A bittersweet relationship

The Bangkok of Thailand and Finance Ministry, a husband & wife who should keep their arguments private, Dr Puey Ungphakorn once reflected.

Photo above of Atchana Waiquamdee, the outgoing central bank's deputy governor for monetary stability.

Click button to listen to BOT and Finance Ministry to download

A marriage built on give and take, Outgoing BoT deputy reflects on up-and-down relationship with Finance Ministry by Parista Yuthamanop

On the surface, the Finance Ministry and the Bank of Thailand appear to have been in conflict over the past month or two, but closer scrutiny reveals the bittersweet relationship that is typical between the two.

Soon after the new government took office early last month, Finance Minister Thirachai Phuvanatnaranubala assigned the central bank to revise the inflation target, restructure the government's liabilities deriving from the huge 1997 bailout fund, establish a sovereign wealth fund and oversee banks' deposit mobilisation through debt instruments.

However, all of these were met with a cautious response by Prasarn Trairatvorakul, the Bank of Thailand's governor.

Atchana Waiquamdee, the central bank's deputy governor for monetary stability, in an interview with the Bangkok Post is resigned to the media playing up the perceived feud.

But I agree with Dr Puey [Ungphakorn], who said: 'The relationship between the central bank and the Finance Ministry is one of husband and wife - if they want to argue, they do so behind closed doors'," she said.

Dr Atchana said Mr Thirachai had been a deputy central bank governor and head of the capital market watchdog before assuming his current post, so he understands the issues well enough.

The Bank of Thailand Act calls for the cabinet to endorse the inflation target based on consultations with the central bank each December.

calls for the cabinet to endorse the inflation target based on consultations with the central bank

The existing target of 0.5% to 3% has been used since 2009, but the central bank believes it should be narrower to make the public more aware of current inflation trends.

There has been an ongoing debate about whether inflation targeting can sufficiently accommodate growth in a developing country like Thailand.

Dr Atchana, who will retire at the end of this week, said the notion that this framework is as strict on price pressures as, for example, the Bank of England or the Bank of New Zealand, is a misconception.

"We call our framework 'flexible inflation targeting'. That means we place a lot of weight on economic growth," she said.

"We have no other choice," she said. "We've tried exchange-rate targeting, and the time for monetary-based targeting has passed."

While the global economic downturn will prompt the government to use more stimulus spending, she says caution should be exercised, as revenue.

"The country's tax collection is only 17% of GDP compared with 25-30% in other economies. It's a tradeoff. If the government gives tax rebates for buying a car, then it stands to lose money that could have been used to improve mass transit or logistics," said Dr Atchana

Above all, they'll have to consider how best to end such a policy.

She said the Monetary Policy Committee will have a tougher time balancing the risks for economic growth and inflation due to the general perception including by the IMF that the global economy is increasingly likely to slip into recession again.

Dr Atchana also said the central bank did not oppose a sovereign wealth fund aimed at maximising returns on foreign reserves.

"After stress-testing our balance of payments, we found there's actually an excess of those foreign reserves used to back banknotes," she said

The key concern is the government's investment strategy. We would like the government to use funds to buy these reserves out rather than just taking them out. This would be similar to South Korea, whose government raised funds from the public and swapped them out with their central bank reserves to set up a sovereign wealth fund. 

Dr Atchana said the central bank's failure to fulfil its commitment to set aside profits from foreign reserves to offset the principal on Financial Institutions Development Fund liabilities has taken away resources that could have been used for other purposes.

However, she said the central bank could set aside funds to reduce that debt if the requirement were amended to allow profits to be used before foreign assets are revaluated in baht terms.

(Source: Bangkok Post, A marriage built on give and take, Outgoing BoT deputy reflects on up-and-down relationship with Finance Ministry, 26/09/2011, Parista Yuthamanop, link)

Central Bank Vocabulary

Dr. Puey Ungphakorn - ป๋วย อึ๊งภากรณ์ (1916 - 1999) was an extremely successful bureaucrat who played a central role in the shaping of Thailand's economic development and in the strengthening of its system of higher education. Puey was the Governor of the (Central) Bank of Thailand for 12 years, a Dean of the Faculty of Economics, and also a rector of Thammasat University in Bangkok. Puey was a member of the Free Thai Movement during World War II. He was a Magsaysay Award winner in the field of public service in 1965."
(See Wikipedia)

give and take - having a flexible approach, changing things to make it work

deputy - a person who is given the power to do something instead of another person, or the person whose rank is immediately below that of the leader of an organisation รอง, ตัวแทน,ผู้รักษาการแทน

outgoing - a government official ending their term in office (they served in a fixed position for a certain period of time)
outgoing BoT deputy - the BoT governor ending their term in office

X reflects on Y - X thinks about issue Y (and tells the readers something about it)

up-and-down relationship - sometimes they are friends, sometimes not

conflict - an angry disagreement between people or groups ความขัดแย้ง   ความไม่ลงรอยกัน

scrutiny - careful and thorough examination การตรวจสอบอย่างละเอียด การใคร่ครวญอย่างละเอียด
closer scrutiny reveals - looking at this or investigating this more closely, you will see 

bittersweet relationship -  sometimes happy, sometimes sad
typical - the usual, the ordinary

central bank - the main bank in the country, that overseas the issuance of money, setting of interest rates and managing of the exchange rate
revise - improve, create again or recreate with improvements

inflation - the level of prices rising in the economy as a whole ภาวะเงินเฟ้อ
inflation target - the range of inflation rates that the central bank must try keep inflation within

target - a goal; the amount you are planning to achieve เป้าหมาย
revise the inflation target - change the inflation target

restructure - to organise something such as a company in a different way so that it will operate better  and more efficiently ปรับโครงสร้างใหม่
liabilities - debts; the money that a company owes others; money borrowed by a company (liabilities + owners' equity = assets) หนี้ขององค์กร หนี้สิน

restructure the government's liabilities - moving the liability from one part of the government to another part of the government

deriving from - coming from

bailout - help in the form of money to prevent failure and bankruptcy ช่วยไม่ให้ธุรกิจล้มละลาย (See glossary)
1997 bailout fund -

the government's liabilities deriving from the huge 1997 bailout fund -
establish - create

sovereign wealth fund -

sovereign - (of a country) ruling itself เอกราช อำนาจอธิปไตย
wealth - how much money and assets a person or country owns
sovereign wealth - the assets and wealth of a country
 
oversee - to watch or organise a job or an activity to make certain that it is being done correctly คุมงาน,ควบคุม ตรวจตรา manage จัดการ ดูแล
deposit - 1. bank deposit; money that a person keeps at a bank in a "bank account; to leave something somewhere ทับถม, สะสม

mobilisation - a gathering together of people or things
deposit mobilisation  gathering together bank deposits
debt instruments - some way that money is borrowed (such as a bond or by a special higher interest rate longer-term bank account such as a certificate of deposit)
banks' deposit mobilisation through debt instruments  - gathering together deposit money by offering new bank accounts (longer-term, higher interest rate)

cautious - careful to avoid danger ระมัดระวังไม่ให้เกิดขึ้น
met with a cautious response - when something big happened, they were very slow and careful in their response 

stability - when a situation does change suddenly and unexpectedly, so people can operate normally and successfully ความมีเสถียรภาพ ความมั่นคง
monetary stability -   

interview - to ask someone questions in a meeting for a newspaper article, television show, etc. The noun form is also interview สัมภาษณ์, การสัมภาษณ์
resigned to - accepts something that is not good (that they don't really want to accept) 

feud - a fight; an angry disagreement between two people or groups that continues for a long time; row; dispute ความอาฆาต
perceive X as Y - believe X to be Y: see X as being Y
perceived feud -  believe something to be a "feud" or fight (when it is not really a fight)

media - public ways of communicating news and information: television, radio, newspapers, magazines, the internet, considered as a group สื่อ
playing up - making some issue into a bigger issue than it really is 
resigned to the media playing up the perceived feud - accepts that the media is going to make the disgreement seem bigger than it actually is

Dr Puey Ungphakorn

argue behind closed doors (like a husband and wife do) -

capital - money invested in a business (See glossary)
capital markets - markets for buying and selling stocks, bonds, etc (markets for business investments)
capital market watchdog - the Securities and Exchange Commission (SEC)

watchdog -1. an organisation or person that works to stop people from doing illegal things; that makes sure that everyone plays by the rules  กลุ่มจับตาประชาธิปไตย 2. a dog trained to protect a place สุนัขเฝ้าบ้าน (See glossary)

current - of the present time ปัจจุบัน
before assuming his current post - before beginning work in his current position

issues - subjects that need to be considered ประเด็น
understands the issues well enough  

endorse - officially improve
consultations - meeting with the people who will be affected by a decision (stakeholders) before making a decision

aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ
ongoing - currently happening;  happening at the present moment; continuing ไม่หยุดยั้ง, ต่อเนื่อง อย่างต่อเนื่อง

debate - a discussion or formal argument on an issue between people with different views (See Wikipedia)
inflation targeting

accommodate growth in a developing country - allow the growth that a developing country needs
accommodate - do things to meet or satisfy the needs of another; to prepare what is needed for something ปรับตัว

retire - ending your career and work life (usually late in life, to do something else) 
notion - belief or idea ความคิด, ความเชื่อ, แนวคิด

framework - a system of rules, ideas or beliefs that is used to plan or decide something ขอบข่ายงาน, โครงร่าง
strict - very careful and exact เข้มงวด
framework strict on price pressures -

misconception - to have the wrong idea about something; not understanding something

flexible inflation targeting -
weight - importance ความสำคัญ
place a lot of weight on economic growth -

global - throughout the world ทั่วโลก
downturn - ระยะตกต่ำ going down
global economic downturn - a problem in the world economy (all economies growing slowly, incomes down)
prompt - to cause something to happen or be done ก่อให้เกิด

fiscal stimulus - a temporary increase in government spending to get the economy moving again after a recession or economic downturn
stimulus spending - "fiscal stimulus" money spent by the government

exercise - to use something in your actions (example: exercise power or rights การใช้สิทธิ
caution should be exercised - use caution in your actions

revenue - income from taxes or business activities รายได้
revenue collection - they have only collected a small percentage of the tax they could collect

modest - fairly small, especially when compared with other things of the same type; not large in size or amount ไม่มากมาย
revenue collection has remained modest - a small percentage of the people who could pay tax, actually pay taxes

exchange-rate targeting - (See monetary policy)
monetary-based targeting - (See monetary policy)

tradeoff between X and Y - if you want more X, then you have to give up some Y
rebates - giving money back after payment
tax rebates - getting money back on tax paid (have to pay less tax)

stands to lose money - in the future, they may lose money 

improve - to make better ทำให้ดีขึ้น

mass - large numbers จำนวนมหาศาล
transit - the act of moving from one place to another การเดินทางผ่าน
mass transit - transport such as subway, bus or light rail (skytrain) for moving large numbers of people around a city or area
improve mass transit

logistics - the activity of transporting, storing, and tracking goods (being sent from one place to another) (See Wikipedia and previous article) การขนส่งสินค้า การขนส่งและจัดจำหน่ายสินค้า
policy - a set of plans or action agreed on by a government, political party, business, or other group นโยบาย  (See Wikipedia)

perception - การรับรู้ the way you see and think about something
balancing the risks for economic growth and inflation - there is a tradeoff between the two (fast growth usually generates inflation; slow growth would have little or no inflation,,,) 
general perception - what most people think (feel about a situation, view the situation)

recession - a general slowdown in economic activity in a country over a sustained period of time; a reduction in an economic activity and GDP for two or more than half a year (two quarters) (See Wikipedia) ภาวะเศรษฐกิจถดถอย

slip into recession - when a recession slowly begins
increasingly likely to slip into recession - a recession seems more and more possible, everyday ...
global economy is increasingly likely to slip into recession again

oppose - to disagree with or not approve of a plan or policy คัดค้าน

foreign reserves - the amount of foreign currency or gold held by a national bank, which is used for dealing with the national banks of other countries เงินสำรอง
maximising returns on foreign reserves - making as much money on the foreign reserve assets as possible

key - important คนสำคัญ
key concern - an important thing that people worry about

stress - difficulties or pressures that could cause failure
stress-testing -  "a form of testing that is used to determine the stability of a given system or entity. It involves testing beyond normal operational capacity, often to a breaking point, in order to observe the results. Stress testing may have a more specific meaning in certain industries, such as fatigue testing for materials" (See Wikipedia)
financial sector stress tests - looking at how well an asset or a whole financial organization does in different situations, by a running a mathematical computer simulation of the future using some economic model of how the economy works (See Wikipedia)

stress-testing our balance of payments - using an economic model to test what would happen to the balance of payments (if certain things happened)

excess - greater than is usual; too much of something มากเกินปริมาณที่พอดี

foreign reserves used to back banknotes - foreign reserves provide backing or support for the money supply (For more info see Wikipedia)

key concern - an important thing that people are worrying about

funds - an amount of money kept for a special purpose
use funds to buy these reserves out rather than just taking them out

South Korea, whose government raised funds from the public and swapped them out with their central bank reserves to set up a sovereign wealth fund.  

commitment - a promise to do something in the future; requirement; something that you must do ข้อผูกมัด, ข้อสัญญา, ความรับผิดชอบ
failure to fulfil its commitment

offset - move in the opposite direction, reduce by moving in the opposite direction, counter-balance, compensate in the opposite direction ("x offsets y" means "x reduces the effect of y"), make up for (profits from the manufacturing business offset losses from the retail business) (See glossary)

principal - the amount of a loan
set aside profits from foreign reserves to offset the principal on Financial Institutions Development Fund liabilities
resources - things such as materials, money, and other things needed for a person or organisation to function properly and achieve their goals ทรัพยากร

set aside funds to reduce that debt

amended - change  
requirement were amended - requirement was changed

assets - a thing of value with an owner; things that can earn money for their owner ทรัพย์สิน
allow profits to be used before foreign assets are revaluated in baht terms