NEW THAI ECONOMIC TEAM TAKES THE REINS OF A

C O N F I D E N T I A L SECTION 01 OF 05 BANGKOK 003746

SIPDIS

STATE FOR EAP/MLS, EAP/RSP, EEB
STATE PASS TO USTR (WEISEL/BISBEE)
TREASURY FOR OASIA
COMMERCE FOR EAP/MAC/OKSA
SINGAPORE FOR FINATT BAKER

E.O. 12958: DECL: 12/24/2018
TAGS: ECON EFIN PGOV ETRD PINR TH
SUBJECT: NEW THAI ECONOMIC TEAM TAKES THE REINS OF A
WORSENING ECONOMY

REF: A. BANGKOK 3712 (NEW THAI CABINET APPOINTED)

B. BANGKOK 3648 (ABHISIT ELECTED)

BANGKOK 00003746 001.2 OF 005


Classified By: Ambassador Eric G. John for Reasons 1.4 (b) and (d).


1. (SBU) Summary: Thai businesses and investors are worried
about the effects of the global financial crisis on Thailand,
and Prime Minister Abhisit's cabinet selections for his
economic team have not quelled these fears. An
Oxford-educated economist, Abhisit and his Oxford classmate
Korn Chatikavanij, a career investment banker who will serve
as Finance Minister, have been welcomed by most business
elites and economic observers, but Abhisit's picks for other
key economic positions, particularly those at the Ministries
of Commerce and Industry, were met with sharp criticism, as
the appointments simply appear to be the result of the
political trading to secure Abhisit's coalition in
Parliament. Exacerbating these concerns, the Ministry of
Commerce released its November export data, showing an 18.6
percent decline in export values year-on-year. Most
government and private sector analysts have predicted
significantly slower overall economic growth for 2009, with
most estimates between zero and two per cent. Thailand's
financial house remains in good order, with high foreign
exchange reserves and low foreign debt. On December 29, the
new Prime Minister and his cabinet Abhisit will present the
government's policy agenda to parliament for debate, formally
outlining the plans the government hopes to implement in both
the near- and long-term. End Summary.


2. (C) Comment: Abhisit and Korn, while both only 44 years
old, bring a breadth of economic knowledge and experience to
the new government. However, it remains to be seen whether
Abhisit will be able to ward off political pressures from
both within and outside his coalition and still push forward
much-needed programs and policies that will allow Thailand to
cope with the global economic downturn and position itself to
be competitive globally in the years ahead. The political
maneuvering that resulted in coalition allies putting
seemingly unqualified people in key cabinet positions does
not bode well. Meanwhile, well-placed business contacts tell
us that the current projections for some growth in 2009 are
optimistic and GDP growth may well be negative. End Comment.

TWO OXFORD CLASSMATES LEAD THE ECONOMIC TEAM
--------------


3. (SBU) Prime Minister Abhisit's cabinet selections for his
economic team received unenthusiastic reactions from most
business and media observers -- with one exception, Finance
Minister Korn Chatikavanij. Korn was quickly hailed as
Abhisit's most capable economic minister, and the only one,
other than Abhisit himself, who has any background in
economic issues (see bio below). Abhisit announced that he
will lead the government's economic team himself, but Korn is
expected to be alongside the Prime Minister when any
decisions are made. Korn, a career investment banker turned
politician, has served as the opposition party's "shadow
Finance Minister" since February, closely monitoring the
financial policies and programs instituted by Prime Ministers
Samak and Somchai. Abhisit and Korn are close friends, as
well, having studied economics together at Oxford University.
Abhisit entered politics not too long after returning to
Thailand from Oxford, while Korn went on to become one of
Thailand's most well-known investment bankers, eventually
becoming the head of JP Morgan's operations here.


4. (SBU) Abhisit's policy plans will not be presented in
parliament until December 29, but Abhisit and Korn have made
several policy announcements at economic-related public
appearances this week, including at a visit to the Stock
Exchange of Thailand on December 22 in hopes of building
investor confidence. Korn told the press that his first
priority will be to revive investment and boost consumption,
in hopes of mitigating the impact of the global economic

BANGKOK 00003746 002.2 OF 005


downturn. One of the government's first major initiatives,
according to Korn, will be to significantly increase the
mid-year supplementary spending bill in hopes of
jump-starting the Thai economy. Abhisit, Korn, and other
members of the economic team are expected to meet with the
central bank governor later this week to discuss monetary
policies.

OTHER PICKS DRAW CRITICISM
--------------


5. (SBU) While most observers have positively responded to
Abhisit's selection of Korn as Finance Minister, his other
picks for his economic team have disappointed the business
community and economic observers. Two appointments, in
particular, Pornthiwa Nakasai as Commerce Minister and
Charnchai Chairungruang as Industry Minister, have been
heavily criticized for their apparent lack of experience on
commercial or economic issues. Abhisit himself even noted
that his cabinet may not look impressive but claimed that his
government will have stability. Abhisit and the Democrat
Party ceded the majority of key economist posts to leaders of
other parties within the coalition. Many political and
business insiders believed that the Democrat Party's "shadow
commerce minister" Kiat Sitthiamorn would receive the
Commerce appointment, but even that position was lost during
the political maneuvering.

TOUGH ECONOMIC TIMES AHEAD
--------------


6. (SBU) Abhisit and his economic team are expected to seek
quick solutions, or at least cushions to soften the blow, to
several negative trends: decreasing demand for Thai exports,
declining investment, and rising unemployment. Most analysts
have presented bleak economic forecasts for 2009, too,
predicting less than two percent economic growth next year.
Government and private sector forecasts also show
unemployment nearly doubling in the next year, although these
estimates may be exaggerated.


7. (SBU) Thailand's export growth rate dipped into the red
for the first time in six years, according to the Ministry of
Commerce data released on December 22. The year-on-year data
showed an 18.6 per cent decline in the value of exports from
November 2007 to November 2008. The country-specific export
data showed that Thailand is taking a hit from the global
economic crisis, too. Export performance in nearly all of
Thailand's key markets was significantly down according to
the year-on-year data: -14.2 per cent for the United States,
-8.4 per cent for Japan, -16.7 per cent for the European
Union, -34.7 percent for Hong Kong, and -36.3 per cent for
China. Even though the Ministry of Commerce still expects
export growth for all of 2008 to be about 18 per cent, the
Ministry's forecast for 2009 predicts export growth between
zero and five per cent.


8. (SBU) Foreign investment figures appear to be
significantly worsening, too. One of Abhisit's most
difficult but immediate tasks will be restoring business and
investor confidence in Thailand's economy after months of
political turmoil, including the stand-offs at Bangkok's
airports that several figures in the new government
supported. Total foreign direct investment, as estimated
through the Board of Investment's applications for incentive
packages, declined from more than $13 billion to less than $9
billion, approximately a 35 percent drop year-on-year over
the January to November time frame. Investment from the
United States has plunged from nearly $2.5 billion in 2007 to
less than $250 million in 2008, according to BOI year-on-year
estimates through November.


9. (SBU) Most analysts continue to argue that Thailand's
economic fundamentals are still relatively strong -- high
levels of foreign reserves at the central bank, low inflation

BANGKOK 00003746 003.2 OF 005


rates, high capital to debt ratios, and a low exposure to
foreign debt. Abhisit and his economic team will be tested
on how well they can maintain these strong fundamentals and
at the same time boost domestic consumption levels and
encourage domestic and foreign investment.

SELECT BIOS
--------------


10. (SBU) Below are biographic notes on select members of PM
Abhisit's economic team. Post will continue to provide
additional bio details on key cabinet officials in our
regular reporting.

Finance Minister Korn Chatikavanij
--------------

Korn Chatikavanij is the only Democrat Party member who holds
a key economic position in Prime Minister Abhisit's cabinet.
A 44-year old career investment banker turned politician,
Finance Minister Korn has quickly attracted the confidence of
business and financial leaders -- something that cannot be
said for Abhisit's other economic appointments. Since
February, Korn has served as the opposition's "shadow Finance
Minister." (Note: Democrat Party Leader Abhisit established
the opposition's "shadow cabinet" to closely track the
performance of then PM Samak's and later PM Somchai's
governments.) Known for his good looks and 6'3" height,
Korn's nickname in the Thai media translates as "tall and
handsome."

For nearly 20 years, Korn worked as the managing director of
Jardine Fleming Thanakom Securities, a company he cofounded
at the age of 24. The brokerage became one of Thailand's
largest securities firms and was acquired by JP Morgan in

1999. Korn then became the country director for JP Morgan,
where he remained until 2004. (Note: The Embassy used to
meet with Korn frequently in his capacity at JP Morgan and
has maintained contact with him since then.) A political
neophyte, Korn left the financial world to enter politics in
February 2005, when he was elected to parliament. He quickly
rose up the ranks of the Democratic Party, becoming the
Deputy Secretary-General during his first year in office.
According to formal party records, Korn is a significant
financial backer of the party, although we are not sure how
his contributions stack up against other figures,
undisclosed forms of support.

Korn received his Bachelor's with honors in philosophy,
politics, and economics from St. John's College at Oxford
University, where he befriended fellow classmate Abhisit
Vejjajiva. Korn is married to Vorakorn ("Jay") Chatikavanij,
and has two daughters, aged 11 and 9, as well as two
step-sons, aged 26 and 16.

Commerce Minister Pornthiwa Nakasai
--------------

One of the more controversial appointments of Abhisit's
cabinet is Pornthiwa Nakasai as Commerce Minister. She is
the head of the newly formed Bhum Jai Thai Party, which
consists of members of the recently dissolved Matchima
Thippathai Party, and her appointment has largely been viewed
as the result of Abhisit's coalition-building exercise within
Parliament. She has been widely criticized for her lack of
experience in business or commercial issues, with the
exception of her family's entertainment venues in
metropolitan Bangkok. Recognizing the business community's
criticisms, Pornthiwa set up an advisory team to assist her
at the Ministry, comprised of former Vice Minister of
Commerce Dr. Uttama Savanayana, former Finance and Commerce
Minister Somkid Jatusripitak, as well as other business
leaders.

Pornthiwa received her first bachelor's degree in geography

BANGKOK 00003746 004.2 OF 005


from Songkla University at Pattani and her second B.A. in
political science from Ramkhamkaeng University. She also
holds a master's degree in public administration from
Thammasat University. She is married to Anucha Nakasai and
has two children.

Industry Minister Charnchai Chairungruang
--------------

Charnchai Chairungruang, aged 56, is a career parliamentarian
who hails from Mahasarakham province in Thailand's northeast.
He was first elected to parliament in 1983 and has secured
his seat in most elections over the past 25 years. Charnchai
has held several political positions including Government
Deputy Spokesperson, Secretary to the Deputy Interior
Minister, and Parliament Secretary. He is the current leader
of the Puea Pandin (Motherland) Party, representing five
members of parliament for the Democrat-led coalition
government. Before joining Puea Pandin, he was a member of
the Thai Rak Thai Party (TRT). Despite his 25 years of
service in the House, Charnchai is considered an unknown to
the business elites, as very little is known about his
economic views. Before pursuing his undergraduate studies,
Charnchai received construction training at Uttentawai
technical college. He later received his bachelor's degree
at Rajabhat Maha Sarakham University and also a graduate
degree in political science from Chulalongkorn University.

Transport Minister Sophon Zaram
--------------

Sophon Zaram, aged 49, most recently served as the Deputy
Minister of Transportation under PM Somchai. He is one of
several People Power Party MPs who joined the Democrat Party
to help form Abhisit's government. Sophon is considered a
close aide and friend of Newin Chidchob, who led the
defection from Thaksin's camp and made the new government
possible. A local school teacher turned parliamentarian,
Sophon was first elected to parliament in 2001. Sophon
received his undergraduate degree in primary education from
Buriram Rajaphat University. He is married to Areeyaporn
Zaram and has three sons. Sophon speaks only Thai.

Virachai Virameteekul, Minister Attached to the PM's Office
-------------- --------------

Virachai Virameteekul's appointment to PM Abhisit's cabinet
was another controversial decision. Nipit Intrasombat of the
Democrat Party accused Virachai of buying his cabinet
position, for a reported 80 million Baht (over two millions
USD),fueling speculation about the role of financial
incentives in forming Abhisit's government coalition and
cabinet. Virachai is the former son-in-law of Dhanin
Chearavanont, the Chairman of the giant Thai conglomerate
Charoen Paokphand Group. This close relationship to Dhanin,
in addition to the donation to Abhisit's party, was
reportedly what secured Virachai's ministerial appointment.

Virachai began his career as a professor and lecturer of
accounting at several prestigious Thai universities. In
1993, he left academia to become the Vice Chairman of the
Business Development Bank. Virachai entered politics in 2001
with the now-defunct Thai Rak Thai party. He was later
appointed to several leadership positions during the Thaksin
administration: Vice Minister of Agriculture and Cooperatives
in 2003, Vice Minister of Finance in 2004, Vice Minister of
Foreign Affairs in 2005. After the 2006 military coup,
Virachai emerged as the political advisor to the Prime
Minister in the interim government, despite his party
affiliation with the deposed Thai Rak Thai-led government.
He kept a relatively low profile during the Samak and Somchai
administrations and then, rather unexpectedly, resurfaced in
the Abhisit government in this Minister-level advisory
position to the Prime Minister. Virachai will reportedly be
part of Abhisit's senior economic team.

BANGKOK 00003746 005.2 OF 005



Virachai holds a master's in business administration from
Clark University, and a doctorate degree in accounting from
Chulalongkorn University.

JOHN