7.49am Bot Intervenes To Rescue The Baht

[backflip]

martin,

"The way is to encourage investment in the country as much possible. Investment brings jobs, jobs brings wealth, and slowly but surely the country will become more industrialised and wealthier."

What part of this quote do you believe is inaccurate today? Investment should not be encouraged? Investment deosn't bring jobs? Jobs don't bring wealth? The change is quick? The country will become less industrialized and poorer?

[Martin]

Hi 'backflip':

Sorry that I didn't make my point clearly.

I think the sort of investment that was great was when the Japanese built factories here to make things for which there was an assured order book. Those Thai workers got good jobs that were secure.

(Some Thais would argue that that industrialisation came at the price of a great loss of 'social capital' from the villages, and swelling of the ranks of the urban poor, and that that cost was greater than the benefits. Whilst I would agree that over-industrialisation is worse than the right middling amount, I think that it would have been bad for Thailand not to have had any.)

Nowadays, I cannot see that a new factory is likely to do so well. The prospects for it to get good workers are less, as the pool of available people with the right attitudes and abilities has been sucked pretty dry, and the prospects for it selling what it manufactures aren't so good.

In the Thailand situation now, it seems to me that there is every likelihood of the country becoming gradually less-industrialised as export orders reduce, but it can avoid becoming poorer.

It happened that three times in my life I have made a move that resulted in me having less cash income, but my family getting an improvement in their quality of life.

And I don't see any reason why what happened to our one family can't, with care, happen to a lot in Thailand.

So I agree with the thrust of His Majesty's speeches.

[somtaamgaiyang]

martin,

"The way is to encourage investment in the country as much possible. Investment brings jobs, jobs brings wealth, and slowly but surely the country will become more industrialised and wealthier."

What part of this quote do you believe is inaccurate today? Investment should not be encouraged? Investment deosn't bring jobs? Jobs don't bring wealth? The change is quick? The country will become less industrialized and poorer?

The interesting figure to know would be how much of the increase in GDP of whatever figure the Central Bank is touting is directly related to NEW investment coming on line in the country. Since you can assume that companies once established from inward investment come on line and are feeding a lot into foreign supply chains, I would assume that a large percentage of this growth is new investment coming on line.

With less foreign investment, less GDP growth, we all end up less wealthy!

[Martin]

"With less foreign investment, less GDP growth, we all end up less wealthy! "

That is statement with which I disagree.

Take 1997. Thailand had more foreign investment and more GDP growth and yet we all ended up less wealthy.

The reason was that the foreign investment had started going into non-productive activity (such as property speculation).

There is now such a long chain between the original saver/depositor and where the money is deployed in activity that there is the possibility of it ending up in making a bad contribution to a country's GDP.

A strong argument can be made that pushing up GDPs for the past thirty-or-so years has been very harmful to overall wealth. For instance, in the colder developed countries, the winter-heating industry has made a good contribution to GDPs year after year. But if people had cut back a bit for a few years and bought insulation with their money, all would now be better off, even though GDPs hadn't grown as much.

There is an analogy with driving a car.

"With less fuel being injected, less increase of revs, we all end up going slower" is not true when over-injection, relative to the surface that car has happened upon has caused the driving wheels to start spinning.

But it is not so much the parallels to 1997 for Asia, as the parallels to 1929 for the whole world that is causing concern. Many countries cannot now decouple themselves from what is happening worldwide, but Thailand is a bit better placed than they are.

[somtaamgaiyang]

"With less foreign investment, less GDP growth, we all end up less wealthy! "

That is statement with which I disagree.

Take 1997. Thailand had more foreign investment and more GDP growth and yet we all ended up less wealthy.

The reason was that the foreign investment had started going into non-productive activity (such as property speculation).

There is now such a long chain between the original saver/depositor and where the money is deployed in activity that there is the possibility of it ending up in making a bad contribution to a country's GDP.

A strong argument can be made that pushing up GDPs for the past thirty-or-so years has been very harmful to overall wealth. For instance, in the colder developed countries, the winter-heating industry has made a good contribution to GDPs year after year. But if people had cut back a bit for a few years and bought insulation with their money, all would now be better off, even though GDPs hadn't grown as much.

There is an analogy with driving a car.

"With less fuel being injected, less increase of revs, we all end up going slower" is not true when over-injection, relative to the surface that car has happened upon has caused the driving wheels to start spinning.

But it is not so much the parallels to 1997 for Asia, as the parallels to 1929 for the whole world that is causing concern. Many countries cannot now decouple themselves from what is happening worldwide, but Thailand is a bit better placed than they are.

http://web.worldbank.org/WBSITE/EXTERNAL/D...:239419,00.html

Martin, I am not advocating investment in high rise condominium blocks as a policy for boosting GDP. Also do not forget, GDP is all measured in USD, so a massive drop in the value represents a drop in GDP, total GDP in thailand is whatever value of Baht today, halve the value of the baht and you have a de-facto halving of value in USD. Thailand has now returned to the same GDP per head as 97, so since the value of the baht is at 35 not 25 one could arge the economy in baht terms is actually 50% larger.

To stand still at this point when China, Vietnam and India are racing along at 10% growth is crazy. The French like a 35 hour week and long holidays, but then at the same time, aren't rich enough to pay their bills. Thailand has so far to go in economic development terms that it should be encouraging investment not attempting to protect a few specific industries from a strengthening baht. A few % on the baht will not stop Toyota producing pick ups here, a 30% witholding will discourage new investment no doubt about it.

Thailand needs to decide what it wants to be, relatively poorer for the next 10 years, or boom its way into the future