Ranking Asia-Pacific’s finance ministers is designed to provide moral support to the success stories – and to give a nudge to those who could do better, or at least prompt discussion among their constituency.
Finance ministers are responsible for government finances, fiscal policy and in some cases financial regulation.
The sheer variety of the office’s power, prestige and responsibilities across the region render ineffective a quantitative approach. Instead the FinanceAsia team of journalists relied on good old-fashioned opinion.
With the help of many analysts, investors and bankers, whom we kept anonymous, our team weighed each minister’s contribution to the budget and fiscal policy; use and development of capital markets; where applicable, structural reforms and regulation; investor perceptions; and that most intangible of things, independence.
Evaluating an individual is difficult because finance ministers operate within someone else’s mandate – a prime minister, a party, or a bureaucracy. They also can look bad or good thanks to whatever mess or fortune they inherit from predecessors.
Our rankings are therefore relative. A minister at or near the top can take pride in his work, but by no means has his list of challenges (or even failures) gotten any shorter. Conversely, no one should aim to be at the bottom of our rankings, but we understand they face the hardest choices, or must operate in an environment that is often inimical to fiscal probity.
Nonetheless, certain individuals can and do make a difference. They are not just policy wonks, but masterful politicians who know how to massage the bureaucracy, who have the vision to cut through Gordian knots, who have the chops to get their agenda enacted, who possess the nous to maintain the prime minister’s trust, and who put the national interest above their personal relationships.
Whether any of our 12 ministers hit all of those lofty marks, we leave to our readers to decide – but here is FinanceAsia’s sense of who comes closer.
12) Taro Aso — Japan
Japan’s Taro Aso rates lowly because he has presided over a weakening in fiscal discipline during his tenure.
December’s general election was in many ways a showdown between the elected government’s pro-growth policies known as Abenomics, after Prime Minister Shinzo Abe, and the finance ministry’s fiscally conservative bureaucrats. Fiscal discipline lost.
An early battleground was sales tax. Japan has delayed a sales tax hike to 10% by 18 months until April 2017. The Ministry of Finance estimates that the delay will deprive the government’s coffers of about ¥5 trillion in tax revenues from April 2016 to March 2017.
The move makes it almost impossible for the government to hit its target of reducing the primary budget deficit to 3.3% of GDP in 2015.
Aso also failed to resist plans to cut the corporate tax rate from April by 2.51 percentage points to 32.1%.
The tax cuts come at a time of record spending. The draft budget for April 2015 to March 2016, approved by the cabinet on January 14, projects expenditure of ¥96.3 trillion, up from ¥95.9 trillion a year earlier.
Japan’s debt-to-GDP ratio now stands at 245%, up from 184% at the end of 2008 and close to post-World War II levels when Japan defaulted on its debt. Urgent action is needed if the government is to achieve a primary surplus by fiscal 2020.
11) Sommai Phasee — Thailand
Sommai Phasee, Thailand’s finance minister, only assumed his current role in August 2014, following the military coup. He is no newcomer, though, having previously served as a deputy finance minister following another coup in the 2006.
The main challenge he faces is reviving Thailand’s flagging economy, which has reeled from the effects of the political instability that prevailed from the second half of 2013 up till the military coup in May. As a result of this, the government is projecting GDP growth in 2014 of just 1%, while exports, tourism and domestic consumption sag.
Ironically the priority of the new government has been to continue doling out subsidies to rice farmers, continuing the same ruinous policy for which the military ostensibly ousted Yingluck Shinawatra from the prime minister’s office. The 2015 budget will slash payments to villages but it’s likely the government will continue paying off farmers to ensure political quiet.
The government therefore must shore up revenues, particularly as exports weaken. Weakening the baht is anathema, so the main idea pitched by the new government is an inheritance tax. On paper this is a good idea, but implementation of such measures is difficult in transparent, clean countries such as Canada or New Zealand. Making it work fairly in Thailand is quite a task.
The 2015 budget is mildly stimulative but hardly Keynesian. So far measures that could restore finances, improve competitiveness and restore consumer confidence are unlikely to be tried by the junta running the government.
10) John Tsang Chun-wah — Hong Kong
Financial secretary John Tsang Chun-wah fears Hong Kong’s fiscal reserves would be depleted in 20 years, now that Chief Executive Leung Chun-ying has pledged up to HK$20 billion per year to help alleviate poverty. But HK$20 billion is a drop in the bucket given Hong Kong’s HK$1.4 trillion in fiscal reserves, modest levels of government debt and consistent cash surpluses.
Markets favour governments that are conservative and prudent, but Tsang’s caution is extreme. While spending continues to go to infrastructure boondoggles that benefit well connected developers, the government is miserly toward its old, its sick, and its poor. This is increasingly untenable given the runaway prices in real estate that have priced much of the middle class out of ownership.
Hong Kong’s current fiscal stability ignores the lack of progress in shifting fiscal policy to address the pressures of an ageing population on housing, healthcare or savings. It is 15 years since the Mandatory Provident Fund emerged; since then the government has lacked any sort of vision. The best the government can offer are market-unfriendly measures against foreign property owners and a promise to expand public housing, without addressing the underlying causes of inflation and inequality.
9) Joe Hockey — AustraliaHockey in particular has come off as a whinger instead of as a leader. Communication miscues made his first budget in 2012 a non-starter, deemed miserly to an electorate not primed for austerity. Australian finances aren’t terrible – it’s a stable, AAA-rated country – but considering the country is emerging from a two-decades commodity boom, that it has already slipped into a budget deficit is worrying. Howard and Costello failed to save for a rainy day, while recent Labour governments overindulged in social programmes. Hockey became treasurer in the midst of a rapidly falling terms of trade, which has hurt revenues – and his projections have failed to keep pace with markets.
Hockey’s next budget, due in May, will make or break him. He must be realistic about Australia’s terms of trade, and replace tinkering with boldness: orient taxes away from personal income in favour of widening a national goods and services tax, close loopholes and cut spending. Even if the agenda doesn’t get through an unruly Senate, an articulated vision at least sets Abbott up for a 2016 election and a solid mandate. Hockey must spend his dwindling political capital on this task lest he find himself missing from Abbott’s side in the next election.
