Thailand's Finance Minister Talks Recovery

thai-finance-minister-OV50-hsmall
Korn Chatikavanij, Thailand's finance minister. Apichart Weerawong / AP

Korn Chatikavanij, Thailand's finance minister, is a quintessential policy wonk who managed to steer his country to a quick economic recovery, in large part due to a $30 billion stimulus package he devised. The Oxford-educated former investment banker spoke with NEWSWEEK's Jerry Guo about the country's tumultuous politics and its economic potential. Excerpts:

At a time when Western economies are still struggling, Thailand is projected to reach 8 percent growth this year. What's driving this?

The fact that external demand has improved from 2009 levels has meant that those of us with open economies in Southeast Asia will do well. Export has been strong to fellow Asian nations, so we have been somewhat protected from the [ongoing] weakness in the euro zone and U.S. The biggest growth in terms of markets for us has been China and the ASEAN nations. We've also had a very successful government stimulus since the beginning of 2009.

What made Thailand's fiscal spending during the crisis so effective?

We needed something that would replace the disappearing external demand and replace it pretty quickly. The first step was designed for short-term impact: we literally wrote about 9 million checks to low-income households for $70, in the belief that [they] would have the greatest elastic demand and we would be able to leverage that increased spending in the domestic economy. That worked really quite well. On top of that, we also provided extra old-age stipends to about 6 million pensioners and provided income guarantees for 4 million farmers who were almost all in the low-income bracket.

Is any of this growth driven by manufacturers fleeing China as costs there increase?

Countries like Vietnam and, to a different degree, Thailand somewhat benefited from that, but more Vietnam than us. They are more into low-cost manufacturing than we are; we went through that about two decades ago. The biggest post-China opportunity…isn't taking over their manufacturing mantle, but accelerating urbanization and a demographic change—a high percentage of the Asian population will be retirees—in countries like India and China. Both these trends play to Thailand's strengths. Urbanization means increased food consumption; [retirees] means demand for travel.

How will your government address the underlying social and economic problems brought to light by the so-called red-shirt protesters?

There are three simultaneous approaches. One is a security approach, making sure we are not actually going after individual protesters but holding the ringleaders accountable legally; we're in the process of filing charges. A second approach is addressing the issues that were raised: social inequality and poverty, issues that the government takes very seriously. For instance, we are working to refinance all loan-shark debt, which has been a cancer in our system. We've refinanced over 400,000 individual accounts. We need to do more of this and make people realize the government makes them a priority. They don't need to protest. A third approach is the truth-and-reconciliation process, to find out what happened during the crackdown…This is being handled by an independent body, and we're hoping results will come within the year.

The Western narrative of the protests this spring was that it was a class struggle between urban and rural Thais. Is this accurate?

I don't believe the Western narrative is correct. There is a genuine income-distribution gap. There are genuine differences in people's access to resources. All of these need to be addressed as quickly as we can. Arguably this government has done more for the poor than any recent government. The big truth is these inequalities do exist, but the big lie was that this was what the conflict was about. It wasn't. The conflict was really [deposed prime minister] Thaksin Shinawatra and his supporters wanting to regain power, wanting to overturn the corruption conviction against him, and wanting to get back his ill-gotten assets. What we're really facing is a small group of instigators trying to overthrow the core pillars of Thailand.