EX-FINANCE MINISTER SOUNDS PUBLIC-DEBT WARNING

       Former finance minister Thanong Bidaya has expressed concern about the level of public investment under the government's Thai Khemkhaeng (TKK) project, saying it might be investing too much over a very short period.
       Expenditure under TKK is expected to amount to Bt1.4 trillion over the next three years.
       Thanong told a seminar hosted by the National Economic and Social Development Board yesterday that he was concerned about rising public debt, which could cause high inflation and erode Thailand's sovereign credit rating.
       While he was speaking, the Finance Ministry was preparing to propose today that the Cabinet approve borrowing of Bt801 billion for the new fiscal year starting October 1. The ministry plans to raise the funds to finance a budget deficit of Bt350 billion, public investment next year worth Bt270 billion and the restructuring of Financial Institutions Development Fund debt worth Bt181 billion. The ministry plans to issue long-term and savings bonds, plus borrow directly from banks.
       Thanong said the government might not need to invest too much over the next three years. In any case, the government's plan could be delayed by red tape in the budgeting procedure, which has seen public investment in the past take several years to implement.
       The former finance minister said the government had not yet set a clear plan of how public debts would be repaid. The level of public debt is expected to rise to about 60 per cent of gross domestic product by 2012, from 40 per cent now.
       Thanong said the government was being too optimistic in predicting the economy would expand about 5 per cent in years to come. At best, economic growth will be 2-3 per cent, which will create difficulty for the next government in serving public debts, he said.
       Although the government is not borrowing abroad, domestic borrowing can create trouble.
       "It will be all right if the government borrows from the market or those having ample liquidity. But if it simply prints more money, it will cause high inflation," he said.
       He also attacked the government's policy of boosting consumption, which he said would not be sustainable. The government should instead be providing support, such as deregulation, to help exporters. It should also find new markets for them.
       While economists continue to debate the "shape" of the global economic recovery - whether its graph form will be L- or U-shaped - Thanong said a high risk remained.
       He believes the recovery will be U-shaped, or a gradual recovery.
       However, if the world's private sectors do not recover after many governments have injected huge amounts of liquidity into their economies, then recovery will be delayed, he said.
       Thanong also said the government might need to centralise supervision of financial institutions. He said it should learn a lesson from the United States, which failed to prevent the financial crisis because there were many regulators supervising financial institutions, and their efforts were not coordinated.
       In the face of such a crisis, developed countries like the US and those in Europe could take care of themselves, but small countries like Thailand would face great difficulty rescuing their economies.