S & P Urges 'decisive Effort' To Restore Confidence In Thailand

[george]

S and P urges 'decisive effort' to restore confidence in Thailand

Thailand needs to make a 'decisive effort' to restore confidence following deadly bombings in Bangkok and amid perceptions of weakening political stability, ratings agency Standard and Poor's said Monday.

"Thailand has been recognized as an attractive destination for foreign investment in recent years," said Standard and Poor's credit analyst Kim Eng Tan, following the release of a report called "Decisive effort needed to reverse the deterioration in investment confidence in Thailand".

"However, its reputation as an investment destination has suffered a number of setbacks over the course of 2006," Tan added.

The New Year's Eve bombings that killed three capped a year of political turbulence that raised new concerns among the public about foreign companies operating in Thailand.

Concerns about political stability were heightened when former prime minister Thaksin Shinawatra was ousted in a coup in September.

Among the issues tied to his downfall were the sale of Shin Corp, the telecom giant he founded, to Singapore's Temasek Holdings.

The commerce ministry has since found the deal violated foreign ownership laws, raising concerns among international firms that their subsidiaries here may also be found to have illegal ownership structures.

Public debate about free trade agreements, privatization, and opposition to expansion plans by foreign retailers have also damaged confidence in Thailand, the S and P report said.

The sudden introduction of capital controls last month has also left investors wary about future abrupt policy changes, it added.

"Nevertheless, many of Thailand's economic strengths remain unaffected by events in the past year. Rebuilding investor confidence to attract new foreign investment is therefore a key to maintaining economic growth at a pace similar to that seen in the recent past," said Tan.

"Left unaddressed, diminished foreign investor confidence will lower Thailand's economic prospects and weaken a key support for its creditworthiness."

AFP 2007-01-08

[cdnvic]

Being decisive (coups, changing visa and investment rules) is what gets the Thai government in trouble in the first place. When will they learn to just leave things alone?

[Jai Dee]

Decisive effort crucial to boost investors' confidence in Thailand

The New Year’s Eve bomb attacks in Bangkok have been the latest in a string of events since early 2006 to hurt the investment climate in Thailand (foreign currency BBB+/Stable/A-2, local currency A/Stable/A-1).

Standard & Poor's Ratings Services said on Jan 8 the impact of such events on foreign investor confidence is of particular significance as foreign investments have been an important source of economic growth in Thailand in recent years.

"The resulting poorer economic growth prospects will further weaken support for the sovereign credit ratings on Thailand unless the government takes decisive steps to reverse the worsening investment climate," it said in a report.

The report was entitled "Decisive effort needed to reverse the deterioration in investment confidence in Thailand".

"Thailand has been recognized as an attractive destination for foreign investment in recent years," said S&P credit analyst Tan Kim Eng. "However, its reputation as an investment destination has suffered a number of setbacks over the course of 2006."

The perception of political stability in Thailand was damaged by the confrontation between the Thaksin government and its opponents, which culminated in the military overthrow of the government on Sept 19.

The related public debate about the sale of Shin Corp, the privatisation of several state-owned enterprises, and the issue of free trade agreements in general suggested that local sentiment had turned against foreign investors.

This impression was reinforced by opposition to the expansion plans of international retail companies, which prompted the government to draft a law to regulate their activities.

Foreign investors were also unsettled by the investigations into the use of nominees in the acquisition of Shin Corp. Other foreign companies that had adopted similar strategies to acquire majority stakes in Thai firms now fear that their holdings could be declared illegal.

In the wake of the Bank of Thailand’s abrupt introduction of capital controls in December (which have since been partially reversed), investors are wary of further sudden changes in government policies.

The New Year’s Eve bombings in Bangkok added security fears to the growing list of foreign investors concerns.

"Nevertheless, many of Thailand’s economic strengths remain unaffected by events in the past year. Rebuilding investor confidence to attract new foreign investment is therefore a key to maintaining economic growth at a pace similar to that seen in the recent past," said Tan.

"Left unaddressed, diminished foreign investor confidence will lower Thailand’s economic prospects and weaken a key support for its creditworthiness."

Source: The Edge Daily - 8 January 2006

[John K]

Being decisive (coups, changing visa and investment rules) is what gets the Thai government in trouble in the first place. When will they learn to just leave things alone?

I have to agree here. Not thinking things out more than one or two steps on changes are beginning to have fallout for the Thais. If I did not know better it seems like they think they are the only player in the game. I am not keeping score but good decisions vs bad decisions, it seems that bad decisions are much more frequent. If this keeps up in a few months all the people they are chasing away will be on the Thai VIP list. That may include people with VOA as they have money too.

[Mid]

"Left unaddressed, diminished foreign investor confidence will lower Thailand's economic prospects and weaken a key support for its creditworthiness."

and will the powers to be take any notice of this ( dare I say gentle ) warning ?

[Dupont]

On top of all this is the moral panic breaking out. Just look at the threads that the Ministry of Returning Thailand to the 1600's has generated recently. She has another one today about TV content. Has she only just noticed this weekend what is on TV and in the Media? Elevating her to this position causes lack of confidence as she just shouldn't still be in post.

Then theres the Nationalism that was generated to garner votes. It was never needed and turned many off.

The Labour Department figure of 14,000 foreign part owned registered companies should have woken them up. Whilst many of them are small bars, restaurants, lifestyle businesses, the foreign staff were helping the housing market along whether buying or renting.

Some of these 14,000 companies are big multi-nationals with many high earning foreign staff in this country. Many of these staff once here, fall in love with the place and aspire to live here. So they are scaring off the top end of the market with this bid to get the lower earning foreigners out. Absolutely no foresight.

To stop the rot requires the Thais to firstly notice that it is rot. Then come up with a plan (not the usual knee jerk reaction) that will restore confidence. Believe me, it takes a lot more to regain confidence than it does to loose it.

Any elderly house owner will have had three major scares this past year that he/she will have perceived as an attempt to take away their house or land or visa. Are they likely to buy anymore land or recommend to a friend that they come here and do the same??? Not for years to come thats for sure.

Edited January 8, 2007 by Dupont

[cclub75]

"Left unaddressed, diminished foreign investor confidence will lower Thailand’s economic prospects and weaken a key support for its creditworthiness."

What a delicious diplomatic tone...

And a perfect timing : it's tomorrow that the Cabinet should announce the changes of the Foreign Business Act (and the nominee issue)...

Just to remind you : the new rule to qualify a company as "foreign" or "thai" would be the voting rights (before it was just the % of shares).

Because of the new year eve bombs... I bet now on a new "delay" in this announcement (further talks with the ad hoc committee, etc.).

I can't see the Cabinet give another blow to foreign investors. Now. The air is just too hot... And too smelly.

[opothai]

i can not see a military government in power worrying too much about econmics and running a country when they have all the power to make themselves stronger with hardware and the feeling of importance.

they have power struggles within to worry about first.

[bkkandrew]

"Left unaddressed, diminished foreign investor confidence will lower Thailand's economic prospects and weaken a key support for its creditworthiness."

and will the powers to be take any notice of this ( dare I say gentle ) warning ?

I doubt they will understand it until it happens, then they will lauch another crazy sceme to address the results....

[andy1308]

I worry that Thailand is on the brink right now. Any more 'problems' and any remaining confidence from overseas investors is likely to vanish. It's not so much what happens inside the Kingdom, but the effect it has outside.

I know I am stating the obvious here, but I agree that the 'decisive effort' that is mentioned is the S&P report is much needed right now. However, any efforts will be wasted if there are further problems or instability.

[John K]

I think for me this is a popcorn topic. I will just make some popcorn sit back and watch. It will be very amusing to see what happens as the ‘lets see what this does’ approach moves forward.

[Dupont]

i can not see a military government in power worrying too much about econmics and running a country when they have all the power to make themselves stronger with hardware and the feeling of importance.

they have power struggles within to worry about first.

They will worry as they are a faction of factions as well.

The potential of this disruption is massive and its only the fact that its not been felt in the pocket yet, that they are going on with it.

Anything that affects the economy is felt from the bottom to the top, espescially on the scale this is likely to have. Not to mention that it will be felt for a very long time.

People invest here now as they have some control throught the voting set up. Take that away and you may as well set up a bank account and just ask people to pour money into it.

Nobody, but nobody is going to invest a brass farthing if they change this. Think about it, you don't own your investment and you cannot manage it. Once you have imparted your knowledge to your Thai partners, you can not even take an income from it as they can vote on your salary.

On the other hand, the business will not be worth anything to them as the impact will be felt accross the board. As in Zimbabwe when the farmers took over the farms from the white people. They are even poorer and hungrier now than before. its 19th century forumulative communist theory and will not work. 100% of nothing is nothing and 49 percent of 1 million baht is 490,000 baht as I recall from business school.