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Do showcase spending schemes really boost economies?

By Jonathan Head
BBC News, Bangkok

image captionThe Bangkok car purchase scheme has helped many Thais become car owners - but at a cost

You've heard of Abenomics? Well how about Thaksinomics?

In Thailand, a single political force has won all five general elections held since 2001. It has had various names - Thai Rak Thai, PPP, Pheu Thai - but it has always been loyal to and largely funded by the former Prime Minister, Thaksin Shinawatra.

The key to its seemingly unbreakable hold over the mass of mainly rural voters is a series of well-marketed spending programmes, which are now commonly called Thaksinomics.

These are broadly intended to make ordinary Thais feel better off, with the hope that this will stimulate domestic demand in what is still a very export-reliant economy, and encourage the growth of home-grown businesses outside Bangkok.

Mr Thaksin is now in self-imposed exile following a conviction for abuse of power in 2008. Two years ago his sister Yingluck became prime minister.

"We were trying to equip the people with the ability to pay tax," says Pansak Vinyaratn, one of the architects of the original Thaksin platform in 2001 and now chief policy advisor to Prime Minister Yingluck.

"Now this is not a very positive statement going into an election. But that's actually what we were trying to do.

"If you want to be elected, you have to fulfil your contract with the voters. What is the most basic contract with the voters? They expect you to facilitate their life to be better."

The original policies were for the most part a great success. They included a very popular programme of affordable healthcare for all, a micro-credit fund made available to every village in the country, and a scheme to promote local products in larger markets.

"The policies in his first term were very good policies," says Nipon Poapongsakorn at the Thailand Development Research Institute.

"Mr Thaksin and his colleagues spent almost two years before the election looking at the social and economic problems.

"And he kept his promises. That's why he won a landslide election."

'This is a learning tool'

image captionThe government has promised every school student a tablet computer

His sister has tried to repeat that success. Yet her version of Thaksinomics is proving a lot more contentious.

Her government introduced two easily-grasped crowd-pleasers in its first two years: a promise to give every school pupil a tablet computer, and a generous tax rebate last year for first-time car buyers.

I watched children in a remote school near the border with Myanmar being given their tablets: a Chinese-made, basic model, which the government got for a price of around $80 (£50) each.

For many of them it was their first encounter with any kind of computer, and their parents were impressed by the government's generosity.

But integrating them into the sometimes antiquated Thai curriculum and ensuring teachers know how to use them, has been a quite a challenge.

"This a learning tool, this is not for playing games," Dr Benjalug Namfa from the Office of the Basic Education Commission told me as she watched the children trying out their tablets.

"That's why we came up with a 200-day lesson plan to help the teachers use them properly, to judge the appropriate amount of time to use them."

The biggest criticism of the tablet scheme is that it does not address the education system's main problems: poorly-trained teachers, out-dated teaching methods and persistent corruption.

Clogged streets

The First Car scheme was a runaway success on its own terms, with 1.2 million people buying eligible cars before the deadline at the end of last year.

For companies such as Honda, it has provided a welcome boost following the disastrous floods in 2011 that affected many factories in the country.

However, there have been criticisms that it favours the middle classes, that it conflicts with government efforts to reduce dependence on road transport and that most of the extra cars have ended up on the already clogged streets of Bangkok.

It has also tempted buyers who could not afford the repayments. Around 200,000 of those putting down a deposit for the cars are expected to cancel their orders.

But by far the most controversial Thaksinomics policy is the government's rice purchase programme, under which it has offered rice farmers a guaranteed price for their crop.

"The price they offered was 50 to 60% higher than the market price", says Nipon Poapongsakorn.

image captionPromising rice farmers a guaranteed price for their crop has proved very expensive

Because the government was offering such a high price, farmers significantly increased production. Huge amounts of often poor-quality rice were also smuggled in from Cambodia, to be passed off as home-grown.

Thailand is now sitting on a rice mountain, which it cannot sell without incurring a loss that could be more than $10bn at today's prices.

The potential cost of the scheme has even prompted warnings from international investors, yet Bangkok backtracked on a promise to reduce the price this year after protests by farmers.

Mixed benefits

Thaksinomics has always been about two things. First, it was about establishing a secure hold over the voters, and in that it has unquestionably been successful.

But it is also supposed to be about driving the domestic economy.

The original schemes for micro-credit, affordable healthcare and local product promotion have lifted the living standards of millions of poorer Thais, as has this government's decision to raise the minimum wage.

But the benefits of the car and rice purchase schemes are more doubtful, especially given their cost.

Thailand still remains heavily dependent on exports and on foreign direct investment for its growth.

The dynamic, home-grown economy that Mr Thaksin talked about when he was first elected: a nation of self-made entrepreneurs like him, if perhaps not quite so wealthy, is still just a dream.

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