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Jockeying starts for posts in new Thai government

05 July 2011 22:56 (UTC +04:00)

Baku â€“ APA. Thailand’s prime minister elect, Yingluck Shinawatra, said on Tuesday it was too early to decide on her cabinet as jockeying for posts started and investors expressed concern her populist policies would fuel inflation, forcing interest rates up, APA reports quoting â€œReutersâ€.
Yingluck’s choice of ministers will need to address concerns about possible cronyism and pacify critics who fear the return of her divisive brother, Thaksin, after their Puea Thai Party won a landslide victory in Sunday’s election.
"At this time there have been no consultations about the cabinet," Yingluck told reporters.
Puea Thai won 265 seats in the 500-seat parliament, according to the latest Election Commission tally on Tuesday, and could govern alone, but Yingluck, who will be Thailand’s first female prime minister, has said she would form a five-party coalition controlling 299 seats.
"We will not exclude anyone, be he an insider or outsider," said Yingluck.
The formation of a coalition is seen as a way of projecting an image of broad parliamentary support for Puea Thai and easing political friction as it seeks to implement policies.
A cabinet dominated by pro-Thaksin ministers could weaken Yingluck’s calls for reconciliation after six often bloody years of political crisis.
"Yingluck’s most urgent and challenging task is to dispel the climate of mutual suspicion among differing political stripes," said Avudh Panananda, a columnist at The Nation newspaper.
Reconciliation will not be easy for the political novice Yingluck who has never held political office. Thailand remains bitterly divided between pro- and anti-Thaksin camps and another confrontation is still widely feared sooner or later.
"Yingluck’s ’learning curve,’ or her ability to govern, will be the basis for medium- to long-term risk premia," said Jun Trinidad from Citi AP Economics Research in Manila.
"The PT party’s cabinet appointments and post-election agenda will be crucial to reassuring investors and underpinning market sentiment."
Comments by PT economic chief and a top candidate for finance minister that Thailand
should adopt a managed exchange rate similar to Singapore and China will raise investors concerned over central bank independence.
"There is no country in this region that adopts a fully flexible exchange rate. China, Hong Kong, Singapore and others all have adopted managed exchange rate policies," Suchart Thadathamrongvej told Reuters in an interview on Tuesday .
DIVIDED THAILAND
Sunday’s election result was seen as a rejection of Thailand’s traditional establishment of generals, "old money" families and royal advisers who backed the outgoing government.
Thailand’s politically powerful military has said it will accept the result, adding to a sense of stability in a country plagued by unrest since the army staged a coup in 2006 to oust Thaksin.
"Puea Thai’s performance severely limits the ability of the anti-Thaksin elites to alter the political landscape, as they recognize the potential for a strong backlash if the new government is ousted any time soon," said Roberto Herrera-Lim, director of Eurasia Group in New York.
"It will take some time for the Bangkok elites to reorganize and effectively maneuver against the government," he said in a note on Thailand.
"For its part, Puea Thai will also attempt to avoid any direct provocation, and the risk that it will brazenly push its political agenda soon is low."
Thaksin said before the poll he would like to return in December to attend his eldest daughter’s wedding.
INFLATION WORRIES
"A degree of political stability post-elections is becoming increasingly crucial now, especially given that the economy is heading into a tougher growth/inflation cyclical environment," said analyst Mark Tan from Goldman Sachs Global Economics.
"This was partially the reason behind our equity strategists’ recent downgrade of Thai equity markets to underweight," said Tan. "In our view, Thailand is at an important crossroads in its political landscape."
Yingluck plans to roll out Thaksin-style populist programs that could fuel public spending and inflation -- from subway extensions and high-speed trains to big wage increases and giveaways aimed at boosting spending power in rural areas.
"The increased government spending is something to watch closely. The central bank has been rather explicitly warning against it," said Wellian Wiranto, an economist for HSBC in Singapore.
The Bank of Thailand may tighten monetary policy faster than thought this year to tame inflation, which is expected to accelerate under Puea Thai, a Reuters Poll of economists found.
The central bank’s benchmark interest rate, the one-day repurchase rate, may rise to 3.75 percent by the end of the year, they said.
Economists also warned that a boost in spending risks a rise in the debt-to-GDP ratio to 60 percent or more from about 42 percent now within six years. By law, public debt must not exceed 60 percent of gross domestic product.