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05BANGKOK1072 AMBASSADOR’S COURTESY CALL ON FINANCE MINISTER SOMKID JATUSRIPITAK

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“26758”,”2/10/2005 7:41″,”05BANGKOK1072″,

 

“Embassy Bangkok”,”UNCLASSIFIED//FOR OFFICIAL USE ONLY”,

 

“”,”This record is a partial extract of the original cable.

 

The full text of the original cable is not available.

 

“,”UNCLAS SECTION 01 OF 03 BANGKOK 001072

 

SIPDIS

 

SENSITIVE

 

DEPARTMENT PASS USTR BWEISEL AND DKATZ

GENEVA FOR USTR

COMMERCE FOR ITA/MAC/AP/OKSA/JKELLY

 

E.O. 12958: N/A

TAGS: ECON, EFIN, EINV, PREL, TH, Ambassador\’s Calls, US-Thai FTA

SUBJECT: AMBASSADOR\’S COURTESY CALL ON FINANCE MINISTER

SOMKID JATUSRIPITAK

 

1. (U) Sensitive but unclassified. Please handle accordingly.

 

2. (SBU) Summary. On February 3, the Ambassador paid a

courtesy call on Minister of Finance Somkid Jatusripitak. The

Ambassador discussed the ongoing Thai-US FTA negotiations,

and stressed the need to work together to ensure the talks

continue to proceed smoothly and amicably. While agreeing on

the need to move forward, Somkid expressed caution over the

public perceptions of the agreement in Thailand, and urged

the U.S. to see the FTA as a vehicle for cooperation rather

than a negotiation over trade liberalization. Somkid praised

the leadership of Prime Minister Thaksin and his management

team in restoring the Thai economy to good health following

the 1997 financial crisis, and sketched out an ambitious

agenda for bureaucratic reform over the next 3-4 years. End

Summary.

 

The FTA: Not Only about Trade Liberalization

 

3. (SBU) Moving quickly to the Thai-U.S. Free Trade Agreement

(FTA), Somkid said that he expects to continue to play a key

role in overseeing the negotiations after the election, and

that Prime Minister Thaksin remains supportive of the talks.

However, Somkid explained that the FTA is not only about

reducing tariffs and taxes, but also about pursuing

activities of mutual support. Noting lingering resentment

over the perception that the U.S. was no supportive during

the 1997 financial crisis, Somkid acknowledged that the Thai

public still viewed the economic intentions of the US

negatively, casting a shadow over the FTA negotiations.

Instead, he said, we should highlight bilateral cooperation

and outcomes that will make Thailand more competitive. Along

these lines, the agreement should not only be concerned with

trade liberalization, but with cooperation in trade and in

investment — tariffs are only one part.

 

4. (SBU) Somkid told the Ambassador that he plans to travel

to Japan to re-invigorate the Japan-Thailand Economic

Partnership (JTEP) negotiations, which have stumbled recently

over key trade and investment issues. Referring to a

conversation with the Japanese Ambassador last week, Somkid

said that Japan should not treat a developing country like

Thailand the same as other developed countries in their trade

negotiations. According to Somkid, he told the Japanese

Ambassador, \”I will take care of your businesses in Thailand

— you must take care of me.\” Overall, Somkid said, the US

FTA is more politically sensitive than JTEP due to negative

Thai perceptions of U.S. investors, another hangover from the

1997 crisis. The Ambassador explained that despite this

perception, American investors bring more into Thailand than

the Japanese. While Japanese businesses retain control

through many expatriate managers, the American business

model, in contrast, seeks to hand over control to

well-trained local managers as soon as possible. The

Ambassador pointed out that this model is more effective in

transferring technology and management skills to Thais.

 

5. (SBU) Somkid looked forward to a positive outcome from the

FTA talks, where both sides are better off. Acknowledging the

Ambassador\’s offer to help work toward these goals, Somkid

suggested that the talks be characterized publicly not as

\”negotiations\” — which has connotations of conflict — but

as \”discussions.\” Given the importance of perceptions, Somkid

recommended changing the name of the FTA to something along

the same lines as JTEP, underscoring \”economic partnership.\”

Somkid indicated that the Thai people are \”scared\” of larger

countries like China, Japan and the U.S., but that Thais must

be able to accept new ideas and situations. The Ambassador

agreed that it is important to put a human face on the FTA,

but for it to pass the U.S. Congress, the FTA must be

comprehensive.

 

6. (SBU) Somkid added that another challenge for the Thaksin

administration is the political opposition, which often tries

to distort the message of the FTA and claims that Thaksin

will \”sell everything\” to the U.S. While Somkid\’s Thai Rak

Thai party has avoided all FTA topics during the election

campaign, he agreed that they must clarify the government\’s

intentions. He assured the Ambassador that the RTG will get

back to work on the FTA \”not too long\” after the elections.

Somkid stressed that both the US and Thailand must help each

other move the FTA forward smoothly, and having good

communication is paramount; if there are missteps, there are

groups willing to mislabel the discussions. In response, the

Ambassador proposed that they both strive to keep each other

apprised of each government\’s political and policy

developments, so as to avoid unwanted surprises.

Economic Recovery Successful Due to Management

 

7. (SBU) Noting the quick and successful recovery of the Thai

economy from the 1997 financial crisis, the Ambassador asked

Somkid which steps were most effective in restoring the

economy\’s health. Overall, Somkid praised the steady

leadership and management style of the Thaksin

administration. In his role as Finance Minister, Somkid said

that he focused first on rebuilding domestic confidence to

spur investment and consumption. He explained that previous

governments had focused exclusively on the export market,

neglecting the potentially dynamic domestic consumer market.

By urging the state banks to lend aggressively — commercial

banks had sharply curtailed credit after the 1997 crisis and

are still lending conservatively — they were able to

stimulate investment and consumption, thus boosting

confidence. Internationally, he stated, this government had

promoted Thailand as the \”hub\” of Southeast Asia, and forged

trade agreements and links with other countries in the

region. In addition, Thailand remains an attractive

destination for FDI, including the expansion of domestic

capital markets.

 

Thaksin, part II: More Changes Ahead in the Economy and the

Bureaucracy

 

8. (SBU) According to Somkid, Thaksin and his \”managers\” are

still in the process of making major changes in the structure

of the Thai economy. Somkid acknowledged that despite the

economic recovery, the underlying structure of the Thai

economy had not changed for decades. The hardest part, he

admitted, is convincing bureaucrats and businesses to change

their ways voluntarily, before change is forced upon them.

Somkid said that they have had some success so far; many

banks have changed their attitudes about credit, and have

helped to stimulate both rural and urban demand through their

lending policies.

 

9. (SBU) Somkid told the Ambassador that one of the main

agenda items for the next Thaksin administration is to

improve and reform the Thai bureaucracy. The plans for

bureaucratic reform and restructuring will not focus on any

one institution in particular — such as the highly-respected

Bank of Thailand, which is widely seen to have mismanaged the

1997 financial crisis — but will be part of a much wider and

comprehensive effort. Somkid said that the bureaucracy had

improved under the Thaksin administration — mainly through

pressure — but many institutions, such as the educational

system, were failing in their mission. (Somkid decried the

fact that he has to send his children to school in the U.S.)

Somkid agreed with the Ambassador\’s suggestion that raising

the salaries of government officials, as Singapore has done,

had proven successful in recruiting, and retaining, the most

talented civil servants.

 

\”Managing\” Thailand Still Biggest Priority

 

10. (SBU) Somkid recognized that this reform agenda is

ambitious, but believes it can be achieved in 3-4 years under

a strong, visionary leader like Thaksin. Describing the

leadership and management style of Thaksin and his advisors,

Somkid used the expression, \”rao ruu yaang ped (\”to know like

a duck,\” which can fly, swim, and walk on land),\” a Thai

phrase meaning that they are generalists who can oversee all

the specialized elements of administration. Although now

Finance Minister, Somkid pointed out that his Ph.D. was in

marketing; Thaksin himself, who received a Ph.D. in criminal

justice, founded a company that now owned communications

satellites in space. According to Somkid, successful

management depends on leadership and vision, not expertise.

 

11. (SBU) In approaching this agenda, Somkid said Thaksin and

his advisors have no fixed formula or theory — \”what has to

be done, will be done.\” As with Thaksin\’s streamlining of

ministries in 2002, Somkid predicted that a strong and stable

administration would be able to make many changes in a second

term. Using the example of Malaysia, Somkid said 25 years of

stability under Mahathir had a great impact on Malaysia\’s

growth and development. While acknowledging the benefits of

stability, the Ambassador urged Somkid to be wary of

comparison between Thaksin, and Mahathir or Singapore\’s Lee

Kwan Yew. Comments like these, often designed to please local

audiences, also resonate to foreign capitals, sometimes

giving the impression that Thaksin may be impatient with

democratic institutions and processes.

12. (SBU) Comment: Second to PM Thaksin, Somkid is the most

recognized authority on financial and economic matters in the

current administration. A key Thaksin insider — and founding

member of the Thai Rak Thai party — Somkid plays an

especially important role in setting economic and trade

policy. Despite Thaksin\’s enthusiasm for FTAs, Somkid\’s

comments suggest that his support for these negotiations is

lukewarm, at best (and many observers believe that left to

his own devices, Somkid would abandon the FTA project

entirely). Somkid\’s appeal for sympathy and generosity in the

FTA negotiations is a commonly heard refrain from RTG

officials and leaders. Fear of being overwhelmed by the U.S.

in these talks has increasingly led the RTG to characterize

this agreement as an ill-defined vehicle for economic

cooperation, rather than a means to secure U.S. market access

and reforms of the Thai economy. Somkid\’s promise to return

to the hard work of FTA-making should probably be taken at

face value, but our impression was that Somkid is not the

kind of enthusiastic supporter we need at his level of

leadership to move these negotiations forward. End Comment.

BOYCE

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Written by thaicables

July 6, 2011 at 7:26 am

Posted in Somkid, Unclassified

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