Is Thailand's economy due for a makeover?

In some ways, it looks as if the generals that deposed elected prime minister Thaksin Shinawatra in a bloodless coup last month want to institute a completely new economic doctrine.

Retired General Surayud Chulanont, the junta-appointed premier, initially worried the business community when he told reporters his one-year government would focus on "sufficiency economy" and "indicators of happiness" instead of economic growth.

But while foreign investors have reason to fear that some parts of Thailand's open economy may start to close up, local business leaders expect the changes in economic policy to be largely rhetorical.

"Maybe in the short term we'll see some overreaction in dealing with Mr. Thaksin's policies, but as time goes on people will see the positive side of being more moderate," said Twatchai Yongkittikul, secretary-general of the Thai Bankers' Association. "Most of the old economic policies will continue. The interim government should focus on political reforms, so it's unlikely they will implement new economic policy."

For all the political chaos Thailand has seen over the past year, the economy has proved refreshingly stable. Inflation is under control, the current account is running a surplus, and stronger than expected growth in both exports and tourism has helped offset a decline in domestic demand. Economists expect that a more stable government – regardless of whether the military installed it – should unleash a torrent of pent-up consumer spending and investment.

"All in all, things look good. The economy should bottom out in the fourth quarter and then start recovering next year," said Ussara Wiraipitch, a senior economist at Standard Chartered. The London-based bank is forecasting Thailand's GDP to grow 5.2 percent next year, much higher than the expected 4.1 percent growth this year.

The government's new economic team, led by respected former central bank chief and new finance minister Pridiyathorn Devakula, has already taken measures to reassure investors. It quickly approved a budget for the next fiscal year and said public investment projects would go forward as planned.

"The government will immediately start with [infrastructure projects] that are economically viable," Mr. Pridiyathorn told reporters. "We will invest prudently."

The measured tone of the military-appointed government contrasts sharply with the relentless marketing that characterized Thaksin's administration. Under the self-styled CEO prime minister, the government aggressively pursued privatization, free-trade deals, and cheap lending programs – and gave every new project a brand name.

Government spending programs became "megaprojects." A plan to develop top clothing designers turned into "Bangkok Fashion City." An initiative to promote more Thai restaurants overseas made Thailand the "Kitchen of the World."

The government billed Thailand as the regional "hub" of everything from tourism and automobile manufacturing to halal food production and Buddhism. Even the policies had a name (with an accompanying website): Thaksinomics.

With Thaksin out, a new economic language has arrived. Buzzwords now include "sufficiency," "moderation," and "stability."

The new lingo stems from the "sufficiency economy" philosophy of the revered King Bhumibol Adulyadej, which many see as conflicting with Thaksin's brand of capitalism. But while the words may evoke images of an agrarian paradise, followers of both Adam Smith and Karl Marx could claim to practice "sufficiency economy."

According to a definition of the term on its official website (www.sufficiencyeconomy.org), sufficiency economy is a philosophy of "moderation, reasonableness and the need for a self-immunity mechanism" that has "universal domain applicability" and calls for modernization "in line with the forces of globalization."

While the interim government will pay lip service to this philosophy out of respect for the god-like king, who has ruled Thailand for 60 years and endorsed the Sept. 19 coup, most analysts don't expect any drastic new policies.

In addition to Pridiyathorn, who holds an MBA from the Wharton School at the University of Pennsylvania, Mr. Surayud's cabinet is comprised of ardent capitalists. His commerce minister is a former ambassador to the World Trade Organization; his foreign minister formerly headed the negotiating team in bilateral trade talks with the US; his energy minister has called for the state-owned electricity monopoly to be privatized; and his industry minister headed the country's largest private bank.

"Most of the economic cabinet members are quite liberal," said Sompob Manarangsun, an economist at Chulalongkorn University. "Thailand is not about to close up its economy."

Potentially more worrisome than the talk about sufficiency economy are two lawsuits brought by Thaksin's opponents. Decisions in the cases – one regarding the privatization of state-owned oil giant PTT Plc and the other over the foreign purchase of Shin Corp, which was owned by Thaksin's family – could sour the overall investment climate.

But since implementing such drastic changes is seen as too costly to the economy, many analysts expect the government to reach a settlement that finds some middle ground.

"I think the government knows that it would cause many problems if these companies need to make major changes," said Kosin Sripaiboon, the research head at UOB Kay Hian Securities in Thailand. "So the result of both cases will likely be a compromise with minimal impact on the entire economy."