Would You Invest In Thai Business Or Real Estate Now?

[Alf Witt]

"We have a record of welcoming foreign investment. We are not hostile to them. Foreign investors have made Thailand develop and we are certainly still adhering to this policy," Finance Minister Pridiyathorn Devakula on introducing the new amendments to the Foreign Business Act.

We have had visa restrictions, military coup, failed attepts at capital controls, and now legislation aimed at reducing foreigners ability to control their investment in Thailand (FBA).

Time for some measurable reaction. Please take our poll.

Edited January 15, 2007 by Alf Witt

[jumnien]

It's a bad time to invest in Thailand illegally; they may, but probably not, start enforcing business laws here. If legally done, it's probably a great time to invest. Recent Thai govt action has decreased the amount of hot money around and hopefully farang entrepreneurs, less competition to worry about. That's the good news. But, what if things straighten themselves out, as often happens in the Land of smiles, and all the farang start flooding back with their masses of money and hair-brained schemes?

[pap]

It's a bad time to invest in Thailand illegally; they may, but probably not, start enforcing business laws here. If legally done, it's probably a great time to invest. Recent Thai govt action has decreased the amount of hot money around and hopefully farang entrepreneurs, less competition to worry about. That's the good news. But, what if things straighten themselves out, as often happens in the Land of smiles, and all the farang start flooding back with their masses of money and hair-brained schemes?

The Thai governments timing could not be worse for their errors. I don't honestly believe that farang money is just sitting and waiting for them to get their act together when you can stick this money in India, Malaysia, Vietnam or China and make bank. The same can be said for hedge fund investors and international mutual funds not just business capital.

4.7% was the estimated economic growth with 8% and 9% all around them why would you invest in a place that has higher risk and lower return?

I love Thailand but they seem not to get that this is a competition. If the people you compete with get more money than you than they get better colleges and better infastructure. These things bring in more money. Soon you are not competing with your neighbors at all. 40 years go protectionism would have worked. Today it does not. Not because globalization is better but because so many countries have bought into the concept. That leaves very little wiggle room for economies not willing to buy into it. You you choose not to accept globalization then you better be very astute in you economic decisions.

So far the current crop of government officials have not proven to be astute.

[jumnien]

Khun Pap,

I basically agree with what you say. However, I think we will look back 2 or 4 years from now and see that much of this protectionist crud just never became institutionalized properly and will fade.

So, it's kink of like investing in an individual stock. The bad news is priced in, SET P/E of 8, and the country as a whole is rather cheap in many ways. Good news will make it less of a bargain when it comes. It's always hard to time the market. But, we've been rather blessed with bad news for some time now which has served us well in bringing prices down a bit. But, we cannot count on bad news forever.

Buy low, sell high! I'd say we're closer to the low than the high!

[Alf Witt]

On a forum where many members like to air their opinions few have responded to this poll. Why?

[jbowman1993]

I'd be happy to invest in Thailand. Please give me some money, and I wll do so right away....

[PhilHarries]

It's a bad time to invest in Thailand illegally; they may, but probably not, start enforcing business laws here. If legally done, it's probably a great time to invest. Recent Thai govt action has decreased the amount of hot money around and hopefully farang entrepreneurs, less competition to worry about. That's the good news. But, what if things straighten themselves out, as often happens in the Land of smiles, and all the farang start flooding back with their masses of money and hair-brained schemes?

And there's the rub! You should never invst your money illegally in a country because when they decide on, whatever whim they like, to enforce the rules your ar5e is out the windown without pants, you have absolutely no recourse. That Thailand allows illegal or, at best, dodgy investment and/or business schemes illustrates what a bunch of morally corrupt <deleted> you are dealing with.

Legally I do not think it is a good time to invest in Thailand, there's too much instability as ably demonstrated by the current imposed administration. Give it a couple of years until we have a democratically elected government who has demonstrated it's competance and I'd be willing to reconsider, but for now my money remains in a safer haven.

Investment is a risk anywhere, just look at the endowment mortgage schemes in the UK, by just why would anyone want to risk their money in a country under military rule? Especially when you consider other, more attractive, alternatives.

[GuestHouse]

"Invest in Thailand"

The whole notion is in error and ignores the basic principal "Do not bring money into Thailand that you cannot afford to loose"

Thailand is a place to spend money, not a place to make money. OK some (extremely few) foreigners make money in Thailand but the rest are telling themselves porkies.

As has been said above, legitimate investment is welcome and probably not a bad bet, but if your complaint is that the land laws are being enforced and you can't cheat your Thai wife out of her share of your marital wealth... my heart breaks for you.

[~G~]

Thailand is a place to spend money, not a place to make money. OK some (extremely few) foreigners make money in Thailand but the rest are telling themselves porkies.

Exactly. It is similar to a Gambler going to a Casino - the rules are set in a way that the Expectency is against the

gambler, so he is very likely to lose in the long term. The house is Thailand, the rules are clearly against small foreign investors, plus they change whenever the house feels like it.

Ok, you can certainly make some profit here and there, I'm not saying you can't. But in the long-term, the odds are against the small investor, and between doing visa runs endlessly and work permit renewals, always being at the mercy of immigration and ministry of labour for the renewals, begging landlords to renew leases (coz you can't properly own the land), changing company status, and potentially being subject to probes and investigations from the mutiple government bodies, in the long run you need quite Exceptional Returns to justify getting into this kind of adventure.

[bmanly]

Thailand is a place to spend money, not a place to make money. OK some (extremely few) foreigners make money in Thailand but the rest are telling themselves porkies.

Exactly. It is similar to a Gambler going to a Casino - the rules are set in a way that the Expectency is against the

gambler, so he is very likely to lose in the long term. The house is Thailand, the rules are clearly against small foreign investors, plus they change whenever the house feels like it.

Ok, you can certainly make some profit here and there, I'm not saying you can't. But in the long-term, the odds are against the small investor, and between doing visa runs endlessly and work permit renewals, always being at the mercy of immigration and ministry of labour for the renewals, begging landlords to renew leases (coz you can't properly own the land), changing company status, and potentially being subject to probes and investigations from the mutiple government bodies, in the long run you need quite Exceptional Returns to justify getting into this kind of adventure.

I agree with both of you guys. I was asked many years ago by the wife’s family as to "why I don't buy this and that investment" and my answer after 17 years has always been the same. Why invest in somewhere where you are not treated equal, where the laws can change daily and where corruption has never been solved? I have chosen to keep my money invested in my home country where real estate and share prices have risen over the years. We have government laws and codes of conduct that protect your investments. Why would you swap a certainty for an uncertainty?

[Alf Witt]

votes, please.

[JimsKnight]

Thailand is a place to spend money, not a place to make money. OK some (extremely few) foreigners make money in Thailand but the rest are telling themselves porkies.

Exactly. It is similar to a Gambler going to a Casino - the rules are set in a way that the Expectency is against the

gambler, so he is very likely to lose in the long term. The house is Thailand, the rules are clearly against small foreign investors, plus they change whenever the house feels like it.

Ok, you can certainly make some profit here and there, I'm not saying you can't. But in the long-term, the odds are against the small investor, and between doing visa runs endlessly and work permit renewals, always being at the mercy of immigration and ministry of labour for the renewals, begging landlords to renew leases (coz you can't properly own the land), changing company status, and potentially being subject to probes and investigations from the mutiple government bodies, in the long run you need quite Exceptional Returns to justify getting into this kind of adventure.

This is all very good wisdom guys. and I agree with you.

But you'll always get that one lucky so and so who by pure dumb luck half the time makes his fortune in Thailand, he tells all his mates back home, thus a further bunch of hare brained idiots chase the fools gold around thailand. They spread the word to all they meet in LOS and beyond. They all go quiet afterwards when the ventures failed, but the snowball keeps rolling...

I've only met two out of hundreds of people who actually made their 'fortune' out in Thailand. One was an exceptionally lucky Dive Instructor in Koh Tao who by being in the right place at the right time with the right credentials walked into a dive managers position on one of the busiest dive centers on the island.

The other spoke and wrote fluent thai to the point of being a native speaker, he landed a top dollar job for Asia Times by being in the right place at the right time. My point is they both didn't even have to invest a dime in some business or house.

I was working as a DM on the island years ago (still with some fools gold in me!) . While I was there I a millionaire came to the dive shop I was at, he was a real down to earth type. I took him out diving. He said to almost exactly what GH just said. 'Make your money in the West and bring it to the East.' I asked him a few things, he mentioned burmas a good place to consider but you'd need to sit on the land for a llloooong time to see it make money. Then he said to me 'Its hardest to make your first half a million than anything else. He said once you get that it all becomes a whole lot easier.

Then he got talking about THailand and he turned around and said 'Unless you have a time machine to return to the 1980s to Patong Beach when 1 Rai of Land was only 50k baht forget it. By 1990 the price was up to 5 million baht.'

Still those gold seekers keep on coming most tend to just tend to fade to grey or burn out. The rest barely break even.

The Sunbelt kids may trumpet their little hearts out on this and that but buying a condo is about all I'd wager them, and that would be as a long term means to live rather than to sell after a short time.

Edited January 17, 2007 by JimsKnight

[englishoak]

I have chosen to keep my money invested in my home country where real estate and share prices have risen over the years. We have government laws and codes of conduct that protect your investments. Why would you swap a certainty for an uncertainty?

And that is my thinking too

[Alf Witt]

Results so far not too surprising.

[Gaudente]

Only a mentally sick person might even consider to invest in Thailand now. Direct investment ? You have to set up a company of which you have to pay 100% but can own only 49%. Not bad to start with a neat loss of 51%.

Bonds? there's the 30% deposit to pay and anyway where's the bargain in a 5% coupon that net of tax becomes 4.25% that is just 1% more then inflation ? countries like Turkey and Brazil are paying real (i.e. net of inflation) interest rates of 10% the first and 8% the latter. Stocks ? Surely they appear undervalued, but can we trust the financial statements ? Just to make an example, Thai Military Bank tumbled after closing the 4th quarter with an unbelievable loss of 17 billion baht , more then the last 3 years earnings. How many other time bombs are there around in Thai quoted firms ?

Condominiums ? there's a terrible oversupply and demand is on decline due to the VISA regulations preventing to actually stay in your property.

Also consider the risk you could not be able to take back your money out of the country. That's what's happening to me. Because I am trying to send MY MONEY to a safer place (even Iraq would be safer then here, believe me), but just today my bank refused to make the swift.

So be warned, each cent you send into Thailand is a lost one, wether you spend it with a bar girl or "invest" in some "sure bargain"

[Gaudente]

"We have a record of welcoming foreign investment. We are not hostile to them.

This statement remembers me the movie "Mars Attacks". The martians slaughter people in the streets while their loudspeakers endlessy broadcast: "we come in peace"

[johnnyk]

"We have a record of welcoming foreign investment. We are not hostile to them.

This statement remembers me the movie "Mars Attacks". The martians slaughter people in the streets while their loudspeakers endlessy broadcast: "we come in peace"

Or "The Iraquis need to show some gratitude."

[Khun Bob]

A good investment in Thailand right now would be a service to help farangs relocate to cambodia or vietnam... ;-)

[xbusman]

The economy here is roughly 70% export and 10% tourism. That means EVERYTHING ELSE is 20%. Wow, that aint much.

Exports have stopped growing and in fact shrunk last year when adjusted for currency and inflation. Tourism is falling falling falling. Coups, new airport, lots of reasons but Thailand has seen a decreasing share of the tourism market.

Infrastructure here is neglected, education is terrible, and skilled employees about impossible to find. They have no developed industry, and despite wanting to be the hub of everything, in reality they are the hub of nothing.

As the baht pushes past 37, Thailand becomes mostly uncompetitive with the rest of Asia, and then you add the corruption costs and difficulties with corporate structure.... As we approach 34 baht to the dollar, we are in essence watching 67% of the GDP evaporate before our eyes. At this rate, in three years we could lose 50% of our GDP, ever been through something like that? It is not pretty.

Time to batten down the hatches and fasten the seat belts. The productive money is fleeing Thailand while the speculative money is have its way with her. This is not a time to invest safely in Thailand but does not mean that opportunity is not here.

[Alf Witt]

A good analysis Xbusman. Thailand in a nutshell.

[johnnyk]

Speculative money was the reason for the 30% withholding.

To discourage fast in and out currency speculations, stock & bond plays etc. which have the effect of driving up the currency than leaving it to crash. (viz. 1997)

30% off the top for a year will dampen 'speculative money'.

[jinjok]

good analysis xbus - but i dont think smart money was ever actually here for reasons you had stated.

thailand is auto hub and DABBLES in technology.

its big exports - agroculture

its labor pricey and poorly educated

its business climate - frigid and opaque

the new airport is precisely why no one should invest in thailand. it is a classic text book example from inception (why build it) to design, procurement, location, quality of construction, computers and the roll out.

[TukTukDriver]

" The economy here is roughly 70% export and 10% tourism. That means EVERYTHING ELSE is 20%. Wow, that aint much."

Think how dependent the 20% is on the other two sectors.

I wonder how much the exchange rate will affect the tourism industry. Even if the rate stayed at something like 33 to the $, wouldn't a drop in demand bring about a drop in prices? Having traveled to remote parts of Thailand as well as Patong, I have learned the price difference between the two is wide. Does the 1200 baht hotel room really have to stay at 1200 when they seem to get by dropping it to 600 in the off season? It sure wouldn't cost 1200 if it were in Nakhon Sawan.

It sure will be interesting to watch.

[taxexile]

That Thailand allows illegal or, at best, dodgy investment and/or business schemes illustrates what a bunch of morally corrupt <deleted> you are dealing with.

that , and xbusmans post should be all the advice anybody needs.

[jumnien]

I would dispute that 70% figure of the Thai economy is exclusively exports. As for 10% tourism, I've seen 6% cited, as well. One must also remember that Thais are by far the biggest spenders in the tourism sector in Thailand spending approximately 4 times that of any other country, a total of 40% of all tourism spending is by domestic Thai tourists.

[Gaudente]

The economy here is roughly 70% export and 10% tourism. That means EVERYTHING ELSE is 20%. Wow, that aint much.

That's not the correct way to read the data.

http://www.bot.or.th/bothomepage/databank/...ance/tab85e.asp

3rd quarter total GDP is 1942 billion baht and exports are 1522 billion. So you say 78% of GDP are exports.

But please note the 1420 billion of imports. Most of these imports are not final consumer goods but materials needed to manufacture exported goods. So the actual added value creation involved in exports is much, much less then its total value.I guess it can reasonably be extimated in 200 billion.When you compare this value to the 1082 billion of private consumption, the 255 billion of public sector expenditure and the 555 billion of gross capital formation, you see that the affirmation that 70% of economy is export is absolutely wrong.

Exports anyway DO play a big role in this country economy, and the stronger baht is hitting them HARD.

[Gaudente]

http://www.bot.or.th/bothomepage/databank/...ance/tab45e.asp

Here you can see imports composition. In 3rq quarter consumer good imports were just 95 billions (just add the july, august and september coloumns) on a grand total of 1420 billions.

Now that does not mean the remaining 1325 billions were ALL used for export manufacturing, as some are machinery (and that goes to gross capital increase), some are fuel (and that goes for internal consumption for transport and electricity, but again some of these transports and energy are used to manufacture and ship exported goods).

So it is really difficult to extimate the weight of export on total GDP , but surely it is not 70% !

[xbusman]

Easy to dispute mdeland. I have seen it reported everywhere from 60% to 80%, you know how figures are. Figures dont lie but liars alway figure. Over the past few years I keep seeing 67% to 69% by agencies both inside and outside thailand. I would bet that is pretty close.

Tourism, same problem. Some groups figure the knock on effect of GDP from tourism, some dont. The reality is that tourism is a minimum of 5% and probably a maximum of 11% of GDP. I would guess that depends on the year too. I think there are wild swings in tourism rates, at least there is in every other country of the world depending on the price of oil and how much terrorism is in the news.

I think for the purpose of discussion, as non economists, we should be pretty comfortable with exports providing 68% of the economy and tourism around 8%. We might be off a few percentage points but I doubt the central bank is going to stop by my office and bust my chops about it. Soooo, 76% of our entire GDP is dependent on the baht. Thats enough to tell me why Tarisa is not sleeping well.

[xbusman]

Nope, sorry to burst your bubble. In the calculation of Thailands GDP it is reported that exports represent 70% of Gross domestic product. You can calculate imports any way you like, but in the measure of goods and services, sold by thailand, 70% are shipped out for sale in foriegn countries.

[rogerinthai]

But please note the 1420 billion of imports. Most of these imports are not final consumer goods but materials needed to manufacture exported goods. So the actual added value creation involved in exports is much, much less then its total value....I guess it can reasonably be extimated in 200 billion.When you compare this value to the 1082 billion of private consumption, the 255 billion of public sector expenditure and the 555 billion of gross capital formation, you see that the affirmation that 70% of economy is export is absolutely wrong.

Exports anyway DO play a big role in this country economy, and the stronger baht is hitting them HARD.

Public sector expenditure gets some of its money from customs duty. If export-related imports drop, public sector will also have less money to spend.

Private consumption partly comes from revenues of exporters, manufacturers and all the related work force (PLENTY of people). So if exports drops significantly, private consumption drops as well. In addition, less revenues to those sectors will result in less taxes and again, less public sector funds.

Edited January 28, 2007 by rogerinthai