THE THAI POLITICAL SITUATION

Turning now to the issue at hand, having just returned from Bangkok last month where I had the opportunity to meet with the Prime Minister and several key ministers, I wish to take this opportunity to provide you with a quick update on the Thai political situation.

As you know, the general elections last year resulted in one of the biggest landslides in Thai history. It was the first time, in fact, that one party, the Thai Rak Thai Party, won an absolute majority in the House of Representatives. This was consolidated even further by mergers with other political parties and by the expansion of the government coalition to include the Chart Pattana Party.

The government therefore commands a strong majority in the lower house. This is, I believe, a good sign, as with political stability, the government can pursue its legislative agenda and push through both political and economic reforms deemed necessary.

At the same time, we also have a strong system of checks and balances. As a result of the promulgation of our new constitution, the People's Constitution, in 1997, we now have an elected Senate as well as independent agencies such as the Constitutional Court to balance the powers of the executive.

One of the government's political initiatives, and one that is most talked about today, is bureaucratic reform--the rationale for which revolves around the government's desire to make our bureaucratic system more streamlined and more efficient, one that is able to keep up with the changing world environment and one that provides people with better services.

Toward this end, by next week or the beginning of our next fiscal year, the government expects to have in place a new structure of ministries and departments that is more agenda-based, along with, of course, a new cabinet lineup.

While the composition of the new cabinet is still a matter of speculation, most pundits agree that many of the current ministers will be reappointed to their old portfolios. The changes that will take place, though, will mainly reflect the establishment of six new ministries, namely:

• The Ministry of Information and Communications Technology,
• The Ministry of Energy,
• The Ministry of National Resources and the Environment,
• The Ministry of Tourism and Sports,
• The Ministry of Social Development and Human Security, and
• The Ministry of Religion and Cultural Affairs.

Through these bureaucratic reforms, the government also hopes to more effectively implement the various policy initiatives that formed the basis of its election platform.

This brings me to the next topic: the government's economic initiatives and policies.

ECONOMIC INITIATIVES AND POLICIES

Given the slowdown in the world economic situation, particularly in the world's three main engines of growth--the United States, Europe, and Japan--the government recognized earlier on that the country could no longer depend solely upon exports and foreign direct investment to drive the Thai economy.

The government therefore embarked upon what we call a "dual track plus" development policy, a two-pronged approach that aims to promote exports and foreign direct investment in parallel with enhancing domestic consumption.

To promote domestic-led growth and poverty alleviation from the grassroots upward, the government has launched a number of signature projects, including the establishment of the 1 million baht Village and Urban Revolving Fund, the One Village One Product project, the People's Bank, the Bank for SMEs of Thailand, the Thai Asset Management Corporation, a 30-baht-per-visit universal health care insurance scheme, and a debt relief program to alleviate the plight of small farmers.

At the same time, the government also continued with the economic and financial reforms necessary to increase the competitiveness of Thailand in the long term, including the privatization of our key state enterprises including those in key industries such as telecommunications, transportation, banking and utilities.

All these efforts seemed to have paid off. Let me give you some statistics.

LATEST THAI ECONOMIC SITUATION

At the peak of the crisis in 1998, Thailand's GDP declined by 10.2 percent. From the latest figures released just last week by the National Economic and Social Development Board of Thailand, growth during the second quarter of this year reached 5.1 percent, with growth for the year projected to be around 4.0 percent-4.5 per cent, buoyed largely by increased domestic spending.

Our Manufacturing Production Index (MPI) continues to increase, rising by 9.6 percent year-on-year this past July, making the average so far this year around 120.4 compared to 112.1 registered in 2000. Our Industrial Capacity Utilization rate is also up, reaching 58.8 percent in July versus 53.6 percent last year.

Our external position has also improved tremendously. At the very beginning of the financial crisis, our international reserves were almost depleted, used up in the defense of the baht. Today, our reserves stand at around $38.5 billion. Our baht currency has strengthened and is now stabilized at around 41-42 baht to the U.S. dollar compared with over 56 baht to the dollar at the peak of the crisis.

Exports, which contracted by 6.8 percent in 1998, are expected to rise by 1.7 percent this year. Our current account, which was perennially in deficit before the crisis, should this year register a surplus of 3.4 percent.

Inflation, which rose to as high as 8.1 percent in 1998, should this year be just 0.4 percent.

Unemployment is now around 1.9 percent versus 2.4 percent last year.

The government is also tackling once and for all the non-performing loan problem through the establishment of the Thai Asset Management Corporation or TAMC. So far, some 200 billion baht worth of debt has already been restructured. As a result, the level of NPLs, which peaked at around 48 percent during the crisis, now stands at around 10.2 percent, helping the banking system to resume its normal lending activities.

Though Thailand is on the road to recovery, we are by no means complacent, particularly given the uncertainty regarding the direction of the world's major economies as well as the situation regarding Iraq. To ensure that our recovery continues on a sustained path, we will therefore continue with the strengthening of our domestic economy, the continued opening of our markets to foreign trade and investment, and with further economic and financial reforms to make our Kingdom more competitive and more resilient in the long term.

THAILAND'S ECONOMIC OUTREACH

In talking about our economic situation, I also wish to highlight what we are also doing with other countries to increase our competitiveness and promote the sustained growth of the Kingdom and the region as a whole.

Thailand is currently studying the possibility of negotiating free trade agreements with many countries, from Australia to South Korea, and from China to Bahrain--all of which should present even more trade and investment opportunities within the country.

With the United States, as you may know, during Ambassador Robert Zoellick's visit to Thailand last April, it was also agreed that both countries would begin working on a Trade and Investment Framework Agreement (TIFA), which would address the full range of trade issues, including consultations on the elements of a possible free trade arrangement between us. The agreement would also establish a council, to be chaired jointly by the Thai Minister of Commerce and the United States Trade Representative, to oversee these endeavours which would act as building blocks for a deeper economic partnership.

ASIA COOPERATION DIALOGUE

One of the most important initiatives of the government is the Asia Cooperation Dialogue, or ACD, which held its inaugural meeting this past June in Cha-am, Thailand.

Initiated by the Prime Minister of Thailand himself, the ACD is a forum which serves as a "missing link" to bring together the various regional groupings for the benefit of Asia and the world. It is a top-down and evolving process, providing leaders in Asia with an opportunity to draw upon and combine the region's diverse strengths and assets, leading to the forging of strategic partnerships.

Following the meeting, several key areas were identified as areas in which participating countries could co-operate, including poverty alleviation, human resource development, bridging the digital divide, science and technology, promotion of Asian culture and tourism, development of small and medium enterprises (SMEs), resource management, energy security, transportation and communications linkages, non-traditional security issues, enhancing the role of the business and academic sectors, and infrastructure development.

It is important to recognise that the ACD is an evolving process, open and inclusive. By strengthening Asia, we hope are strengthening our partners in other regions of the world, who will benefit as ACD grows and prospers.

INTELLECTUAL PROPERTY RIGHTS

Before I conclude, I wish to also address a couple of issues that some quarters here in Washington, D.C., are concerned about. The first is that of intellectual property rights, an issue that in fact both our governments have long been working on.

I wish to reassure you of the importance attached by the Thai government to this issue, as can clearly be seen by our efforts to improve upon our legal framework. Here, several laws have already been passed and amended, while others are still being considered by parliament.

Enforcement has also been strengthened, as reflected by recent statistics of arrests and cases related to violations of intellectual property rights. For example, in 1994, a total of 1,781 arrests were made in cases related to IPR violations. Last year, this figure rose to 4,002 arrests, while this year, the figure so far has reached 2,762 arrests.

We now also have a Central Intellectual Property and International Trade Court, which was established five years ago and has helped expedite tremendously the processing of cases related to intellectual property rights.

TRAFFICKING IN HUMAN BEINGS

Another issue is that of trafficking in human beings. Here, let me also reassure you of the importance attached by the Royal Thai Government to the suppression of not only trafficking in human beings, but also the sexual exploitation of women and children.

Because of their very serious nature, Thailand has prioritized the need for all government agencies concerned to work together to prevent and suppress these crimes. To provide an improved legal framework for these endeavors, Thailand has enacted several key laws aimed at decriminalizing prostitution, protecting victims of trafficking, promoting child-friendly judicial procedures, and countering transnational organized crime.

At the grassroots level, programs have been organized to promote increased public awareness of these problems as well as to provide advice, assistance, and training to help the rehabilitation of those exploited. The Royal Thai Government is determined to resolve any problem that may hinder law enforcement through police training and improvement of inter-agency co-ordination.

The government has also been working with civil society and non-governmental organizations, as reflected by the signing of Memoranda of Understanding (MOUs) on Common Guidelines of Practices among Concerned Agencies Dealing with Women and Children Who Become Victims of Human Trafficking. At the sub-regional level, Thailand is also working closely with Cambodia to finalize an MOU on Co-operation for Eliminating Trafficking in Children and Women and assisting Victims of Human Trafficking.

Therefore, I cannot stress to you enough the seriousness with which the Thai government has been tackling the problem of trafficking in human beings and the sexual exploitation of women and children. While we do not underestimate the difficulties that may lie ahead of us, we are determined to press ahead, tackling all the challenges and problems that may arise.

--His Excellency Mr. Sakthip Krairiksh is Ambassador of Thailand to the United States. These remarks are adapted from his presentation at a country briefing on Thailand organized by the U.S.-Thailand Business Council and The Heritage Foundation and held at The Heritage Foundation on September 26, 2002.