Thailand’s finance minister Korn faces the ultimate stress test

Finance minister Korn Chatikavanij has steered the Thai economy successfully through huge political and social upheaval. But his long-term aim is to connect with Thailand’s people, and not just its financial and business elite, to bring prosperity to the majority. Eric Ellis shadowed Korn as he travelled beyond Bangkok, examining the extent of the grassroots challenges Korn faces to effect meaningful change in a country ill-served by previous incumbents.

EARLIER THIS YEAR, Thailand’s Korn Chatikavanij faced a dilemma.
Should the ex-JPMorgan heavyweight take up the generous offer of a Washington-based managing directorship at the World Bank, its Asia slot, or should he stay on as the Thai finance minister, a job he’d been in barely a year and one he had coveted since leaving banking?
He decided to stay in Bangkok.

Over nine turbulent weeks between March and May, two things happened that convinced him he had made the right decision: he brought home a stunning 12% expansion of the Thai economy in the first quarter – the fastest growth in 15 years – and the government stared down a violent uprising by so-called red-shirt protesters backed by the exiled former prime minister, telecoms billionaire Thaksin Shinawatra, under whose elected though autocratic rule Thailand had enjoyed an earlier economic boom.

“When I look back over the last few years…,” the urbane 46-year-old Korn reflects, “…well, talk about stress test!”

Euromoney has tracked Korn’s evolution from investment banker to minister of state over the past three years, first joining him in 2007 when he was in opposition and, perhaps reflecting his UK roots (the son of a senior civil servant, he was born in London and educated at Winchester College and St John’s College, Oxford), attempting to take up, for the first time in Thai democracy, a role akin to Her Majesty’s Loyal Opposition in the UK, shadowing and engaging the then Thaksinista finance minister Surapong Suebwonglee while presenting an alternative blueprint to run the economy. “That was a good thing we did, a very useful exercise as preparation for the real thing,” he says.

Then last year he found himself, almost blinking with surprise, in government after sympathetic yellow shirts laid siege to Bangkok airport for a month, a protest that precipitated the removal of the last of five Thaksin-friendly governments but also plunged Thailand into one of the world’s deepest recessions.
The team of prime minister Abhisit Vejjajiva and Korn obtained power through a parliamentary vote in December 2008, when a crucial faction that had traditionally supported the Thaksin-friendly bloc crossed the floor. Thai politics has long been notoriously corrupt and insiders and critics alike claimed the price of the 23-strong defection was about $1 million a seat. Korn and Abhisit deny the vote was anything but democratic but Korn, widely seen as a rare cleanskin in Thailand’s murky scene, was known to be uncomfortable with the defection, having openly criticized his now key parliamentary allies in a newspaper column just weeks earlier.

Now in power, and having seen off myriad attempts to dislodge them, senior Democrats such as Korn are working to address the key grievances that have convulsed Thailand for three years. A constant criticism from the red side is that pro-royal commercial and business elites of Bangkok behave as if imbued with generations of belief in their own self-worth, regarding their societal primacy and privilege as a celestial birthright. A man with Korn’s pedigree – UK-born and educated, from a wealthy family with royal connections, a multi-millionaire (his family own large slabs of Bangkok’s Sathorn district, which is also his parliamentary constituency) – makes him a pin-up for the proverbial red dartboards.

But through all the dramas, in particular the nine-week protest from March to May that paralysed central Bangkok when red shirts laid siege to the capital, Korn has tried as best he might to keep a steady hand on the economic tiller. The 46-year-old former investment banker – schooled at SG Warburg in the City of London, he later ran the Thai arms of Jardine Fleming and JPMorgan that Jardine Fleming was merged into – has been celebrated for keeping the Thai economy afloat as the country was assailed by myriad dramas, not least Thailand’s immersion into its own self-inflicted crisis just as its main markets abroad, notably the US and the EU, plunged into turmoil.

In the week after the May protests had been quelled, the Thai parliament had a budget debate. Such things are usually summary events, debate being a generous description. But Korn says this one was different, and he relished it. “It was the best one we’ve ever had.” The opposition filed a no-confidence motion, and Korn was one of five ministers in their sights. Although Korn was censured, the way he had managed the economy was never debated, which disappointed him somewhat. “I thought ‘why bother filing a motion against me if you are not going to debate it’” he recalls. So he debated himself, technically responding to a written censure. As a believer in the parliamentary process, Korn says “it is absolutely appropriate – no, it is essential – that the economy be debated and analyzed in parliament”.

He says: “It’s a real challenge, the change that we are making at the ministry of finance.” He’s choreographing a cultural change at the finance ministry, a revolution of sorts that suits Thailand’s now embedded fractious politics.

“I like going to work,” he says. “You make what you can of it, you can choose just to be ministry of finance in the strict definition, to grow the economy or you can choose to get involved in a whole lot of things, the consultative process with people, to understand the issues at grassroots, and, at the end of the day, everything is about money. With political office, you don’t just need to do things, you must be seen to be doing things.”

Korn says his ministry is traditionally perceived by Thais as akin to the Bank of Thailand: a “big-picture entity, involved only in the macro economy and not immediately relevant to real lives.”
He dismisses this perception. “That’s not true,” he says. “If you look at our network and the tools that we have, we can make a big impact.”

He points to Thailand’s stunning performance in the first quarter of 2010, announced in the midst of the recent red-shirt blockade of downtown Bangkok, when GDP rose an unexpected 12%. That was Thailand’s fastest economic growth rate in 15 years and, importantly for the Korn-Abhisit team and their difficult engagement with a sceptical Thai public, the previous best growth rate pre-dates the famously boomy Thaksin years. It also meant Korn had kept the promises made last year, when he told Euromoney this government would “live or die” on the basis of its economic management, and brought Thailand clear of a longer-lasting recession.

“The 12% growth was almost entirely pre-protest,” Korn explains. “We reasonably anticipated a full-year growth rate of something close to 7%, maybe even a bit more, but as a result of what happened, we have had to lower the growth rate. But we are still aiming for 6%, which is still pretty good, the best year we’ve had for a decade. The key is maintaining momentum of exports. The euro crisis is more of a problem for us.”

The swing factor in all this, he says, is the impact of the Thai crisis on investor confidence, in immediate terms whether the tourists return, which he says is as much about euro weakness as Thailand’s political crisis. Korn assesses tourism at about 6% to 7% of the economy. “Tourism is one of the best income distributors so, paradoxically, the people it will affect the most are those the reds claim as their base, the grassroots.”
Minimal impact

Yet despite the clearly shocking turn of events in Bangkok, where up to 100 people were killed, mostly by the Thai military during the red uprising, Korn doesn’t expect the disturbances to have longer-lasting impact on the economy. The events, he argues, were confined to a small section of the capital. Yes, there has been an impact on tourist traffic – hotel occupancy fell to 10% to 15% in June – but tourism has rebounded strongly. The manufacturing heartland of Thailand was largely unaffected, unlike in the November 2008 “yellow” crisis when goods couldn’t be got to market because of the transport shutdown. In this crisis, Thais didn’t walk off job sites and Korn says the signs so far suggest that the impact will be “minimal and that tourist numbers are already recovering.

“We are doing well,” he insists, “under the circumstances of all that is going on politically.”
Korn was directly involved in attempts to shut down the red-shirt blockade, shuttling to Singapore to convince its state-owned Temasek Holdings to cease the satellite transmission of a pro-Thaksin TV station. The trips highlighted an issue that Korn had raised when in opposition, when he railed against Thaksin’s 2006 untaxed sale of his media and telecom group Shin Corp to the Singaporeans, whose senior statesman Lee Kuan Yew cultivated a younger Thaksin as a regional up-and-comer.

An avowed free marketer, Korn had criticized Temasek’s $3 billion deal as “effectively a nationalization”, as a private but nationally strategic asset fell under the control of a foreign government, Singapore’s. His view is that governments should not be in business. (The Temasek-Thaksin deal had been the catalyst for massive anti-Thaksin protests, culminating in the September 2006 military coup that ousted him.)

Two years on from that Temasek criticism, Korn says he was happy that the Singaporeans acted “in a way that a good owner would” when he asked them to stop transmitting the red propaganda, broadcast through a channel hastily renamed the “People’s Channel”. Although many Thais – even non-reds – grumbled that this was a breach of free speech by an unelected government ruled by a party calling itself Democrat, Korn sees it as a legal issue: that the station was broadcasting slander and untruths, something even the most liberal of legal systems could not tolerate. “Forget libel, this was hate speech designed to provoke people into violent action against the government,” he says. (The government has also moved to shut down access to thousands of anti-government and anti-monarchy websites, another move that challenges the liberal Korn, one of the government’s most avid users of social media.)

The ex-investment banker’s philosophical opposition to nationalization is again colliding with the anti-Thaksin political imperative that drives his party. Much of the division in Thailand is a war of ideas and influence driven in the media. Korn has got Temasek to stop transmitting red propaganda but, as his party sees it, that’s a battle won, not a war. Now, the government wants to buy the Thaksin assets from Singapore, a nationalization of a nationalization, as one observer describes it. This has many complications, not least that various arms of the old Thaksin empire, including some of the now Temasek-owned bits, are embroiled in legal action. Much of the debate centres on Temasek-owned Thaicom, listed on the Securities Exchange of Thailand.

No sooner had Korn touched down in Bangkok after talks in Singapore than its shares soared 40% on the bruised and politically battered stock market. The reds pointed fingers at Korn, accusing him of insider trading, deploying no evidence whatsoever apart from the fact that because he had once been an investment banker, ipso facto he must still be trading shares. The accusation wounded Korn. As he says: “The old investment banker instinct kicked in and took over from the political.” He says he consciously avoided any meaningful public comment on what are premature Thaicom negotiations “at best” so as not to unduly influence the stock market, just as a good investment banker would be legally compelled to do.

“I get frustrated, to be honest with you,” he says. “I understand it – it’s a political approach they are making – but it’s just not me. I’m not good at talking about national interest as a major driver for decisions, which is why, I guess, I’m in the ministry of finance.”

Wrong call

Korn’s approach to the accusation was two-fold. First, he pointed out that it would have been a poor investment decision to trade rather than hold and then opened himself to direct public questioning on Facebook and Twitter, bypassing unfriendly and unreliable media to plead his case, or the lack of one.
“I don’t think the Singaporeans would mind me saying that they took a bet in trusting the guy [Thaksin] and they made a wrong call,” he says. “But who’s to blame them? A lot of people did. The wrong call was made and they didn’t do their due diligence, and that’s the very same due diligence we are doing right now.”

Korn doesn’t pull back from the criticism he made of the government-owned Temasek – and sovereign funds generally – as a “nationalizing” investor. But, diplomatically-minded, he reminds us that he also said: “I feel much safer that our sensitive satellites are owned by the Singapore government and not a Thaksin government. And I’ve been proven right by recent events.”

A key Korn task during the Bangkok siege was to assure key foreign business allies and investors that despite the 24/7 images transmitted on the news cycle, Thailand wasn’t shutting down, and that the government was in control. He shuttled to Europe, Japan, Korea and China. “They were concerned and they had every right to be concerned,” he says. “But my attitude is that the time you need to be communicating and keep the channel open with your friends and partners is when things are bad and the worst thing you can do is to shut off. It’s better to be out there.”

That is why, today, he finds himself a few hours west of Bangkok in Samut Sakhon, a struggling seaside town, one of many in Thailand in the crosshairs of the issues that polarize this country.
Neither urban nor rural, Samut Sakhon is a market town, in a district neatly split in sympathies between the two colourized camps that divide Thailand; the so-called red-shirts that gather under the broad umbrella provided by the military-ousted Thaksin, and the pro-establishment, pro-royal yellow-shirts who champion the ruling military-backed Abhisit-Korn team.

A train pulls into the Samut Sakhon station and people disgorge. But this being southeast Asia, that doesn’t mean they are alighting passengers. The crowds moving goods and chattels are smallholders so jostling for real estate they have to replace their stalls on the railtracks every time a locomotive motors through. Amidst this maelstrom of humanity, a man is being moved along at the centre of throng, and pressing ever-so-slowly through the masses.

At a lofty 1.94 metres, this man would stand out anyway, literally head and shoulders above his fellow Thais, who call him lor yohng – Thai for handsome and lofty. But what marks him more is a casual grace as he moves through the throng honouring folk with modest wais – Thailand’s traditional clasped hand greeting. The man is a natural campaigner but, unlike many politicians, he isn’t going through the motions. He’s enjoying himself, and the stallholders are enjoying him listening to their hard-luck stories. But it’s a festive scene – there are stalls handing out the ubiquitous khao niew ma muang, the mango and sticky coconut rice so beloved of Thais, cool drinks and bunting. And the only coloured shirts are friendly non-political ones – the green polos of the government-owned Agricultural Bank staff and the pink polos of the AgBank’s urban equivalent, the Government Savings Bank.

Korn’s image consultant is here as well, describing how he “positions” the minister as “The Professional Who Cares”.

The consultant says: “Actually, he sells himself. He’s tall, he’s good-looking, he’s down to earth and he’s made his money, he doesn’t need to be corrupt like so many of our politicians. We need more people like him in Thailand.”

Although the scene is contrived by his minders, there is also a serious message here today. Korn is to meet a handful of Thais who have been liberated from the grip of loan-sharking, a common affliction across the country, and one that impoverishes. Fix this, Korn’s thinking goes, and you go a long way towards addressing red-shirt grievances. The government is offering amnesties to loan sharks, trying to end the loans at 15% to 20% monthly interest rates that cripple the poor.

One woman Korn lingers with tells him she got into such deep debt with loan sharks that she tried to kill herself. She was discovered at the 11th hour by relatives and brought to the finance ministry-owned Government Savings Bank, which consolidated her debts, refinanced her on easy terms and helped kick-start her smallholding. The woman loan shark stands next to her – the message is that both sides can be liberated from loan-sharking. The two have prepared a sign with a handwritten poem in Thai for the occasion. “Thank you Khun Korn. You helped turned my life around. You are like a cool stream that soothes me. You’ve created a new life for me.”

Loan-sharking has long been a big problem in Thailand, and various governments have sought to limit its spread, partly because of the cancerous effects on society and the economy but also to curb the rise of alternative money sources among political opponents and criminals.

No irony

This is controversial stuff in Thailand. Much of the recent political debate has centred on Thailand’s rural poor: how they have been left behind by Thailand’s recent development, second- and third-class citizens compared with the establishment-advantaged urban elite in Bangkok. Few world cities dominate a country as much as Bangkok does Thailand but the image of the noble Thai farmer tending his padi and buffalo tugs a nationalist heartstring among Thais, even urban dwellers who wouldn’t know one end of a rice strand from the other.

When farmers from the country’s impoverished northeast – Thaksin’s political heartland – gathered to protest in Bangkok in March, many wore red tee-shirts emblazoned with the Thai word prai, meaning “serf”. It wasn’t ironic, nor was the location of their protests, the slickest, most expensive strip of real estate in Bangkok, home to five-star hotels, sumptuous shopping malls and ritzy apartment buildings. It was also symbolic that this Ratchaprasong district abutting Bangkok’s pukka Sports Club is mostly owned by the Crown Property Bureau of the embattled royal family, whose ailing octogenarian King Bhumibol is positioned as Thailand’s sympathetic champion of the poor, as increasingly was Thaksin.

This current campaign is a little different, as with the drive to clean up crippling bad debts among the poor comes an amnesty extended to the loan sharks. Korn even says that “loan providers” have a role in Thai society, but where authorities step in is when debt collectors abuse rights and break the law when picking up monies owed. “This is the most extreme of people’s financial issues, the loan-sharking, and the most urgent because every day that passes, people are suffering,” Korn says.

He talks about a waffle seller he just met in the Samut Sakhon market. “Can you imagine? She’s selling her waffles from 10pm to 7am and never getting to see her children properly, doesn’t get any sleep, paying off interest of 1,500 to 2,000 baht a day on waffles she’s selling for five baht each. Unbelievable!”

Korn tells the story with genuine empathy. He says it just eats away at the societal core, and is magnified by thousands across the country. He sees it as going to the heart of genuine red grievances, as distinct from those stirred up by Thaksin and his friends. “We have to address this as a matter of urgency. It had just been neglected by previous governments or just had money thrown at it, without addressing the institutional problem. But we are dealing with it and this time is also the first where we are using the government-owned financial institutions as a tool.”

Politically, Korn and his colleagues’ task is to nibble away at the less radical fringes of the red movement, the so-called pinks; and isolate, harass and demonize Thaksin to the point where he becomes irrelevant. “There’s 10% of the population who is yellow, another 10% who are hardcore red, or even if you double that – 20/20. That’s still 60% who do not define themselves by either colour,” Korn says. “But most of what you hear about the country is from either of these polar ends. You’ve got to address the relatively silent middle, that’s the challenge. More than any other time, the government has to do what it is supposed to do, and that is to lead.”

If that sounds like veiled criticism of prime minister Abhisit, and a tilt at his job, that would be to view Thai politics through a western or even Westminster prism, and understandable given Korn’s Anglo-centred pedigree. As half of a kind of Clegg-Cameron prototype, Korn is widely regarded as the most impressive Thai minister, and more capable than his childhood friend, the prime minister. But for all their plotting, Thais do not topple party leaders using the black arts often deployed by their western counterparts. The nakedly ambitious Thaksin aside, Thai party politics has tended to be consensus-based and consultative. The Democrats have operated more as a gentlemen’s club. The last Democrat prime minister before Abhisit was his patron, the softly spoken Chuan Leekpai, an indecisive figure persuaded to take office who often behaved and ruled as if being premier was the last thing he wanted to do. The most common description among Thais of Abhisit is that he is “nice”. Korn is both “nice” and “smart”, that is when he is not being described as “tall”.

Common sense shortage

Korn’s clear Anglophilia extends to a preference for Westminster-style ministerial government – that ministers should be elected members of the legislature. His electorate encompasses Bangkok’s financial quarter. “The electoral process encourages accountability and forces you to stay in touch, which is immense value in how you do your job,” he says. Korn holds his seat by a very large majority.
“The macro level we are dealing with,” he says. “It’s the micro level that needs urgent attention. It’s a political minefield.”

If that all sounds like common sense and good national housekeeping, it is not surprising. But in a country as poisonous and as deadly as Thailand has become since Thaksin was ousted by the military in 2006, common sense has been in relatively short supply.

It’s also good politics from Korn’s point of view. His ruling Democrat Party does not command an electoral mandate as emphatic or, indeed, legitimate as the thrice-elected Thaksin forces, ousted in September 2006.

Mindful of Thailand’s predilection for coups – there have been 15 during King Bhumibol’s 63-year reign – Korn says the military is not a problem for his government. “Not at all. I was never in any doubt during the crisis, despite all the speculation, that there would be no coup. And I think it’s a mark of success – the fact that we were able to resolve the situation within the framework of the constitution without resorting to our usual fallback, a coup or a wrong intervention.”

Korn says many reds would, however, disagree with the appropriateness of the ‘intervention’ that did end the siege – a day-long clinical military shutdown of the protest with numerous fatalities.
With cooperation from Korn’s ministry, the justice ministry is tracking “suspicious but necessarily unlawful” movement of cash among known red-shirt supporters. Government-friendly Bangkok media recently published the names and financial movements of 83 Thais the government is investigating. The inference is clear – Thaksin is funding the campaign from his various exiles, such as Dubai and Montenegro.

Korn is determined that the government will continue to pursue Thaksin, applying so far successful diplomatic pressure to squeeze and isolate him, and ultimately detain him. He says he is not convinced that the world “is on board” to cooperate with the government in apprehending Thaksin, who faces criminal charges in Bangkok, but “increasingly so”. He cites recent bans from public appearances in France and UK action to deny him an entry visa. “I think the key is, and he knows it, that if the extra judicial and terrorism charges stick then that would have a serious impact on his freedom to move around, and of his funds, which are much more important as far as I am concerned.”
Korn is emphatic. “We have to do this. The mistake we have made is to assume he would be rational and have a level of respect for his own country and the people of Thailand… and that makes him pretty much an enemy of the state.”

Korn insists that his government is not undertaking a red purge, a Thai-style night of the long knives to root out opponents. “In fact, quite the opposite,” he says. “There is an amnesty provided to protesters – other than the core ringleaders” and a government emphasis on reconciliation which, he admits, “has not gone down entirely well” with Democrat supporters.

Enormous pressure

Euromoney asks Korn if there were any moments during the nine-week crisis when he felt control was wobbling and the government was faltering. He laughs. “All the time!” he says. He remembers arriving in Paris on April 10, the day that 26 people were killed in clashes between protesters and military, Thailand’s worst political violence in almost three decades, and returning to Bangkok immediately on landing. “What I didn’t know while I was in the air was how close the prime minister came to resigning.”
He adds: “What is tragically ironic is how the prime minister has been sold to the red population as being a bloodthirsty demagogue. If he was, it would have been over months ago. He’s been the voice of restraint, holding back against enormous pressure. The biggest pressure we are facing is from our own core base supporters, who are asking ‘why are we so weak’ and ‘why aren’t we upholding the law.’” He says the government is damned when it does take firm action, and damned when it doesn’t.

At the height of the crisis, when Abhisit was confined to a Bangkok military base, Korn said he went to the office every day unharmed and unhindered, albeit under tight security. Occasionally he swung by Abhisit’s bunker, dropping off food and discussing tactics. As best they could, he says, they tried to keep the business of governing open as normally and effectively as they could. Somewhat bizarrely, throughout it all the stock market – usually so sensitive a barometer of turmoil – kept rising and outperforming, save on a handful of days, notably when government troops went to violently clear the blockade. At one point, the reds staged a half-hearted protest in front of the stock exchange to claim Korn was using taxpayers’ money to prop up the index. “Quite ridiculous,” he snorts. “I put the stock market movement down to an inherent belief in the market that things will be fine.”

Searching for root causes of the conflict, Korn rejects a fashionable view that they are poverty and income disparity. “There is poverty, yes, but over the past 25 years, the statistics are clear. Then, 45% of Thais were below the poverty line, now it’s 8%, so absolute poverty has been improving. They have mobile phones, they have televisions, and have more than enough to eat. This is not the poorest country in Asia, and the living conditions are better than in other countries.”

Critics argue that’s easy for a multi-millionaire, 40-something ex-investment banker to say, and that a miserable Thai of modest means doesn’t daily congratulate himself – or thank his government – that he’s better off than an equivalent Bangladeshi or Indonesian. That’s true, agrees Korn, “there is a problem, and a way to explain it is that there is a decline in the rural employed, coinciding with a rise in urban populations. People have moved from farms to factories, in places like here in the outskirts of Bangkok.
“So the rural poor have become the urban poor and in my opinion being urban poor is much worse, the living conditions are worse and your relative wealth is worse, cost of living – exposed to the attractions of wealth, which is a psychological issue.” He cites Thai parallels to the Foxconn issue in southern China, where factory workers are committing suicide, and worries about contagion southward.

“The most significant thing about the Foxconn matter was that overnight the owner was able to double salaries. That means he could afford to do it. Maybe we’ve been conned all this time here by employers as regards our minimum wage, which we all know to be low but have been told is necessary (lest Thai jobs migrate to cheaper neighbours such as Vietnam and China.)

“But I’m thinking, what’s the cost to the country to significantly increase this minimum wage, by order of the Ministry of Labour? If there’s a time to do it, this is now.”

Korn’s thinking betrays the government’s conundrum, and apparent willingness to consider any idea to placate a fractious nation, all the more so from a party most inclined to the establishment business community.

“I would reduce their tax, that’s the quid pro quo, and then I pick it up through higher consumption,” he says. But he admits that “I need to do more work on how this would impact on costs and competitiveness.”

Korn takes heart that during the stand-off, when the government moved to make concessions and appeared to soften, this didn’t evolve as a tipping point to spark a revolution.
“Broadly speaking people are fed up with any colour. But there are people intent on creating trouble, and they remain at large. This is something we must do something about.”

For all Thailand’s recent turmoil, Korn is surprised that so many of his compatriots didn’t join the protest. “I think that’s the scary part, because they could in future,” he says.