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Tuesday, November 11, 2003

Vayapuk in Thailand

Morgan Stanley's Daniel Lian is obviously still very much enamoured with Thaksin economics. The jury may still be out, but all this does look very interesting, and well worth taking seriously.

Thailand is set to unveil its Vayupak initiative on November 11, 2003. Vayupak is named after the mythical bird that is an integral part of Thai culture and history, and revered by Thai people. The initiative is likely to grow into several funds and different variants over time. ...........

Thaksin critics and some market participants have expressed skepticism and concern about the Vayupak. Some believe the Vayupak will be used to prop up the market to keep the ruling regime popular. Others think it will be used as a bail-out tool for failed or poorly run government companies or as a captive financing tool for the issuance of new government debt: In other words, household savings are being mobilized to pay for poor public sector management and poor public finance governance. While we understand such concerns, having examined the policy intent of Vayupak, we believe it is not designed to be a market support apparatus, a scheme for bailing out state enterprises, or a financing tool for the government.............

It is clear that Vayupak I will act to strengthen Mr. Thaksin’s macro platform and Thailand’s virtuous upswing, as it is designed to help revive substantial dead capital and help create new capital for both the government and households. However, Vayupak’s potential stretches way beyond its present round of relatively modest capital creation, in our view. We see three additional areas of structural benefits: 1) future funds based on Vayupak I could be rolled out to help monetize the large pool of dead capital that remains in the public sector and the banking system, i.e., Vayupak could become a long-term ongoing capital creation project; 2) variants of Vayupak could become creative management and financing vehicles for certain quasi-public goods, which would greatly facilitate public sector reform and help increase the efficiency of the overall economy; and 3) variants of Vayupak could become a blueprint financing tool for the proposed Asian Bond Initiative.
Source: Morgan Stanley GEF

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