As the Executive Director of Kiatnakin Bank Public Co. Ltd. (KKP) and holder of several other important positions, Banyong Pongpanich has proposed a way out of past crisis for Thailand many times. So it is a special occasion for us to get to talk with him on the current situation for two whole hours. “When the country is lost, many generations suffer. In the past, every time we got lost, it was all out of good intention. If we don’t stop what is wrong, the next generation will talk about what happens today in a different way; that they love the country so much but pull it back for so long.”
As Covid-19 is the new catalyst for change for humankind, no matter what it will drive us into-- the new normal or the new abnormal, let’s use this crisis to do something that will lead us back to the right path. Even without the pandemic, the world still needs changes.
The 1997 Asian Financial Crisis (Tom Yam Kung Crisis)
It depends on what we learnt from it. Some people learnt nothing, some learnt a lot, while some got stuck on it. Just like Covid-19, it’s clear that the world as we know it is no more. I won’t say ‘New Normal’ because the world has not have ‘Normal’ since before the pandemic. But the world is ‘VUCA’. The US Department of the Interior introduced this concept which means conventional military strategies will no longer work. It became the source of the words ‘Agility’ and ‘Resilience’: organisations must be agile and ready to handle unexpected situations. I’m sure Thai military doesn’t understand this concept. That’s why the national strategy bill has been passed. We can’t have that because it’ll become a trap. It’s a chain, not a beacon. The 3000-plus pages of the reform bill will guide the country for 20 years, but it’s been 3 years and it hasn’t been enforced. Still, it’s there, to be used when they want to. The Covid-19 pandemic is a great proof that the 3000-page plan you’ve written can be thrown away because the world is entirely different.
20-Year National Strategy
We want institutional elements that facilitate us. I’m not into politics, but why democracy is important? If we look at the economic aspect, democracy is like a market system where stakeholders have the right to participate: be it as consumers or producers. Democracy is the same: everyone has the right to get involved. Now, there’s still no ‘perfect’ democracy. It still needs to be developed and adjusted. But one clear indicator can be measured by 3 indexes. The first one is Wealth Index which is measured by the most accurate World Bank’s per capita GDP. The second one is Transparency Index which is measured by Corruption Perception Index published by TI (Transparency International). The third one is Democracy Index: the most popular one is by The Economist. When you look at those three indexes of 20 countries, the results are the same: democratic countries are highly transparent, difficult to corrupt and more developed as well as wealthy in the long run. So the question is, they don’t corrupt because they’re wealthy, thus respect others’ rights, or because they respect others’ rights and don’t corrupt, so they become weathy.
Crisis in Opportunity
Once crisis occurs, the same thing that will happen worldwide is governments will expand due to many reasons. In normal times, the world has proven that governments must shrink. If you listen to Xi Jinping, every year he’ll focus on scaling down the government and let the market work more. That’s the trend of the developed and successful world. The countries with small government tend to flourish, but they must be good and smart government as well. But once crisis happens, be it war, economic crisis or pandemic, governments must expand. That’s the Keynesian1 concept developed by John Maynard Keynes since only governments can amass vast resources to solve the problems. However, there is a framework that governments must not only expand, but also know when to scale down. After World War II, the countries that scaled down after expansion prospered, while those that stayed put after expansion became socialist which were bad in the long run.
Back to our country, the government has launched the 1.99 trillion baht stimulus. I’ll say that it’s not enough, there must be more. It must be admitted that people are severely suffering. I support the public health measures and appreciate that Thailand ranks top of the world in terms of Covid-19 management. Now that we’ve made it this far, the government is expanding, how do we use this opportunity? First, we must have expansion framework. I can use the 5T by Dr. Santitarn Satienthai. The first T is ‘Titanic’; that’s why I said 1.99 trillion is not enough, we can add another trillion. Public debt isn’t scary if we manage it well. The second one is ‘Timely’; relief programs must be launched in time, don’t wait until people starve. The third T is ‘Targeted’; trying to develop direct measures from the government to the people without any bureaucratic processes. For example, no construction, no auction, no procurement. I support the cash handout measures since it’s difficult to cheat. To do that, you must create fake identities. Or the tax measures, that’s also hard to cheat. Like Germany, they postpone tax payment for two years to keep money in the system. The next one is ‘Transparent’; every spending must be transparent. And the last one is ‘Temporary’; once done, they must step back. Don’t stay put after expansion. If they keep setting committees for everything, it’ll be hard to stop.
Now let me talk about government spending. Firstly, public debt can go up to 20%. Don’t be afraid, let it hit the ceiling. The debt ceiling can even be expanded since it’s public debt to GDP but the GDP is in deficit as well. As the top figure increases, the bottom figure decreases, the percentage is high since it can be deficit up to 10% in two years. Therefore, don’t worry. When it’s necessary, just change it. As for how to decrease it in the future, the longer you state how to lower the debt ceiling in advance, the easier it is to take out loans and the lower the costs. The first method is raising tax. There are two types we should raise: corporate tax should be raised back to 25% since the additional 5% won’t lose Thai business their competitive advantages, and property tax since it’s easy to collect. Land tax, for example, no one can hide their land. Those two taxes are effective and collected from wealthy people.
Privatisation of State Owned Enterprises
Another thing that should be done at this time is the privatisation of state owned enterprises. If you carry out a complete privatization like the UK government which sold off all their shares of British Petroleum, British Airways and British Telecom, the upside is money. With good timing, it could make 2-3 trillion baht. And those enterprises will be more efficient. I’m a neoliberal. I don’t like the government, sorry everyone. That’s because it’s been proven that, without the pressure to be more efficient and competitive which is how state-owned enterprises operate, the government fails. It’s simple creativity, no need to think of something out there. And it’ll help reduce public debt back to the original percentage.
Covid-19 Loan Bill
The government has planned 400-billion restoring budget, but there are now over 40,000 projects lining up which total at over 800 billion. It’s not the answer. I say let’s allocate 100 billion to local administration. The fund can be allocated per head or GDP: low GDP per Capita areas should get more, while those with high GDP per Capita get less. The structure is already there. We can revive the village fund and let them manage it themselves. And we get to experiment with distributing authority and resources. Would you believe that one of the most successful anti-corruption measures was distributing the resources to the local level and let them control themselves.
Additionally, I’d like to propose that, out of the 400 billion, 0.5% or about 2 billion should be set aside for an open fund for the civil society. That is, let the NGOs propose the projects to monitor whether the overall budget is spent transparently. To eradicate corruption, it’s not enough to be open, but complete and active disclosure must be enforced. That means to be open from the start, and in machine readable format too. If we can achieve that level of disclosure and let the experts from the civil society monitor, I can guarantee that we can save over 10 billion. It’ll take only 2 billion to monitor 398 billion.
Stopping Covid-19 for the Country?
I’ve conducted my own little poll which got responses from about 500 people. I asked why we succeed in stopping Covid-19: 1) Thai people collectively stop it for the country, or 2) Thai people stop it for themselves. Do you think which answer one people choose more? Only about 5 respondents picked the first answer. What does it reflect? Stop telling everyone to do it for the community at large. What does it even mean? I’ve done anti-corruption campaigns for over 10 years. At first we tried to focus on the moral aspect which no one knew exactly what it meant. Eventually, we studied and found that successful countries use self-interest. People must be told that what is being corrupted belong to them and they are the ones who suffer. And they must stand up, not for the country, but for themselves, their families and their friends. That’s how it succeeds. Therefore, public policy must stop focusing on the community at large, moral or ethics because it doesn’t work. We must be straightforward because it’s not wrong for everyone to stand out and protect their own interest. I’ve worked for over 40 years. I’ve known people who bribe and people who take the bribe. No one thinks they do anything wrong. They have explanation for themselves: from lame excuses like ‘Everyone does it’ to ‘If we don’t do it, we can’t compete with those who do?’
Now that we can achieve this much, why don’t we try setting up Safe Haven Tourism? Let’s say we offer a 3-month package for wealthy Europeans and Americans to visit Thailand for a million baht per head. I think many will buy it. Upon arrival, they’ll spend the 14-day quarantine at 4-star hotels and move to 5-star hotels afterward with pre-arranged travel programs. 10,000 such tourists will bring us 10 billion baht as well as give a boost to the hotel industry. If they want to eat at Michelin restaurants, they can pay an extra 10,000 baht per meal or we can offer different levels of packaged tour. And if they are sick, we have the hospitals for them since they can’t go to the hospital at home. As for Thailand, they said that our goal is to flattening the curve, i.e. to keep the number of patients below our capacity so we try to slow down the curve. Well, our facilities can handle 13,000 patients, but we have 70 patients right now. Even the hospitals are going under.
A large number of government officers are employed to execute senseless regulations. To reform bureaucracy, we must reform the laws at the same time. Scaling down governments is the neoliberal concept which says governments should only perform necessary duties such as supporting, facilitating and enforcing the regulations to create fair competition as well as handling what the private sector don’t do such as education and healthcare. Governments will only intervene in the market in two cases. The first case is market failure such as when monopoly occurs, the governments must stop it. Or in some industries, if a natural monopoly happens, the government will regulate it to prevent profiteering. Thai government, however, does the opposite. They promote monopoly because the private sector loves it. Whoever gets it will gain massive profits. The second case is the concept of externalities. In theory, there is no stakeholder as a representative to negotiate in the market so the government must perform that duty. But one of the externality management methods that I don’t like is letting the private sector do it themselves, which leads to meaningless CSR.
Reform means new arrangement. That means the old context doesn’t work or isn’t fully efficient. New arrangement comes with redistribution. Some of the people who used to benefits from the old structure will lose them. The goal of national reform is redistributing the centralized benefits to the public so that those who should not get them will not get them. But reform is not a win-win; somebody has to lose something and they won’t allow that to happen easily. People like to talk about reform without understanding its context and obstacles. A good reform is to redistribute the benefits that are centralized in maybe 100 or 10,000 people to 70 million people. When a reform takes place, those 70 million people won’t be aware of it. Say I can reduce corruption totaling 4 billion baht. It sounds a lot, but when you distribute it to 70 million people, it’s 80 baht each. You see that? They don’t get it. That’s what you need to understand. It’s the same with corruption. When we carry out a reform, those who lose benefits won’t allow it. So reform will only happen when the people understand and political parties will then understand too because they can win election because of it. I believe that if the people choose, they will learn. But if we believe that the people are still not mature enough to choose what’s right, then what’s right? ‘Right’ is the word I hate the most. Right for who? Who get to decide that?
Do you know the Regulatory Guillotine2? Thailand has 1,000 acts but over 100,000 orders and rules, from ministerial to citizen levels, have been issued as per those acts. Those rules have been issued for a hundred year and never stop, only increasing. Thailand has 3,000-4,000 types of license that citizens and entrepreneurs must apply from government agencies even though OECD recommends that there should be no more than 300 licenses. And for one license, an agency and hundreds of officials must be set up to issue it. Each license also comes with bribery. Let’s say we want to support health care business, we’ll get stuck with those extensive, senseless rules.
Situation after Covid 19
The opportunity I’ve mentioned is the most effective anti-corruption process. It’s called developing the ecology that doesn’t allow corruption to happen easily. And if it happens, it’ll be easy to see. Actually, this concept needs participation from the civil society. We must create transparency and active disclosure of information. The Information Act must be amended. The state-owned enterprises must be more open; procurement process must be fully disclosed from purchase transactions to prices. I’ve examined procurement projects and every time the process was correct. But I say you have to look into the result instead; if the process is correct, why state purchase is always expensive.”
Successful organisations take two kinds of people: the right-brain thinkers who are creative and the left-brain thinkers who take action. Human weakness, however, is that we like people who are like us. That’s normal, but I choose to learn and train myself to be the opposite. At Kiatnakin, for example, I must find those who have what I don’t have to join my team as many as possible. That’s how my team can increase our potential. But in Thailand nowadays, even the way of thinking must be the same. The Right sticks together, same as the Left and ‘Salim’. (laugh) If you’re a soldier, you must think like one. I’m speaking in general, not attacking anyone. But that’s what we are seeing right now, which is a mistake. It limits the potential of one’s team.
And to rely on the potential of others, we must have empathy; knowing how to walk in someone else’ shoes and our world will broaden. We must also respect others. I’ve worked for 40 years and learnt that every human being has good points that deserve respect. No exception. That’s what I’ve found. And that’s what makes us get on.
It may be another pandemic or a meteor hitting earth. But it’s ok, the world will get better in any case. I believe in human potential. Would you believe that the year 1800 may seem like a long time ago but when compared to 4600 million years of the Earth's history, it’s just a blink of an eye. In 1800, which was 200 years ago, the global population was 1 billion. Today, there are 7,500 billion. The 7-fold increase is due to the 247-fold increase of global output, according to World Bank’s figures. So, on average, we already get better. Some people benefit more, while others benefit less, that’s how the world evolves. If we look at the airline sector, airplanes could only begin to fly only 170 years ago but before Covid-19 there were flights almost every minute. Every minute, 3 million people would be flying on the planes. We have 46,000 commercial airplanes but 40,000 of those are now parking. (Smile) It’s a funny world, but it’s you guys who have to carry on this country. Luckily, I’m already old. (Laugh)
Sometimes you succeed, sometimes you fail. That’s normal. I probably fail more than succeed even. But that’s ok. Failure is only scary when it is useless. As long as we learn from our failure, it’ll become a raw material for our future success. That’s the benefit of learning.
1Keynesian Economics states that governments can maintain the growth rate and economic security under mixed economy where both the public and private sectors take important roles.
2Regulatory Guillotine (RG) aims at reviewing, revising and repealing unnecessary laws to improve Thailand’s ease of doing business. It focuses on participation from stakeholders from every sector and systematic reviewing criteria in 2 dimensions: jurisprudence and economics.
Story : Patcharin Pattanaboonpaiboon I Image : Surachet Soparattanadilok