Thailand: The Land Of Fading Smiles

[Jai Dee]

Thailand: The Land of Fading Smiles

Thailand prides itself on its way with Westerners. After all, the kingdom survived the Age of Empire as the only country in Southeast Asia to avoid colonization. Success in deterring the foreign barbarians came from deftly playing the Western powers off against one another, and throwing open doors to European traders. Siam, at it was known then, didn't so much repel the Western invaders as charm them into submission with armfuls of exotic bounty and respites from their malarial colonial outposts.

The military junta that rules Thailand these days might do well to remember the ways of the nation's diplomatically skilled forebears. Just as before, Thailand's economy is dependent on negotiating global forces—the country is the world's No. 1 exporter of rice and relies on tourism and foreign direct investment to power its growth. Yet in recent weeks, the Cabinet appointed by the ruling generals, who in September overthrew the democratically elected Prime Minister Thaksin Shinawatra, has unveiled economic measures that have left foreign investors distinctly uncharmed. In December, to combat an appreciating currency that was irking Thai exporters by making their goods pricier overseas, the central bank briefly instituted harsh capital controls, precipitating the worst one-day drop in the 31-year history of the Bangkok stock exchange. Then, last week, Thailand's Cabinet began tightening foreign-ownership laws, closing loopholes that had made the country one of the region's most welcoming destinations for overseas investment. At the same time, the government is clamping down on the thousands of foreigners who work in Thailand without proper permits. "Given the strong regional competition for foreign investment, Thailand should be sending a message that we welcome foreigners," says Sompop Manarungsan, an economist at Chulalongkorn University in Bangkok. "Instead, we're doing the opposite."

That globalist warning bell may ring true in Davos, but in Thailand, ground zero of the 1997 Asian financial crisis, economic protectionism is on the rise. "There are several members of the coup Cabinet who believe Thailand is too dependent on foreign investment," says Supavud Saicheua, head of research at Phatra Securities in Bangkok. "They believe it's their duty to fix things before global economic trends negatively affect Thailand." In a country where the King is widely revered, the junta's Cabinet has shrewdly tied its closing-door strategy to an existing royal mandate. After the regional financial meltdown a decade ago, Thailand's King Bhumibol Adulyadej urged his subjects to forgo the turbo-charged drive of capitalism for a Buddhist-inspired "sufficiency economy" that embraced moderation. Sounds harmless enough. But free traders complain that the military junta is now using the fuzzy precepts of a sufficiency economy to undermine the legacy of former Prime Minister Thaksin, a billionaire who avidly pursued free-market policies, signing international trade deals and encouraging farmers to take out small-business loans. "Whether you like it or not, we have to live under a capitalist system," Thaksin told the Wall Street Journal on Jan. 15. "If you make a 180-degree about-turn in one day, confidence is destroyed."

So far, the Thai public doesn't appear too rattled. Although a local poll showed the junta Cabinet's popularity plunging from 90% to 48% since October, that's largely blamed on a mysterious New Year's Eve bombing campaign that killed three people in Bangkok—not on economic nationalism. "I think there is a growing group in Thailand that believes business here should belong to Thais, not foreigners," says Sukhbir Khanijoh, senior analyst at Kasikorn Securities in Bangkok. That sentiment was stoked by Thaksin's controversial $1.9 billion sale last year of his family stake in telecom firm Shin Corp. to Singapore's Temasek Holdings—a deal perceived domestically as delivering a key national industry into foreign hands. The tax-free sale came courtesy of the loopholes in the country's Foreign Business Act that the junta government is now eliminating. The changes aim to stop foreign investors using local nominees to put their firms in a Thai name without giving them commensurate decision-making power. "It's clear these moves are going to discourage new investors," says Peter van Haren, head of the Joint Foreign Chambers of Commerce in Bangkok. "Our members have come to me and said this is essentially a forced divestiture."

Thailand's economy is still more open than many of its neighbors'. But in hot investment destinations like Vietnam and China, the trend is toward fewer restrictions, not more. Nor have recent trade figures justified the pleas for protection by Thai exporters, which led to the controversial capital controls. Despite the baht's 15% rise in 2006, Thailand's exports actually climbed 17% last year, to $130 billion. So who loses out? In the short term, mainly foreigners. But given Thailand's dependence on overseas investment, such protectionism may backfire. "The repercussions of these policies will eventually affect Thais too," says van Haren. "There's no way to escape global economics."

Source: Time - 19 January 2007

[GuestHouse]

The world didn't give a toss when Taxin paved the way for over 2500 extra judicial killings. Gross human rights abuses in the southern provinces went with little or no comment.

But when 'Investment is threatened' it's all eyes on the crimes being committed in Thailand against profit.

[lannarebirth]

The world didn't give a toss when Taxin paved the way for over 2500 extra judicial killings. Gross human rights abuses in the southern provinces went with little or no comment.

But when 'Investment is threatened' it's all eyes on the crimes being committed in Thailand against profit.

I don't think this is the large investment, manufacturing crowd speaking. It's hedge funds and other pools of liquid capital, that l"loves you short time" then moves on. In their wake they leave all kinds of economic imbalances. I'm not shy of criticizing the govt. when I think it's warranted, but their efforts (clumsy as they are) to keep these vermin at bay don't bother me in the slightest. The world is currently awash in capital, most of it highly liquid. Thailand will get it's share.

[wasabi]

I'm not sure how wise the recent protectionist measures are. While on one hand Thailand is small and needs to have measures to protect itself against exploitation, it also needs to compete with others in the region. Vietnam just joined the WTO and has been loosening restrictions. They will thus get a large amount of foriegn investment. Yes everyone invests with self interest first, but the host country can benefit. I think Thailand is missing a prime oppurtunity with China leading the pack and now many looking for hidden gems. It looks like Thailand is going to miss the boat on the Asia boom that is happening now. Most big investors feel spooked by Thailand and that they might pull the rug out from under their feet with their knee jerk economic policies.

I do think there is a better balance which could promote nationalism while also encouraging foriegn capital to come in. Even if the hedge funds came in for a quick buck, in their wake they might have left many new businesses, jobs and even improved infastructure.

[dgoz]

Dont forget where we are folks. This is S/E Asia, where managerial incompetence is all the rage.

It's easy for us to sit back and see the mistakes, we are educated and have seen how it's supposed to be done, but these people are from a different culture, where promotion and procurement of the top jobs is done through family and friends, no matter how incompetent they may be.

The Thais know this all too well.

Hence, Thailand is still a 3rd world country here in 2007 with no real foreseeable exit.

I have a very small financial interest in Thailand, but I have a lot more money and expertise to lend this country if only I was welcomed to do so. But I'm afraid that financial and intellectual investment is going to end up somewhere else now. I know of a lot of people who share my opinions. A Farang with a few million baht to invest may not be too important but if you times that by a few thousand Farang it adds up, not to mention the drawback of a few MNC's also hesitant to invest.

It's obvious these people don't want us here, so why fight it?

Countries go from paradise with huge economic promise to sh*tholes all the time, look at history, it will tell you the future.

Remember when Lebanon was the Paris of the middle east? How about now?

What about Zimbabwe and it's rich farming culture. Now they have blacks back on "their land" growing weeds and farming Guinea Pigs where huge sugar cane plantations once thrived. How's their economy doing now?

The list goes on and on. Thailand will join it.

[baboon]

I really do hope Thailand in the near future gets some seriously capable people to Govern and Administer her affairs. The stbilizing force that has been relied upon for so many years cannot last forever and without this force at the helm I fear Thailand could disintegrate into a rather frightening place. I do enjoy living here but it is nice to know I have the option of leaving if the ca ca really hits the fan...I for one am keeping that EU Passport safe and warm.

[bendix]

Dont forget where we are folks. This is S/E Asia, where managerial incompetence is all the rage.

It's easy for us to sit back and see the mistakes, we are educated and have seen how it's supposed to be done, but these people are from a different culture, where promotion and procurement of the top jobs is done through family and friends, no matter how incompetent they may be.

Ummmm. . . . . .ahhhhhh . . .

Oh no, bugger it. I can't be bothered because I don't know where to start.

I'll leave it for stevemarigno to tackle this one .. he's far better equipped to do it, than me.

[qualtrough]

The world didn't give a toss when Taxin paved the way for over 2500 extra judicial killings. Gross human rights abuses in the southern provinces went with little or no comment.

But when 'Investment is threatened' it's all eyes on the crimes being committed in Thailand against profit.

Exactly right!

[Pakboong]

I come from a first world country whose social financial commitment to its people has grown from $20 trillion to $50 trillion in seven years and is set to double again in 5 years. It makes it tough to get on ones first world high horse when facing such a disaster. Thailand may make some first world mistakes, but, they never claimed to be a part of the first world.

[altman]

Thailand's King Bhumibol Adulyadej urged his subjects to forgo the turbo-charged drive of capitalism for a Buddhist-inspired "sufficiency economy" that embraced moderation.

sounds like a good idea to me.

as an old, out of step, curmudgeon my views don't count, but i need to express them regardless.

the western capitalist society is based on exploitation. it hopes that the means of extending that exploitation can be found before the, to me, inevitable results of that exploitation are realized.

while i oppose exploitation in principle, i applaud any steps taken to 'moderate' it.

[Bruce1]

I doubt if HM really meant his "sufficiency economy" principles to be interpreted as a mandate to scare away the foreign investors whose input might create jobs and wealth for his people. As I understand it, sufficiency economy was mainly aimed at encouraging poor rural people to be more self sufficient and better farmers, rather than borrowing from local loan sharks.

Thailand is losing economic momentum under this government. The effects will take a few years to be clearly obvious because investment decision are made several years ahead. The results will be inherited by the next government. Hopefully it will have a better idea of how to run a modern economy than the generals.

What does Thaksin's drugs deaths campaign have to do with foreign investment? Its a false comparison. No logic in making that connection at all. One does not negate the other.

Anyway, the people are making their real desires clear by sacrificing to send their kids to the cities to get an education and a better job. They dont see their futures as being on the farm. They want middle class jobs. Nothing unusual about that, it's a worldwide trend whenever incomes start to rise.

If the economy goes pear-shaped and lots of those bright and eager graduates discover they can't get jobs because this government scared away the foreign investors, then they're not going to be very happy chappies and chapesses at all IMO.

[jts-khorat]

If the economy goes pear-shaped and lots of those bright and eager graduates discover they can't get jobs because this government scared away the foreign investors, then they're not going to be very happy chappies and chapesses at all IMO.

Well, planning is not the strong point of the Thais and making long faces after the fact will not help anybody.

But if the Thais implode their economy, Visa regulations will ease, the bars will be full with girls and hotel and restaurant prices will come down to acceptable levels again instead of the crazy prices you get here on Phuket.

A human tragedy, surely, but it would not be all bad, seeing it from the perspective of an outsider :-)

[SeanBangkok]

TIT