Siamese Multi-Axis Strategy
Thailand's newly unveiled multi-axis strategy is becoming increasingly discernible on the geopolitical chessboard. As the ASEAN bloc's second-largest economy, strategically positioned to influence both the mainland and maritime activities in the region, Thailand continually aims to shape regional dynamics. Srettha Thavisin, the nation's leader, has recently concluded his inaugural visits to China for the Belt and Road Initiative (BRI) forum on October 17, and the first-ever ASEAN-GCC Summit in Saudi Arabia between October 16 and 22, 2023.
Prior to these high-profile engagements, Srettha had embarked on a diplomatic circuit of ASEAN nations, including Cambodia, Malaysia, Brunei, and Singapore. Laos appears to be on the agenda for late next month. In these dialogues, Srettha has explored collaborative opportunities in disputed overlapping areas, specifically a 27,000-square-kilometer section in the Gulf of Thailand, for joint energy development projects.
During his China visit, Srettha effectively donned the hat of his country's chief salesman, advocating for the "Southern Land Bridge" project. This ambitious initiative seeks to connect the Andaman Sea to the South China Sea, offering an alternative route to the congested Malacca Strait. These ventures are not merely economic in scope but strategically critical for Thailand.
This dual-axis strategy has historical precedence. It was previously promoted by Pansak Vinyaratn, the former Chief Advisor to three Thai Prime Ministers, spanning from Chartichai Choonhavan to Thaksin Shinawatra and Yingluck Shinawatra. The focus then was on linking Kunming in China to Singapore on one axis and connecting Dawei in Myanmar to Danang in Vietnam on another, with both routes centrally anchored in Thailand.
Nevertheless, for this grand vision to materialize, Srettha must first fortify confidence in the domestic economy—a strategy successfully executed under Thaksin's regime. However, Srettha's "helicopter money" policy, featuring digital distributions of 10,000 Thai Baht, remains under intense public scrutiny. This represents a significant hurdle that could potentially stymie his ambitious economic reform agenda.
The Controversy Over Thailand's Digital Currency Experiment
Srettha's administration has outlined a dual-purpose strategy for its 10,000 Thai Baht digital currency initiative. The first objective is economic stimulation, while the second aims to catalyze the transition to a digital economy by familiarizing Thai citizens with the use of digital currency, beyond the mere digital transfer of traditional Baht.
Under this plan, Thailand would essentially have two circulating "currencies." The first track retains the conventional use of the Baht through banknotes, coins, transfers, or cheques. Meanwhile, an alternative track would feature a "digital Baht," fully convertible with traditional Thai Baht but subjected to specific conditions. For instance, initially limited to a 4-kilometer radius (potentially expandable to cover an entire district), the digital currency would only be acceptable at VAT-registered local shops or SMEs.
One objective of the Digital Baht strategy is to address economic disparities between Bangkok and its surrounding metropolitan areas, as compared to more remote provincial regions, as evidenced by variations in provincial GDP per capita.
The strategy is ingenious for several reasons. Besides acting as an economic stimulus, it has the ancillary benefits of broadening the country's tax base and potentially enabling family units to accumulate sufficient "helicopter money" to launch new small businesses. Moreover, the geographically restricted circulation ensures that the economic benefits are retained within the domestic economy, rather than leaking overseas.
However, the plan has met with academic pushback. A petition, purportedly signed by 99 economists (although not all signatories appear to be experts in the field), calls for the revocation of the initiative, citing principles of fiscal discipline. Critics argue that sanctioning this kind of policy opens the door for future administrations to indirectly "buy" votes through populist measures. The dissenting voices assert that such fiscal interventions should be reserved for emergency scenarios, akin to the economic depression induced by the COVID-19 pandemic.
Interestingly, some of the petition's reasoning reveals a limited understanding of the underlying technology, particularly when blockchain technology is mentioned—a topic arguably beyond the purview of economic theory alone.
The Government's Calculated Gamble
It is crucial to underscore that, contrary to the misunderstandings propagated by the economists' petition, digital currency alone cannot serve as a panacea for genuine economic reform or as a standalone engine for economic growth. Rather, it needs to be integrated harmoniously into a broader suite of economic initiatives, as Srettha seems to subtly suggest through his "leading by action and example" mantra, particularly in his high-profile overseas engagements.
Revitalizing Thailand's economy is no small feat, especially given the lingering scars of the 1997 financial crisis and the subsequent decades marred by political instability. Such a backdrop has bred an ultra-conservative banking culture in Thailand, where loans are granted only to those deemed low-risk, perpetuating a climate of economic stagnation.
Further complicating matters is the global geopolitical landscape. Given recent escalations in the Middle East between Israel and Hamas, as highlighted by Axios's inaugural "Behind the Curtain" column, relying on a fiscal "reserve" to invigorate the Thai economy may not be a sufficiently prudent policy move.
Looking to Thaksin Shinawatra's playbook for inspiration, this kind of stimulus policy could merely be the opening gambit in a broader strategy to fire up Thailand's economic engine. Should it prove successful, we can anticipate a rollout of other "mega-projects," ranging from a Thai-Cambodia joint energy development in disputed territories to the much-touted Southern Land Bridge initiative and Special Economic Zones akin to the Eastern Seaboard. Additionally, we may see an array of "securitization" ventures and perhaps even the establishment of Thailand's first sovereign wealth fund, akin to Singapore's GIC.
With stakes this high, Thailand needs to astutely balance risk and reward, calibrating its policy mechanisms with precision and foresight.