SUPACHAI: Worried about Thailand’s debt.

THAILAND’S rising public debt could undermine its competitiveness, the Committee on Structural Reform and Competitive Enhancement said yesterday. The committee is concerned the government’s debts are becoming too high, said Deputy Prime Minister and committee chairman Dr Supachai Panitchpakdi. The statement followed the committee’s review of a Finance Ministry report on public sector debt.

As of January 31, public sector debt totalled Bt1.8 trillion, equivalent to 38.5 per cent of Thailand’s gross domestic product (GDP), said the Finance Ministry’s report. Government borrowings accounted for Bt989.8 billion and the Finance Ministry’s guarantees to state enterprises totalled Bt892.44 billion.

“We are concerned with preventing public debt from rising above its present level. This would certainly have an impact on the country’s competitiveness,” Supachai said.

The Swissbased International Institute for Management Development this year ranked Thailand 33rd out of 47 countries in terms of competitiveness, up from 34th last year. The ranking is based on a survey of 47 countries. The US tops the list as the most competitive nation, followed by Singapore, Finland, the Netherlands, Switzerland, Luxembourg, Ireland, Germany, Sweden and Iceland.

The committee is also concerned about the Finance Ministry’s guarantees to state enterprises, said Santi Bangor, deputy secretarygeneral of the National Economic and Social Development Board.

“Several state enterprises are not in a position to handle their debts. This means the Finance Ministry will have to shoulder the burden. And it also means that instead of using the budget to improve the country’s competitiveness, the government has to waste money repaying the debts,” he said. Several state enterprises, including the Bangkok Mass Transit Authority, the Transport Company and the State Railway of Thailand have been heavily losing money, which means the debts will eventually fall to taxpayers. “The government needs to consider how to get the private sector involved in moneylosing state enterprises so as to reduce its burden,” said Supachai.

“We must also take measures to prevent state enterprise debt from rising any higher,” he said.

The debt level is unusually high as a result of the government’s having to absorb the losses of the financial sector. If the Financial Institution Development Fund’s debt of Bt775.57 billion and the Bank of Thailand’s Bt471.62 billion debt were added, the public sector’s debt would rise to 64 per cent of GDP. As a general rule, a country’s public sector debt should not exceed 50 per cent of its GDP.

However, debts notwithstanding, the country can still export and amass a current account surplus, Supachai said. The current account surplus over the past two years has climbed to US$20 billion (Bt758.4 billion), helping Thailand avoid a foreign debt overhang. The current account surplus should continue this year, having already exceeded $2 billion.

The turnaround in the current account has raised the central bank’s foreign exchange reserves to more than $32 billion.

By Watchapong Thongrung, the Nation

April 23, 2000

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