"

REF: A. CHIANG MAI 185 (NORTHERN VILLAGERS EXPECT RTG TO TRY TO LIMIT PPP SUCCESS)
B. CHIANG MAI 182 (THAKSIN LOYALISTS POISED TO RECAPTURE NORTH)

CHIANG MAI 00000187 001.2 OF 002

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SUMMARY
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1. (SBU) In the run-up to the December 23 election, villagers
from northern Thailand praise former Prime Minister Thaksin's
populist economic policies, especially the Village Fund credit
program and the 30 Baht health care plan. Villagers' admiration
for these policies present a challenge for the marketing of King
Bhumibol's concept of the "sufficiency economy," which many
interpret to mean belt-tightening by consumers. With most
leading political parties flocking to emulate Thaksin's populist
programs, the more decisive factors on election day among
northern voters will be personal relationships, vote-buying, and
loyalty to Thaksin and his government's track record in making
good on its promises. End Summary.

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THE GOOD OLE DAYS OF THAKSINOMICS
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2. (U) Village leaders across four provinces of northern
Thailand expressed satisfaction with the populist economic
policies of former Prime Minister Thaksin and his now-banned
Thai Rak Thai (TRT) party. Villagers told EconOff and EconLES
that northern people are "attached to Thaksin's economic
policies." In a trip to Chiang Mai, Chiang Rai, Sukhothai, and
Kampangphet provinces, local leaders specified the following
economic policies as part of the legacy of Thaksinomics in
northern Thailand:

-- The Village Fund: Started in 2001, the Village Fund is a one
million baht (approximately $29,000 USD) fund managed by an
elected committee that issues loans to villagers at low interest
rates with minimal collateral.

-- The 30 Baht Health Care Plan: The RTG provided subsidized
government health care at 30 baht (approximately $.88 USD) per
visit. Following the coup, the new military-appointed
government removed the 30 baht fee in an effort to placate
villagers, but the sustainability of the health care system is
in question, as is the quality of the health care available.

-- Education Fund: Students could request 10,000 baht per person
(approximately $300 USD) from the Government Lottery Officer to
support their education.

-- Agricultural Price Supports: The RTG under Thaksin guaranteed
high agricultural prices by purchasing agricultural goods to
force the price up. For example, while the true market price
for rice was about $117 per ton during the Thaksin
administration, the government price was $176 per ton, forcing
the domestic market price to $147 per ton.

3. (SBU) Villagers credit the success of Thaksin's populist
policies to his ability to effectively make civil servants work
for the people. That said, however, farmers in particular have
little faith that any future government -- regardless of the
ruling party -- will be able to solve their economic problems,
notwithstanding the recent boom in global commodity prices.
These problems include, primarily, the rising costs of inputs
such as fuel, fertilizer, and pesticides. Thailand has met
recent global rice demand, for example, by selling off rice
previously stockpiled during Thaksin's era. According to
farmers in Chiang Rai province, they can only rely on "good
friends" to support their economic interests now.

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THE VILLAGE FUND: THE BEST DEBT MONEY CAN BUY
---------------------------------------------

4. (U) The Thaksin administration policy that received the most
praise among northern Thai villagers was the Village Fund, which
allows village members to borrow money from the fund at a low
interest rate and pay back their debt over the course of a year.
The consensus among village leaders was that the Village Fund
is a good program that the next government should continue, as
the interim government has. Village leaders and members of
Village Fund communities praised the fund for three reasons:

-- Money borrowed from the fund could be reinvested locally thus
increasing production in the village;

-- Revenue generated from interest payments could be used for
village activities or public expenses such as tables and chairs
in public parks;

-- The default rate on loans is low because borrowing members
know that they must pay back in order for their fellow villagers
to get loans.

CHIANG MAI 00000187 002 OF 002

5. (SBU) Despite all of these benefits of the Village Fund,
village leaders and government officials admitted that it has
pushed some borrowers into debt. One village leader in a suburb
of Chiang Mai stated that there are cases of individuals who
borrow from the Village Fund then repay with money borrowed from
private loans, thus causing the person to go deeper into debt.
Other villagers in Chiang Rai and Sukhothai admitted to such
cases in their villages as well. Community development
officials in Sukhothai said, however, that although some Village
Fund members repay their loans with private loans, they are
discouraged from doing so and are encouraged to request
assistance from the Village Fund Committee when they cannot
repay. Despite these cases, village leaders believe that the
Village Fund is a success and contributes to northern Thailand's
loyalty to Thaksin's populist economics.

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"PEOPLE FIRST!" AND OTHER BROAD ECONOMIC PLATFORMS
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6. (SBU) Given the sustained popularity of Thaksin's populist
economic policies, most leading political parties have flocked
to the populist camp. There are no significant differences
across the parties' economic platforms, according to members of
the Chambers of Commerce in both Chiang Mai and Kampangphet. A
Chiang Rai-based candidate of the People's Power Party (PPP -
the self-annointed successor party to TRT) stated that even the
Democrat Party, the PPP's main rival, has adopted the slogan
"People First!" in order to emphasize the populist aspects of
its platform. Moreover, with many smaller parties such as Chart
Thai and Matchima Thippathai acquiring former TRT members,
village leaders say that they are still touting the same
populist messages but under new party banners.

7. (SBU) Despite the broad support for populist economic
policies among leading political parties, local leaders in
northern Thailand believe that none -- even PPP -- will be as
efficient in implementing economic initiatives as former PM
Thaksin's TRT, which held an overwhelming majority in the last
elected parliament. Instead, village leaders believe that
personal relationships and vote-buying will be the primary pull
factors during the election (Ref A). According to Chiang Rai
Rajabhat University political economist Udon Wongtamtip, money
and personal relations are equally important in rural areas of
northern Thailand. Village leaders in Chiang Mai, Chiang Rai,
Sukhothai, and Kampangphet all agreed that the party which pays
the most for votes will reap the greatest support in the
northern provinces. According to one Chiang Mai University
political science professor, people in rural areas believe that
all politicians are corrupt. What distinguishes them, he said,
is what they give back to the people despite their corruption.
Chiang Rai Farmers Network President Pranom Chermchaiyaphum
expects the PPP to offer the highest price for votes, though
village leaders expect the military-appointed government to
target the PPP in its campaign to tackle vote-buying.

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THE INSUFFICIENT SUFFICIENCY ECONOMY
------------------------------------

8. (SBU) For local government officials in the north, an
alternative to Thaksin's widely praised populism is King
Bhumibol's concept of the sufficiency economy. Officials from
Sukhothai's Office of Community Development lauded the
sufficiency economy as built on Buddhist values and the motto
"live well and happy" by practicing moderation in consumption.
Villagers said that local governments are marketing the concept
heavily in northern Thailand as a counterpoint to Thaksin's
philosophy that all Thais should have liberal access to credit
and modern amenities, such as mobile phones and motorcycles.
Despite the fact that the sufficiency economy concept is
targeted at farmers, villagers in Kampangphet were skeptical,
arguing that it does not apply to poor farmers who must borrow
money to spend on inputs (fuel, fertilizer, pesticides, etc.)
rather than the luxuries of modern life.

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COMMENT
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9. (SBU) Broad support for former PM Thaksin's economic populism
still holds strong across northern Thailand. With most rival
parties parroting the PPP/TRT populist platform, economic policy
issues could have a diminished role in voter's decisions on
December 23. However, most northern voters remain loyal to
Thaksin and generally trust the PPP as the successor to a TRT
party that made good on its promises to implement populist
policies (Ref B).
MORROW

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