Pridiyathorn Resigns As Deputy Pm, Finance Minister

[Arkady]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

I absolutely agree. The short run is what Pridiyathorn and Tarisa had to deal with. Their analysis showed that cutting rates wouldn't have worked in this case and they didn't think they had enough time to evaluate it if they did that first. They made the big mistake on the equity markets, no doubt, but they acted and ultimately did the right thing.

Too many people are quick to find fault when they themselves don't know what to do (this is aimed at government officials, not posters on TV, as we aren't supposed to be the experts).

They did not do the right thing. The capital controls have hurt investor sentiment and raised the cost of capital for Thai businesses. In the medium term they make the baht rise further because the negative impact on investor sentiment reduces imports of capital goods and thus the demand for dollars. Further down the track export competitiveness is damaged because the failure to import capital goods for the export sector. This was an extremely dumb policy from people who don't understand capital markets and failed to think through the longer term effects on the economy or consult any one with a better understanding of these issues than themselves or the priestly class of unworldly academic economists they surround themselves with at the Bank of Thailand.

[Hampstead]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.Firstly, many years ago Thailand diversified away from being a predominantly agricultural based economy.If you examine exports the main items are integrated circuits, computer parts, jewellry, furniture etc.Agriculture forms only about 13% of GDP, goods and services being the main component of which tourism is of course very significant.Overall I would say Thailand has less of a problem in this area than NZ and Australia, which excepting commodities,produces very little the rest of the world wants to buy.

Secondly, the poster retains a very naive attitude towards capital controls in the belief they deter hot money.In a very short term sense they do but the so called cure is worse than the disease.The beauty of a free economic market is that it is self regulating, and great damage can be done where markets are artificially protected.

You are sending posts based on emotion again. Settle down and think about it. The main items exported are electronic items that contain a high degree of imported items. As I am sure you know, when the THB strengthens, the imported raw materials are cheaper, creating a natural hedge for electronic parts assembled and exported.

While in theory I fully agree with the beauty of a free market, in a country like Thailand with over 40% of its population tied up in agriculture, it can't afford to allow agricultural exports to crash. Theoretically, it can, but in practice this country has no safety net for its people. The only thing it can do is support its ag exports as best it can, and not letting the THB strengthen vis a vis the USD to a greater extent than its competitors is one of the only things it can do. I realize this is artificial in a way, but they don't have many other avenues.

Yes they do

they had many chances over the last 6 months to reduce interest rates not just reduce them in a last ditch attempt over the last 2 months

this would see more money flow out of savings and into the economy.

also they had many an opportunity over the last 6 months to relax the rules on money being able to leave thailand, so as to allow thai nationals to send more money overseas for investment purposes.

but they chose a huge build up of baht to be stored in the thai banking system, not only by foreigners but also by thai nationals, who have certain rules on how much money they can execute to another country. This is why many thai wealthy individuals have had to use the black market money transfers to send money out of thailand, for which the chinese have the majority of this market.

their excuse for speculators is very far fetched

as even the bot knows full well that funds were coming to thailand as thailand was becoming a financial treasury centre for asia, being able to execute deals back and forth to execute deals for example the many ipo's going on in hong kong and china

the excuse of december made by bot that 2 billion dollars coming into thailand was speculative was an elaboration of the real truth, in fact most of this money was from the sale of icbc bank ipo in hong kong, and as the shares were sold in late november and december, the same money which left thailand to execute the deal was now arriving back to thailand after the sale of the shares.

Yes, they could have relaxed the rules to allow Thai's to move money out sooner, but better late than never.

The IPO is well known, but why was the money parked in Thailand in the first place? Why not in other regional countries with higher rates?

On interest rates, the BOT's analysis is that effective rates in other competing countries were already higher than Thailand's rates, but their currencies were weaker. It was their view that cutting interest rates would not be effective. As for why not lower rates sooner, Thailand raises and lowers its interest rates depending on its inflation rates, not its currency levels. With inflation currently at its lowest level in almost 3 years, now there is room to lower rates should the new FM decide so.

Let's not get into discussions about the black market. If you wish to do so, make your complaints directly to the BOT.

maybe the reserve rule was a panicked attempt to hide their failings in propping up the baht over the last 9 months for the sake of the thai exporters.

as for the flow of money out of thailand, many a thai economist and lecturer have been asking the bot to relax these rules for thai nationals, as you cannot have it all your own way so to allow thai nationals to send more money out of thailand to ease the cash mounting in the thai system.

ie

a huge build up of thai baht in the banking system

competitive exports

and a currency valuation perfect for all individuls

one of these things has to be penalised, and guess what, they penalise the foreign money.

as for the ipo in hong kong , no it is not well known, and even when a few months back i mentioned it on this site under another name YOU asked me for this INFO AS YOU HAD NO IDEA of the ipo, its name or where it listed or how much.and you had little idea on how the bot views speculators

so please do not suddenly claim it is well known.

the build up of money in thailand is from not just foreigners but thai companies and thai business individuals who have had a stronger economy over the last couple of years and more money to sit on.

thailand has been used for a treasury centre as as yet their have been no huge fraud cases over the last 5 years in the thai banking system, whereas in korea, taiwan and japan have seen a huge rise in banking fraud at the very top levels. Hong Kong has always been a major place to park money and thailand was just a poorer sister to hong kong in this system.

thailand has lowered its rates not only for the sake of inflation but to help speed a slowing economy due to this rule, which alone has been a disaster but the knock on affects have been a catastrophe.

Edited March 2, 2007 by Hampstead

[samran]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.Firstly, many years ago Thailand diversified away from being a predominantly agricultural based economy.If you examine exports the main items are integrated circuits, computer parts, jewellry, furniture etc.Agriculture forms only about 13% of GDP, goods and services being the main component of which tourism is of course very significant.Overall I would say Thailand has less of a problem in this area than NZ and Australia, which excepting commodities,produces very little the rest of the world wants to buy.

Secondly, the poster retains a very naive attitude towards capital controls in the belief they deter hot money.In a very short term sense they do but the so called cure is worse than the disease.The beauty of a free economic market is that it is self regulating, and great damage can be done where markets are artificially protected.

Why not just call me stupid then? Thats what you wanted to really say.

I'll just rip up the ole economic degree then. Not worth the paper it is printed on really. The lecturers who taught me better shoot themselves as well. They did a terrible job.

Better ignore that the 13% of agricutural GDP might not be much to the entire economy, but it probably is to the high proportion of the labour force who somehow derive an income from it directly and related industries. Marginal Benefit of Income for them, yeah, a baht forgone for someone who earns a grant total of THB 40K as a dirt poor farmer per year is the same as someone on 40K per month.

Yeah, and lets chuck in some semi-serious sounding stuff about 'cure is worse than the disease' stuff. All very true in a way. I'd love the baht to float freely. I'd love the speculators to bet against themselves. Free market is always right.....well it is mostly....if you don't take into account social costs and benefits.

But if I was a policy maker, the price for this betting isn't just the money the speculator would lose, it is whats gonna happen to the people who directly and indirectly derive an income from an industry from which they have little or no alternative to move on from in the short to medium term. Where is the safety net for them young husband? Where is the integrated industry policy that Thailand has to see that they make it through this? Where is the proper place for pragmatism?

Yeah, me jus stooopid. Never think things through.

[Old Man River]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

I absolutely agree. The short run is what Pridiyathorn and Tarisa had to deal with. Their analysis showed that cutting rates wouldn't have worked in this case and they didn't think they had enough time to evaluate it if they did that first. They made the big mistake on the equity markets, no doubt, but they acted and ultimately did the right thing.

Too many people are quick to find fault when they themselves don't know what to do (this is aimed at government officials, not posters on TV, as we aren't supposed to be the experts).

They did not do the right thing. The capital controls have hurt investor sentiment and raised the cost of capital for Thai businesses. In the medium term they make the baht rise further because the negative impact on investor sentiment reduces imports of capital goods and thus the demand for dollars. Further down the track export competitiveness is damaged because the failure to import capital goods for the export sector. This was an extremely dumb policy from people who don't understand capital markets and failed to think through the longer term effects on the economy or consult any one with a better understanding of these issues than themselves or the priestly class of unworldly academic economists they surround themselves with at the Bank of Thailand.

Arkady, I think it depends from what perspective you look at things. Capital controls was one of the things that hurt investment sentiment. Other little things also have impacted it, like a military coup, bombs going off in Bangkok, changes in the foreign business rules, escalation of deaths in the south etc.

As for the THB strengthening from the 40 range to the 35-36 range to the USD, the main catalyst for this is well accepted to be the weakening of the USD, albeit not to the extent the THB had strengthened vis a vis other regional currencies, hence, the BOT's view that artificial forces were at work.

I realize as outsiders, we can argue whether speculators were involved, but the BOT is much closer to the situation than we are. If their view is that the THB was under attack, then to some exent it was under attack. Certainly, since the capital controls were initiated, we have seen speculators playing in the offshore THB markets. It only stands to reason that they did this in the onshore market prior to the controls.

Your point on their lack of understanding of the capital markets rings true. If they understood the local Thai investor profile, they never would have included the equity markets in the capital controls. The SET has always been a traders market. This, they should have known.

[Arkady]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.Firstly, many years ago Thailand diversified away from being a predominantly agricultural based economy.If you examine exports the main items are integrated circuits, computer parts, jewellry, furniture etc.Agriculture forms only about 13% of GDP, goods and services being the main component of which tourism is of course very significant.Overall I would say Thailand has less of a problem in this area than NZ and Australia, which excepting commodities,produces very little the rest of the world wants to buy.

Secondly, the poster retains a very naive attitude towards capital controls in the belief they deter hot money.In a very short term sense they do but the so called cure is worse than the disease.The beauty of a free economic market is that it is self regulating, and great damage can be done where markets are artificially protected.

Why not just call me stupid then? Thats what you wanted to really say.

I'll just rip up the ole economic degree then. Not worth the paper it is printed on really. The lecturers who taught me better shoot themselves as well. They did a terrible job.

Better ignore that the 13% of agricutural GDP might not be much to the entire economy, but it probably is to the high proportion of the labour force who somehow derive an income from it directly and related industries. Marginal Benefit of Income for them, yeah, a baht forgone for someone who earns a grant total of THB 40K as a dirt poor farmer per year is the same as someone on 40K per month.

Yeah, and lets chuck in some semi-serious sounding stuff about 'cure is worse than the disease' stuff. All very true in a way. I'd love the baht to float freely. I'd love the speculators to bet against themselves. Free market is always right.....well it is mostly....if you don't take into account social costs and benefits.

But if I was a policy maker, the price for this betting isn't just the money the speculator would lose, it is whats gonna happen to the people who directly and indirectly derive an income from an industry from which they have little or no alternative to move on from in the short to medium term. Where is the safety net for them young husband? Where is the integrated industry policy that Thailand has to see that they make it through this? Where is the proper place for pragmatism?

Yeah, me jus stooopid. Never think things through.

The worrying thing is that the percentage of the work force inolved in argriculture started moving back up again about 3 years ago. You can see it on the BoT's website. This means that the economy has been getting a boost from high commodity prices which have made exports look better, rather than getting more competitive in export manufacturing. This also comes at a time when the growth of the work force has decelerated and more retired people have to be supported. Thailand can look forward to a slower rate of sustainable long term growth, while its citizens expect more in terms of benefits from taxpayers funds. In fact you can no longer view the agricultural sector in isolation. Few rural families rely on agriculture. They rely on family members going to work elsewhere and remitting money back for care of parents and children. Thailand has got to encourage foreign investment in services as well as export manufacturing or it will be left badly behind with nothing but expecations from the people who have got used to TRT handouts. Capital controls would be OK if they were smart bombs that could be used to blow up speculators alone. But they are not and the collateral damage in terms of foreign investor sentiment is very extensive and goes on for at least five years, if Chile and Malaysia are anything to judge by. The biggest problem is education. Even if they can stop driving investment away with capital controls and mind bogglingly stupid foreign investment laws the degree to which they can attract higher value added investment is limited by the availabilitly of skilled workers. The education ministry has always been treated like a piggy bank for corrupt politicians and the right wing elite has never wanted to grasp this nettle because they like the idea of an undereducated serf class.

[Old Man River]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.Firstly, many years ago Thailand diversified away from being a predominantly agricultural based economy.If you examine exports the main items are integrated circuits, computer parts, jewellry, furniture etc.Agriculture forms only about 13% of GDP, goods and services being the main component of which tourism is of course very significant.Overall I would say Thailand has less of a problem in this area than NZ and Australia, which excepting commodities,produces very little the rest of the world wants to buy.

Secondly, the poster retains a very naive attitude towards capital controls in the belief they deter hot money.In a very short term sense they do but the so called cure is worse than the disease.The beauty of a free economic market is that it is self regulating, and great damage can be done where markets are artificially protected.

Why not just call me stupid then? Thats what you wanted to really say.

I'll just rip up the ole economic degree then. Not worth the paper it is printed on really. The lecturers who taught me better shoot themselves as well. They did a terrible job.

Better ignore that the 13% of agricutural GDP might not be much to the entire economy, but it probably is to the high proportion of the labour force who somehow derive an income from it directly and related industries. Marginal Benefit of Income for them, yeah, a baht forgone for someone who earns a grant total of THB 40K as a dirt poor farmer per year is the same as someone on 40K per month.

Yeah, and lets chuck in some semi-serious sounding stuff about 'cure is worse than the disease' stuff. All very true in a way. I'd love the baht to float freely. I'd love the speculators to bet against themselves. Free market is always right.....well it is mostly....if you don't take into account social costs and benefits.

But if I was a policy maker, the price for this betting isn't just the money the speculator would lose, it is whats gonna happen to the people who directly and indirectly derive an income from an industry from which they have little or no alternative to move on from in the short to medium term. Where is the safety net for them young husband? Where is the integrated industry policy that Thailand has to see that they make it through this? Where is the proper place for pragmatism?

Yeah, me jus stooopid. Never think things through.

The worrying thing is that the percentage of the work force inolved in argriculture started moving back up again about 3 years ago. You can see it on the BoT's website. This means that the economy has been getting a boost from high commodity prices which have made exports look better, rather than getting more competitive in export manufacturing. This also comes at a time when the growth of the work force has decelerated and more retired people have to be supported. Thailand can look forward to a slower rate of sustainable long term growth, while its citizens expect more in terms of benefits from taxpayers funds. In fact you can no longer view the agricultural sector in isolation. Few rural families rely on agriculture. They rely on family members going to work elsewhere and remitting money back for care of parents and children. Thailand has got to encourage foreign investment in services as well as export manufacturing or it will be left badly behind with nothing but expecations from the people who have got used to TRT handouts. Capital controls would be OK if they were smart bombs that could be used to blow up speculators alone. But they are not and the collateral damage in terms of foreign investor sentiment is very extensive and goes on for at least five years, if Chile and Malaysia are anything to judge by. The biggest problem is education. Even if they can stop driving investment away with capital controls and mind bogglingly stupid foreign investment laws the degree to which they can attract higher value added investment is limited by the availabilitly of skilled workers. The education ministry has always been treated like a piggy bank for corrupt politicians and the right wing elite has never wanted to grasp this nettle because they like the idea of an undereducated serf class.

I fully agree with all your comments.

The foreign business laws have to be relaxed, not tightened. I have read on TV that some have blamed Pridiyathorn for the FBA, but does anyone really think that the Foreign Business Act will be favorably changed with a new FM? No, of course not. Tough times are ahead.

[wintermute]

The biggest problem is education.

This has always been the biggest problem in Thailand. I see Thailand's future more in line with the Phillipines or Indonesia than with Singapore, Hong Kong, Taiwan, or Korea. Mainly because Thailand's system is so broken that it would require revolutionary reforms. The Ministry of Education has thrown lots of money and "patchwork" fixes that are changed every other year. Still, the same problems exist..no standards in education, little attention where it's important, and the "mai pen rai" attitude that goes on with Thai educators here. It's a dire situation and this generation looks even less equipped than the previous one in making the necessary economic/cultural reforms to make Thailand competitive.

I really don't think this problem will be solved anytime soon because it would require hardwork and effort from everyone involved. This includes the parents of the next generation of kids, social infrastructure, and everything else. There's just too much complacency and corruption for change to occur.

Even if they can stop driving investment away with capital controls and mind bogglingly stupid foreign investment laws the degree to which they can attract higher value added investment is limited by the availabilitly of skilled workers. The education ministry has always been treated like a piggy bank for corrupt politicians and the right wing elite has never wanted to grasp this nettle because they like the idea of an undereducated serf class.

Every single foreign corporation has mentioned the lack of skilled workers at one point or another. This was a big reason why Seagate chose to leave Thailand. The operating expenses were piling up and they were having to import engineers and technology experts from other countries to Thailand. It was pointless to stay in Thailand because the deficiencies were impacting the bottomline.

[Hampstead]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.Firstly, many years ago Thailand diversified away from being a predominantly agricultural based economy.If you examine exports the main items are integrated circuits, computer parts, jewellry, furniture etc.Agriculture forms only about 13% of GDP, goods and services being the main component of which tourism is of course very significant.Overall I would say Thailand has less of a problem in this area than NZ and Australia, which excepting commodities,produces very little the rest of the world wants to buy.

Secondly, the poster retains a very naive attitude towards capital controls in the belief they deter hot money.In a very short term sense they do but the so called cure is worse than the disease.The beauty of a free economic market is that it is self regulating, and great damage can be done where markets are artificially protected.

Why not just call me stupid then? Thats what you wanted to really say.

I'll just rip up the ole economic degree then. Not worth the paper it is printed on really. The lecturers who taught me better shoot themselves as well. They did a terrible job.

Better ignore that the 13% of agricutural GDP might not be much to the entire economy, but it probably is to the high proportion of the labour force who somehow derive an income from it directly and related industries. Marginal Benefit of Income for them, yeah, a baht forgone for someone who earns a grant total of THB 40K as a dirt poor farmer per year is the same as someone on 40K per month.

Yeah, and lets chuck in some semi-serious sounding stuff about 'cure is worse than the disease' stuff. All very true in a way. I'd love the baht to float freely. I'd love the speculators to bet against themselves. Free market is always right.....well it is mostly....if you don't take into account social costs and benefits.

But if I was a policy maker, the price for this betting isn't just the money the speculator would lose, it is whats gonna happen to the people who directly and indirectly derive an income from an industry from which they have little or no alternative to move on from in the short to medium term. Where is the safety net for them young husband? Where is the integrated industry policy that Thailand has to see that they make it through this? Where is the proper place for pragmatism?

Yeah, me jus stooopid. Never think things through.

The worrying thing is that the percentage of the work force inolved in argriculture started moving back up again about 3 years ago. You can see it on the BoT's website. This means that the economy has been getting a boost from high commodity prices which have made exports look better, rather than getting more competitive in export manufacturing. This also comes at a time when the growth of the work force has decelerated and more retired people have to be supported. Thailand can look forward to a slower rate of sustainable long term growth, while its citizens expect more in terms of benefits from taxpayers funds. In fact you can no longer view the agricultural sector in isolation. Few rural families rely on agriculture. They rely on family members going to work elsewhere and remitting money back for care of parents and children. Thailand has got to encourage foreign investment in services as well as export manufacturing or it will be left badly behind with nothing but expecations from the people who have got used to TRT handouts. Capital controls would be OK if they were smart bombs that could be used to blow up speculators alone. But they are not and the collateral damage in terms of foreign investor sentiment is very extensive and goes on for at least five years, if Chile and Malaysia are anything to judge by. The biggest problem is education. Even if they can stop driving investment away with capital controls and mind bogglingly stupid foreign investment laws the degree to which they can attract higher value added investment is limited by the availabilitly of skilled workers. The education ministry has always been treated like a piggy bank for corrupt politicians and the right wing elite has never wanted to grasp this nettle because they like the idea of an undereducated serf class.

I fully agree with all your comments.

The foreign business laws have to be relaxed, not tightened. I have read on TV that some have blamed Pridiyathorn for the FBA, but does anyone really think that the Foreign Business Act will be favorably changed with a new FM? No, of course not. Tough times are ahead.

hold on

you are admitting that they have twisted the thai economy into a mess!!!!

your many posts have stuck by tarisa and devakula as if to say they had no choices except the ones they chose.

and now the thai economic system is in absolute chaos

forgive me but my other post answered your questions and as yet no reply

and now i have the feeling you are changing your tune

[wintermute]

The foreign business laws have to be relaxed, not tightened. I have read on TV that some have blamed Pridiyathorn for the FBA, but does anyone really think that the Foreign Business Act will be favorably changed with a new FM? No, of course not. Tough times are ahead.

For Thailand it will be tough but for the rest of the surrounding area it might come as a boon. Vietnam, Malaysia, and Singapore will probably benefit from all those corporations deciding not to invest in Thailand. Those government's are far more accomodating to foreign investment. Vietnam and Malaysia will pick up the FDI slack from Thailand. Singapore is already developed but it will probably gain a windfall of opportunities in investing in Vietnam. Actually, Singapore has already started investing a lot of money into Vietnam..so they are ahead of the game as we speak.

Ironically, the only people this truly hurts are the majority of poor Thai people. The middle/upper class Thais will sit nice and comfy in their positions of power and continue to rake in their profits from nepotism, corruption, and malfeasance. It's truly a feudal society..all they need to do now is create debtors prison, prima nocta, and public executions then Thailand will be a model of 13th century Europe.

[Bruce1]

My point wasn't about the percentage of exports which were agricultural, it was about the percentage of the population enployed in agriculture. Which meshes nicely with the other posters comment about the need to educate the population.

[younghusband]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.Firstly, many years ago Thailand diversified away from being a predominantly agricultural based economy.If you examine exports the main items are integrated circuits, computer parts, jewellry, furniture etc.Agriculture forms only about 13% of GDP, goods and services being the main component of which tourism is of course very significant.Overall I would say Thailand has less of a problem in this area than NZ and Australia, which excepting commodities,produces very little the rest of the world wants to buy.

Secondly, the poster retains a very naive attitude towards capital controls in the belief they deter hot money.In a very short term sense they do but the so called cure is worse than the disease.The beauty of a free economic market is that it is self regulating, and great damage can be done where markets are artificially protected.

Why not just call me stupid then? Thats what you wanted to really say.

I'll just rip up the ole economic degree then. Not worth the paper it is printed on really. The lecturers who taught me better shoot themselves as well. They did a terrible job.

Better ignore that the 13% of agricutural GDP might not be much to the entire economy, but it probably is to the high proportion of the labour force who somehow derive an income from it directly and related industries. Marginal Benefit of Income for them, yeah, a baht forgone for someone who earns a grant total of THB 40K as a dirt poor farmer per year is the same as someone on 40K per month.

Yeah, and lets chuck in some semi-serious sounding stuff about 'cure is worse than the disease' stuff. All very true in a way. I'd love the baht to float freely. I'd love the speculators to bet against themselves. Free market is always right.....well it is mostly....if you don't take into account social costs and benefits.

But if I was a policy maker, the price for this betting isn't just the money the speculator would lose, it is whats gonna happen to the people who directly and indirectly derive an income from an industry from which they have little or no alternative to move on from in the short to medium term. Where is the safety net for them young husband? Where is the integrated industry policy that Thailand has to see that they make it through this? Where is the proper place for pragmatism?

Yeah, me jus stooopid. Never think things through.

I wouldn't dream of calling you stupid, not least because not only would it be impolite but I have no evidence one way or the other although you do seem a bit poorly informed (eg the economy diversification issue).Though on the basis of your posts it seems a little implausible, I don't even disbelieve you have an economics degree.It is one of the features of a forum like this that we can award ourselves all kinds of gongs,medals, degrees and pretty ribbons and nobody can prove otherwise.However if you really believe the old style guided economy precepts, I am afraid your lecturers did indeed do a rather dismal job (unless of course you graduated before say 1970 when these old fashioned beliefs were more prevalent.)

Having said that because they were made so "informally" (that's the politest way I know how to express my concern) I'm not entirely sure I understand all the points you raise.If you care to list your issues clearly I will do my best to respond sensibly.

[Publicus]

China and Thailand are indeed two different sized beasts but have the same contradictions in common, e.,e, corruption, incompetence, nepotism, lieing, cheating, swindling, not knowing how to manage the creation and distribution of wealth, spirits that control our destiny, superstition, luck, ignorance, arrogance, smugness, self-satisfaction, detestation of the foreign devils etc etc etc.

That's what I refer to in my post on the previous page. The whole of the claptrap structure came down in Thailand in '97 and will here again. But when the roof falls in on China, then the whole region will be changed.

Yes, the meltdown of China's economy will affect the global economy. But it won't be the West that is in a state of collapse, bankrupt, disorganized and completely confused and bewildered.

I eagerly await the coming collapse of the East Asia region.

[Mid]

I eagerly await the coming collapse of the East Asia region.

don't be holding your breath

[Hampstead]

China and Thailand are indeed two different sized beasts but have the same contradictions in common, e.,e, corruption, incompetence, nepotism, lieing, cheating, swindling, not knowing how to manage the creation and distribution of wealth, spirits that control our destiny, superstition, luck, ignorance, arrogance, smugness, self-satisfaction, detestation of the foreign devils etc etc etc.

That's what I refer to in my post on the previous page. The whole of the claptrap structure came down in Thailand in '97 and will here again. But when the roof falls in on China, then the whole region will be changed.

Yes, the meltdown of China's economy will affect the global economy. But it won't be the West that is in a state of collapse, bankrupt, disorganized and completely confused and bewildered.

I eagerly await the coming collapse of the East Asia region.

What!!

there is no chinese meltdown!!!

the chinese stockmarket is not a true comparison to its economy, especially when the chinese stockmarket is overun with a few chinese investors dominating the market with insane specualtion and pushing the market upwards of 140% in 12 months. There has been too many restrictions on capital flows in china to allow a more even flow of its stockmarket, which has led to a minority trying to control the market.

the chinese government is just looking at ways to attack these investors, which in turn has led to the recent sell off. With all the major markets seeing record highs this year, then any excuse for profit taking has seen the downward correction this week. Some markets may even see greater profit taking before any upward trend movements set in. late 2006 and early 2007 saw a huge rise in stock prices in the major markets, some would say the markets moved too quickly and therefore this correction is long overdue.

simply the chinese stockmarket is still 20% too high

as for the chinese economy, it has excess liquidity,and a strenghtening overall economic growth

Edited March 3, 2007 by Hampstead

[BigC]

did the 200 billion lost on propping up the thai baht have anything to do with this - i wonder?

also big companies like ford pulling out future investment to thailand of billions of dollors japanise firms also the same. not wanting to invest with an unstable govmment.

dunno who can do a worse job. problem is that thailand is run by ameteur who haven't a glue what they are doing.

they could have been more of a first world counntry long time ago with they just comlied with E.U regulations but they just want to take peoples money and that is about it.

[sriracha john]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.

say wha?

Edited March 4, 2007 by sriracha john

[samran]

OK, little fish, big pond. What would you do under "little fish big pond" to fight speculators who attack the THB so that it appreciates, artificially, to the point where it damages agricultural exports?

In the medium run, policies which ensure that the Thai economy is diversified (like a portfolio) so that it isn't held hostage to the whims of speculators. It takes 20 odd years though for developed countries- see Australia and NZ for classic cases of moving from agricultural based economies to ones focused on service provision.

In the short run, capital controls which only deter hot money (in and out of LOS) in my opinion should be kept.

This is a laughably ignorant post.

say wha?

So must Paul Krugman, who states that capital controls while not ideal, aren't as bad as some like the IMF make them out to believe. No such thing as a smart bomb in economics, but it is a field were incentives are everything. It is partly down to personal belief though (for everyone) how effectively regulators can control or nudge a market. While I am not one for advocating blanket controls on an economy, I do beleive there is room for certain interventions by regulators, in this case, the BOT.

So I'll continue reading my favourite economists, and younghusband can go on reading his. At the end of the day, economists will never agree.

[bingobongo]

uh oh.......why not release the #s? worse than expected maybe?

Pridiyathorn's departure only adds to the perception that the interim administration is losing its direction. This sentiment has been exacerbated by the fact that the Bank of Thailand failed to release key data following Pridiyathorn's departure. Instead, it issued a statement revealing that private investment and consumption were dropping off, without providing any statistics. Furthermore, an expected release on export figures has reportedly been delayed. A turnaround both in the flagging economy's fortunes and the caretaker administration's policy stance is clearly required. In the coming months, the government needs to display strong, central decision making or it risks creating further economic, political and security problems.

Edited March 5, 2007 by bingobongo

[cclub75]

Pridiyathorn's departure only adds to the perception that the interim administration is losing its direction. This sentiment has been exacerbated by the fact that the Bank of Thailand failed to release key data following Pridiyathorn's departure. Instead, it issued a statement revealing that private investment and consumption were dropping off, without providing any statistics. Furthermore, an expected release on export figures has reportedly been delayed. A turnaround both in the flagging economy's fortunes and the caretaker administration's policy stance is clearly required. In the coming months, the government needs to display strong, central decision making or it risks creating further economic, political and security problems.

I share your analysis. This resignation hides much more than a simple ego conflict between some personalities.

Where I disagree : it's stricly impossible, in the months before the elections (style scheduled for end of 2007), to curb a lot the trajectory...

-They have done a lot of damages (AKA confidence, you don't restore confidence with a magic stick)

-They have ABSOLUTLY no legitimacy to initiate and complete reforms

-they will be still prisoners of the politicians games (or worse : coup, contre coup, over coup, reverse coup)

-another obstacle : a full constitutional crisis, and with the black clouds (in the future) of the royal succession...

I should add :

-they suffer a lot from... the total lackness of competent and courageous politicians/technocrats who could really change things

-and last but not least : the "government" has another big problem : the thai administration, who put itself in neutral gear (to use the very political correct expression used by the thai medias).

So, overall, the situation is really gloomy. And once again, there are no "reasonnable reasons" to believe that things could improve before the next elections.

[keda]

global markets slump overnight, now pridiyathorn resigns. just a gentle reminder for those a bit slow off the bat, SELL ALL POSITIONS ON THE SET NOW!

An amateur's question:

Is the fall in stock market only a temporary setback, or is this the beginning of a crash, and what effects might that have on the Thai economy, and life for us here?

hi ColPyat. i hope i'm wrong, and i'm no expert either, but here's my assessment.

the SET has always been led by foreign trading, don't let anyone tell you otherwise.

recent rally was sparked partly internally, but to a larger extent by regional funds who put a Buy on thai index stocks as thailand was seen as undervalued with P/E at around 8 to 9 while regional bourses were closer to 20.

despite lower risk and higher growth prospects, regional markets were so overbought that with the relatively risky thai situation, a price earnings ratio of 8 was just too attractive, so funds looking to spread their risk a bit more took a punt on the SET. but remember, this is during a time when everything else is doing so well, maybe even too well.

if what we have seen in the last 24 hours or so is the start of a global sell off, then obviously funds will move first to protect their exposure in these regional markets. in any case, they will not be parking their funds here, an even higher risk market.

the impact on the SET with pridiyathorn resigning has little to do with whether he was well liked in thailand, and much more to do with how foreign funds view its impact on political stability. the market can deal with the good or the bad, as long as they see it coming, but markets are bad with dealing with uncertainty.

pridiyathorn's departure will create a vacuum, and whatever political wrangling and eventual replacement that will occur, and whether the replacement could be seen as being anymore worthy than pridiyathorn, and the as yet unknown policy angle he/she will adopt, all spells an even murkier and more uncertain picture for thailand.

i'm not sure if the global sell off is temporary, i hope it is, but in either case, they will not be looking here while they have the bigger markets to deal with. if regional prices retreat to 13 or 14 P/E, then obviously thailand will be relatively less attractive and they will be hunting bargains elsewhere.

and so my call is to sell, watch the global situation, wait till further clarity is reached regarding pridiyathorn's replacement, then come back to pick bargain stocks if the situation is encouraging.

Good call, SET downside is far greater than upside.

As to the pridiyathorn resignation, never underestimate Thai ingenuity; the new man will soon find ways to have the financial world laugh at him instead of his predecessor.

[Meerkat]

Good call, SET downside is far greater than upside.

SET downside is approximately 700.

SET upside is infinite.

Unless there's a way for the SET to go negative that I'm not aware of.

[Old Man River]

So, overall, the situation is really gloomy. And once again, there are no "reasonnable reasons" to believe that things could improve before the next elections.

One glimmer of hope my well be the appointment of Chalongphob as new FM, should this really, actually occur. Chalongphob is head of TDRI (Thai Development Research Institute, an independent think tank), which has openly criticized the government's changes in the Foreign Business Act as a blockage to new Foreign Direct Investment.

Pridiyathorn's resignation does give the PM an open door to make needed changes that will help the country and he can blame previous initiatives on Pridiyathorn. In essence, the PM is getting a second chance not to mess it up.

[Arkady]

So, overall, the situation is really gloomy. And once again, there are no "reasonnable reasons" to believe that things could improve before the next elections.

One glimmer of hope my well be the appointment of Chalongphob as new FM, should this really, actually occur. Chalongphob is head of TDRI (Thai Development Research Institute, an independent think tank), which has openly criticized the government's changes in the Foreign Business Act as a blockage to new Foreign Direct Investment.

Pridiyathorn's resignation does give the PM an open door to make needed changes that will help the country and he can blame previous initiatives on Pridiyathorn. In essence, the PM is getting a second chance not to mess it up.

He will probably have less power than Pridyathorn as I think he will not be a deputy PM but he will still hopefully withdraw the ministry's support for the BoT's capital controls and cause them to be scrapped sooner rather than later. Krirk-krai is in charge of the FBA amendments, as Commerce Minister, but Pridyathorn endorsed them and made a lot noise in support. Without this support, Krirk-krai go back to his long snooze in his minister's chair and with luck Sarayud will lose enthusiasm for the FBA amendments, given his many other pressing priorities e.g. the new constitution. Let's hope.

[ThaiGoon]

Good call, SET downside is far greater than upside.

SET downside is approximately 700.

SET upside is infinite.

Unless there's a way for the SET to go negative that I'm not aware of.

[bingobongo]

Applications to build new factories and other facilities dropped 24 percent last year and economists warn that a lack of confidence among consumers and foreign investors -- the product of political uncertainty, the threat of terrorism, and even floods -- will continue to act as a drag on the economy

http://search.japantimes.co.jp/cgi-bin/ed20070307a1.html