The Thai Economy Is In Crisis

[palm]

Overall export figures for July 2007 are down. Yet figures for the whole of 2007 are way up on 2006.

Car exports figures showing an increase of 35% in July, yet its simply not good enough for you whinger falangs.

Thailand has a very strong balance of payments, good GDP growth, low inflation, low unemployment, booming exports, and all this despite the current 'government', high oil costs and a strong baht. These are economic fundamentals.

But hey, maybe the BOT and BOI don't know anything; maybe they should come in here instead and read the advice from whinger foreigners with so much economic expertise, they are forced to live in 10,000 baht-a-month 'slum' apartments.

[xbusman]

Brilliant post Palm, thanks for your insight and careful analysis.

[Mid]

Thailand cuts export growth forecast for 2007

BANGKOK (ThomsonFinancial) - Thailand on Thursday revised down its forecast for export growth in 2007, citing an expected slowdown in global demand and the strength of its currency, the baht, which makes Thai products less competitive abroad.

Exports are likely to rise by 12.5 percent this year, down from an earlier forecast of 13.0 percent, the finance ministry said. Exports account for 60 percent of the Thai economy.

snip

abcmoney.co.uk

[xbusman]

If that forecast is valued in US dollars, which I think it is, hold on tight cause its going to get a lot bumpier than July.

[xbusman]

Forecast of export volume growth revised

The Fiscal Policy Office revised down the forecast growth of export volume this year to 6.5 per cent from the previous 8.1 per cent in response to the stronger baht.

The office's director general Pannee Sathawarodom said on Thursday that however the office has maintained the forecast GDP growth of 4 per cent this year, given that the affect of the July export's smaller growth on the economy would be offset by the state spending and domestic consumption and private sector investment.

-The Nation

Ahhhh, finally, thanks. Exports measured in Thai baht, a breath of fresh air and reality.

Okay, I think I buy export growth of 6.5% this year. I think that is the real number right now if July is just a seasonally adjusted bump. Now if exports are 60% of the economy, and grow by 6.5% that equates into roughly a 4% increase in GDP if government spending and consumption remain the same. I am a little pessimistic on that happening but time will tell.

Would love to know the assumptions underlying this forecast.

Baht appreciates, depreciates, or stays the same?

We know consumer spending is falling fast as reflected in house, car and motorcycle sales. Can government spending make up the difference? How much and how fast? Lets assume that consumption and govt spending are the total of remainder of GDP (they arent but just bear with me). Of that, consumption is probably around 30% and government around 10%. Every 1% decrease in consumption means about .3% loss of GDP. I am guessing that consumption is off between 7 and 10 percent minimally, perhaps much more. Every 1% increase in government spending adds about .1% to GDP. So exports will increase GDP 4%, consumer spending will shave around 2% so government spending has to increase about 20% to make up for that.

All this is going to be handed to the new government with best regards from our military. Should be interesting.

What is the current increase and what do the last five months have to do to make the new revised projection? I think we are currently under 6.5% growth and they are expecting additional expansion to meet that target.

[Old Man River]

Forecast of export volume growth revised

The Fiscal Policy Office revised down the forecast growth of export volume this year to 6.5 per cent from the previous 8.1 per cent in response to the stronger baht.

The office's director general Pannee Sathawarodom said on Thursday that however the office has maintained the forecast GDP growth of 4 per cent this year, given that the affect of the July export's smaller growth on the economy would be offset by the state spending and domestic consumption and private sector investment.

-The Nation

Ahhhh, finally, thanks. Exports measured in Thai baht, a breath of fresh air and reality.

Okay, I think I buy export growth of 6.5% this year. I think that is the real number right now if July is just a seasonally adjusted bump. Now if exports are 60% of the economy, and grow by 6.5% that equates into roughly a 4% increase in GDP if government spending and consumption remain the same. I am a little pessimistic on that happening but time will tell.

Would love to know the assumptions underlying this forecast.

Baht appreciates, depreciates, or stays the same?

We know consumer spending is falling fast as reflected in house, car and motorcycle sales. Can government spending make up the difference? How much and how fast? Lets assume that consumption and govt spending are the total of remainder of GDP (they arent but just bear with me). Of that, consumption is probably around 30% and government around 10%. Every 1% decrease in consumption means about .3% loss of GDP. I am guessing that consumption is off between 7 and 10 percent minimally, perhaps much more. Every 1% increase in government spending adds about .1% to GDP. So exports will increase GDP 4%, consumer spending will shave around 2% so government spending has to increase about 20% to make up for that.

All this is going to be handed to the new government with best regards from our military. Should be interesting.

What is the current increase and what do the last five months have to do to make the new revised projection? I think we are currently under 6.5% growth and they are expecting additional expansion to meet that target.

I have followed your analyses on other threads and think you are spot on. 6.5% is a pipedream, but at least they are now comparing apples with apples. Government spending is always slow and with a pending change of government will be much slower. Consumer spending needs to be bolstered by more than just talk of an upcoming election. The real issue is what will the economy look like next year at this time. I think better, but then again I am an optimist.

[Mid]

FPO maintains GDP growth of 4% this year

Posted: 2007/08/23

From: Mathaba

Thailand’s gross domestic product is expected to grow 4 per cent for this year, boosted by an accelerated government spending, according to the Fiscal Policy Office.

FPO director-general Pannee Sathavarodom said the growth rate remained in a range of 3.8-4.3 per cent the office projected in May.

snip

mathaba.net

format edit

Edited August 23, 2007 by Mid

[highdiver]

If that forecast is valued in US dollars, which I think it is, hold on tight cause its going to get a lot bumpier than July.

I enjoyed reading your posts and you views abou the economy.

I disagree with your analisis of the use of the USD to measure exports. as it was used in previous years.. it was also used 3 and 4 years ago when the Baht was very low compared with the dollar.

as it has been used for so many years it does give a comperative state of growth.

the growth itself is still evident and it seems that you can understand that there is a diference between export going down as in less then last year to export growth decline as in it is still up from last year but not at the same growth rate.

However Thailand export growth in 2007 is up until July. in July the growth rate was 5%. it was less then the expexted growth. but it is still growth..

considering the crisis in the world that started in June and exploded in August.. the figures are well understood.

As per your assumprions about the 6 month delay influence on exports.. i disagree with you as well. todays market is higly sofisiticated and exporteres use hedging as well as dervitives to controll and adress risks. so they dont wait ffor 6 months to see the impact they adress every chanfe imidiatly.

your observation about real estaste are well of as well and this point was debated in detail in the realestate forum.. there are many buidings and aprtments in bangkok that are vacent. they are not in use and the owners keep them because they want to have a flat in bangkok. they keep them as non preforming assets. they are not interested in having them return on investment and they are not interested in renting them out. this is something that cn be seem in many resort destinations in Europe as well. people buy thiose houses as a second home or a hoilday home because they want to and not as as investment.

As for Car manufacturing and exports. thailand is becoming a centrl player in this field. Toyota, ford and BMW manufactur in thailand and this year there are billions pouring in to open new facilities and upgrade old ones.

many of those cars are designed for export and will contribute in the long run to the economy as well as to the export growth.

As per Palms reaction... I dont think he was refering to you in particular... I have a good idea who he was refering to..

but his point is valid..

Thailand has a very strong balance of payments, good and stable GDP growth, low inflation, low unemployment, booming exports, and all this despite the current 'government', high oil costs and a strong baht. These are economic fundamentals.

i will add to that that the trading deifeerence between exports and imports is also possitive hence thailand is exporting more then its importing... how many western countries have that ratio???

there are those members who have as palm so fibdly adressed as "so much economic expertise, they are forced to live in 10,000 baht-a-month 'slum' apartments" have been telling us that the economy is in crisis since this thread started in May...

since this is the initial post lets get back to the subject. Thailand is not in an econmical crisis.. far from it.!!!

[bingobongo]

lollipops and rainbows for all.......

Industrial confidence index lowest in 4 years

http://www.nationmultimedia.com/2007/08/23...ss_30046191.php

[Sunderland]

I like my slum apartment. And it cost less than 10,000 baht. But I like my house in Nonthaburi more.

Economics? I couldn't give a monkey's left bum cheek ...

[Old Man River]

I disagree with your analisis of the use of the USD to measure exports. as it was used in previous years.. it was also used 3 and 4 years ago when the Baht was very low compared with the dollar.

as it has been used for so many years it does give a comperative state of growth.

The main problem with using another currency other than your own for comparative purposes is it brings in a variable that doesn't need to be there. If all exports were in USD's or THB then it should even out, year on year, but if you look at exports in other currencies (the Euro for example) then you are factoring in the Euro/USD exchange rates which may be different from the Euro/THB exchange rates. For many years the USD was the currency used across the board, but it isn't as valid a comparison these days.

[Old Man River]

Double post. Apologies.

Edited August 23, 2007 by Old Man River

[VegasVic]

lollipops and rainbows for all.......

Industrial confidence index lowest in 4 years

http://www.nationmultimedia.com/2007/08/23...ss_30046191.php

Interesting article! I fear that if the baht does not continue its recent weakening trend, that this could be just the tip of the iceberg.

[xbusman]

Well, lets start by going back to basics and work from there.

When I started coming to Asia some twenty years ago, I was struck by how controlled the press is throughout asia. Not only does government meddle fiercely, but I have come to believe that culturally the asian prefer a muted and optimistic press. Being raised in the west, we are privy to a wide range of highly conflictive news sources. With hundreds of opposing views, occasionally if we remain open minded we can get vague outlines of the truth in three dimensions. Not so here. Of all the asian countries (excluding Japan of course) I think Thailand does a fair job of presenting things, enough for you, me and somchai anyway. In the end, who cares if the runway has cracks, if we are the hub of fashion, or if the navy buys an aircraft carrier.

But, and a large but, third world countries and Thailand in particular have a history of suddenly and brutally twisting the economy or their population with little to no warning. With that track record, I think it behooves those of us who wish to remain in the kingdom for whatever reasons to keep a watchful eye on economics and our welcome here (read as visas).

Now I think we can agree that the press is pretty poor at best, outright misleading at times, and on rare occasions correct. Even reporting for surveys done by Chulongkorn and the like while perhaps accurate you would foolish to completely trust the methodology.

So we start in the press and try to determine trends, then apply your practical experience and talk with a wide variety of people on the ground. For me, this forum plays a part of the ground. I can reach a wide variety of individuals with diverse backgrounds and amazing experience.

This leads to my experience as an exporter. Five years ago I had a booming business and was unable to handle the calls. Over the past five years, I have been forced to move each and every product out of Thailand into China and India. As the baht appreciated, I moved product, laid off staff, reduced overhead, cut expenses, and despite our best efforts to place products in Thailand with only one exception have been completely unable to do so for almost a year now. I was able to sell some customers on the quality, on the safety of not being knocked off, on delivery reliability, but eventually when the premium started to push 20% or more I either was forced to move them or lose them.

About a year ago when it got really bad, I started to find all my vendors closing up and moving. Either to China or Vietnam I was losing about three factories a week out of my stable. Despite all this blood, there was nothing but wonderful news in the papers, both English and Thai. I thought about an economy that is 60% based on exports, the strange disconnect from what I was experiencing versus what is in the paper, and an assumption that if it is happening to me the little guy, what are others doing that I am not, what are they seeing that I am not. Time to do some homework.

So over the past year, as my export business out of Thailand has all but stopped, I went to work trying to determine where we are and where we are going as an economy based 60% on exports. Why? First because I would rather leave the business and do something else rather than move to China and second, because I have always thought that the Chinese would eventually burn themselves in a global arena making Thailand the new Asian tiger again. In my little head, I have the suspicion that China will go after Formosa one day and grossly underestimate the consequences. When that happens, I want to be established in Thailand. Unfortunately, I missed Vietnam as I now think that with current policies and practices, Thailand will be behind Vietnam quicker than we think.

So now, let me address your remarks. I address them in the spirit of desperately hoping you are right. I am looking for that argument that indeed tells me that Thailand can survive and prosper 20,30, or 40% higher in price than China. If they lose that competitive edge, I am looking for what is going to replace that 60% of the economy. Perhaps its not on the horizon yet, maybe its going to be a baby who dies from radiated pacifiers out of China. Maybe the Thais will invent a substitute for oil, or an AIDS vaccine, but I am pretty sure that it will not be an economy of massage parlors and beauty salons.

If that forecast is valued in US dollars, which I think it is, hold on tight cause its going to get a lot bumpier than July.

I enjoyed reading your posts and you views abou the economy.

I disagree with your analisis of the use of the USD to measure exports. as it was used in previous years.. it was also used 3 and 4 years ago when the Baht was very low compared with the dollar.

as it has been used for so many years it does give a comperative state of growth.

Highdiver, this is simply inane. Fours years ago exports were growing in very real terms and the baht was appreciating very slightly. I am sorry, but when you measure anything in some bogus foreign currency you are measuring more of the currency change than real goods and services. That argument is simply a straw man, we have to know what exports are doing in real actual good volume to get any clear idea of the trend. Exports have slowed dramatically this year and shrunk in July in real good terms. If you want to feel better, I am dead serious here, use Zimbabwe dollars, they have depreciated 2000% just this month. It is stupid, foolish and misleading to use another currency, any other currency. REAL TERMS, imports are slowing dramatically and projected to shrink this year as compared to last. That is in line with what I am seeing and hearing. A quick check with shipping companies would confirm this. Large companies are hedging, fighting and struggling, some have really stepped to the task and are excelling. I would not expect otherwise. Overall, even those companies have had significant reductions in gross profit but are still viable. My question is how much more pain can they endure than me.

the growth itself is still evident and it seems that you can understand that there is a diference between export going down as in less then last year to export growth decline as in it is still up from last year but not at the same growth rate.

However Thailand export growth in 2007 is up until July. in July the growth rate was 5%. it was less then the expexted growth. but it is still growth..

considering the crisis in the world that started in June and exploded in August.. the figures are well understood.

Sorry, exports dont happen overnight. Believe me, I know. Some do, people come here on buying trips getting jewelry and furniture and the like. Overall, its not the export market, a very small segment. Again, IN REAL TERMS, if they projecting 12.5% export growth in US dollar terms this year and the dollar depreciates 12.5% or more as is expected, real goods shipped and baht income will have shrunk. Stop with the dollar already, you cant see trends when you obscure the facts with useless extraneous information. Which by the way, using the dollar is in itself foolish, the US is not the largest trading partner. I would feel more comfortable if they used yen but would still want to know the REAL exports.

I will grant you this. Our retail businesses in the US began to slow down dramatically in June. We did begin to pull in the reigns in July but we commit for 90% of our goods out at least three months and in some cases a year. You will begin to see the subprime mess hit world production (if it does at all) just starting in August and really taking hold in December. Using the subprime mess to talk about July results makes no sense to anyone with any practical experience. Hey ThaiVisa members, someone argue this point with me with good on the ground experience. Not tourism either, tourism can take a hit in a day as 9/11 and the tsunami proved.

No, the figures are not well understood and we need to understand them. I think thats the reason for all the special meetings to discuss them and the review of customs records going on. I think I understand them but thats why I am here, to see if I am wrong.

As per your assumprions about the 6 month delay influence on exports.. i disagree with you as well. todays market is higly sofisiticated and exporteres use hedging as well as dervitives to controll and adress risks. so they dont wait ffor 6 months to see the impact they adress every chanfe imidiatly.

Six months is the time it will take for the subprime to effect consumers, retailers to adjust inventory and orders, manufacturers to see the results. Hedging and derivatives have nothing to do with that process. We still have current purchase orders that were cut this year in which the stores and buyers had no inkling of the subprime mess and decreased liquidity. In some cases they might be able to reduce them, but we simply wont see the effects of a slowing US consumer UNTIL IT SLOWS.

your observation about real estaste are well of as well and this point was debated in detail in the realestate forum.. there are many buidings and aprtments in bangkok that are vacent. they are not in use and the owners keep them because they want to have a flat in bangkok. they keep them as non preforming assets. they are not interested in having them return on investment and they are not interested in renting them out. this is something that cn be seem in many resort destinations in Europe as well. people buy thiose houses as a second home or a hoilday home because they want to and not as as investment.

I absolutely dont disagree with any of the above. In fact, I am sometimes simply taken back by how wealthy the top 6% are. They can afford to buy cities in Issarn and leave them vacant without noticing. What I am commenting on is the NPL problem I seem to come across with a large majority of properties I look at. How many are left over from the 97 crisis that are draining resources from banks and government funds. I am not referring to new luxury condos, I know nothing of that market. I am talking about shop houses, warehouses, factories, and older rooms and small condos. I throw out that experience looking for someone to say honestly "hey I am in Real Estate and that the oldest trick in the book to get you interested, everything is paid in full" or some such. I can see the machine that is going to take its toll in the US and burn most of those involved along with the innocent who became embroiled through hubris in a bad market, but I cant see that machine here, all I see are empty rooms that have a "problem". At what point will it become a serious "problem" again? How far does an export based economy have to shrink before resources become to thin to be able to comfortably ignore that pesky "problem". Maybe we can lose 20% of GDP and it wont matter, maybe its already too late. I dont care about the wealthy and their second or fifth homes, they are irrelevant to the long term vision. I seriously care about NPLs and how they are handled if things get tougher.

As for Car manufacturing and exports. thailand is becoming a centrl player in this field. Toyota, ford and BMW manufactur in thailand and this year there are billions pouring in to open new facilities and upgrade old ones.

many of those cars are designed for export and will contribute in the long run to the economy as well as to the export growth.

I dont disagree. The Japanese are deadly serious about what they are building here and their commitment. Wish I could say the same for Ford and BMW but as I am not a board member either corporation I will have to see what transpires. Just remember that decisions to invest in car production are very long term, what we are seeing now is because of the wonderful vision and forward thinking of Japanese companies decades ago. I am not privy to their board meetings as well but I can guess at a few things. Having been there, I can tell you that the strengthening baht does not make them more inclined to produce here. Being a huge multinational with diverse resources worldwide, they have little men in cubicles who crunch numbers every second of the day. Those heartless automons dont give a rats arse if Thaksin is in control, the military or the pope, when the currency becomes more painful than another plant somewhere else, one gets ramped down, one gets ramped up. Efficiency and cost control are the mantra, profit is the god. It takes time to implement as I laid out in some other post, but count on it Highdiver, at some point it will be implemented. I dont know where that point is, but the Japanese executives I have spoken with are in the process of ramping down which leads me to believe that we have past that point. Not closing mind you, just adjusting to reduced demand and escalating costs. If I am right, we will start to see that by year end.

As per Palms reaction... I dont think he was refering to you in particular... I have a good idea who he was refering to..

but his point is valid..

Thailand has a very strong balance of payments, good and stable GDP growth, low inflation, low unemployment, booming exports, and all this despite the current 'government', high oil costs and a strong baht. These are economic fundamentals.

i will add to that that the trading deifeerence between exports and imports is also possitive hence thailand is exporting more then its importing... how many western countries have that ratio???

there are those members who have as palm so fibdly adressed as "so much economic expertise, they are forced to live in 10,000 baht-a-month 'slum' apartments" have been telling us that the economy is in crisis since this thread started in May...

I agree and disagree. I agree that Thailand has a very strong balance of payments. We are coming off some very good years and have a great bank account. I cant see that evaporating quickly or perhaps not at all.

Good and stable GDP growth? I personally think that wishing for 4% growth in such a small and dynamic country is simply miserable. I think 4% is going to be tough, and it is always couched in terms like IF the sun shines and IF we get a good clean government and IF consumer spending comes back. My experiences is that IF is hard to cash at a bank. Perhaps we can get 4% but thats pretty miserly for a country with so much potential.

Low inflation, I have a tendency to agree. In terms of goods and services, I have not really seen anything rise unusually. With gross profit shrinking however, all my Thai vendors are trying desperately to raise prices, unfortunately they are caught between a rock and hard place on this one. Dont forget that many things are price controlled by the government, that helps to keep down inflation but can begin to cause distortions. I have been watching for that but dont have any real examples, yet.

Despite the current "government", well dont give them too much credit yet. The things they do dont show up in the economy for some time. The FBA even if passed would have taken years to work its damage. I think they as military people have been a bit clueless on the economy, on world relations, on legitimacy. I would not expect otherwise from any military junta anywhere in the world. The good news is that they seem intent on wielding power behind the curtain where they have been the last 100 years.

Yes, Thailand is exporting more than it is importing. Imports here are tightly controlled by the elite and the reason most things from outside the country cost a fortune. Thats not rocket science. A country that produces such a monstrous abundance of food and where the large majority is kept in poverty is a pretty sure bet to have a positive trade balance. What does a positive trade balance do for us if we dont invest that surplus in infrastructure, productivity advances, education, health. If its used to buy luxury condos to keep empty or build more golf courses that no one will play, what good exactly is a trade surplus. Remember, trade surpluses end up in the pocket of exporters, not in government coffers. Trade surpluses do indeed create wealth, but exactly who is getting wealthy on them here?

I wont comment on the name calling but I do try to listen carefully to the complete cacophony, even the low caste. When in a theater and someone yells fire, it is not in my nature to review credentials first. Now, outside the theater, I want to know what they saw, are they rational, is there smoke, did anyone else see it, or can I go back to my show.

I must tell you, I do not believe that the Thai economy is in crisis. I desperately hope that innovation and human nature will overcome the adversity that is piling up, it most certainly will to some extent. I do believe that in this export based economy that is suffering from a completely irrational appreciation of the baht while competing with the ruthless Chinese manufacturing machine that I am smelling smoke. If there is no fire, I am going back to enjoy the show. If there is a fire, I dont planned on getting burned.

since this is the initial post lets get back to the subject. Thailand is not in an econmical crisis.. far from it.!!!

I agree, Thailand is not in an economic crisis, but I think we are much much closer than you think.

[bingobongo]

one of many soon to be failed businesses as the credit woes spread.......no unicorns here....

Blow to rice exports as company folds

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.

http://www.nationmultimedia.com/2007/08/24/business/business_30046326.php

[LaoPo]

Well, lets start by going back to basics and work from there.

When I started coming to Asia some twenty years ago, I was struck by how controlled the press is throughout asia. Not only does government meddle fiercely, but I have come to believe that culturally the asian prefer a muted and optimistic press. Being raised in the west, we are privy to a wide range of highly conflictive news sources. With hundreds of opposing views, occasionally if we remain open minded we can get vague outlines of the truth in three dimensions. Not so here. Of all the asian countries (excluding Japan of course) I think Thailand does a fair job of presenting things, enough for you, me and somchai anyway. In the end, who cares if the runway has cracks, if we are the hub of fashion, or if the navy buys an aircraft carrier.

But, and a large but, third world countries and Thailand in particular have a history of suddenly and brutally twisting the economy or their population with little to no warning. With that track record, I think it behooves those of us who wish to remain in the kingdom for whatever reasons to keep a watchful eye on economics and our welcome here (read as visas).

Now I think we can agree that the press is pretty poor at best, outright misleading at times, and on rare occasions correct. Even reporting for surveys done by Chulongkorn and the like while perhaps accurate you would foolish to completely trust the methodology.

So we start in the press and try to determine trends, then apply your practical experience and talk with a wide variety of people on the ground. For me, this forum plays a part of the ground. I can reach a wide variety of individuals with diverse backgrounds and amazing experience.

This leads to my experience as an exporter. Five years ago I had a booming business and was unable to handle the calls. Over the past five years, I have been forced to move each and every product out of Thailand into China and India. As the baht appreciated, I moved product, laid off staff, reduced overhead, cut expenses, and despite our best efforts to place products in Thailand with only one exception have been completely unable to do so for almost a year now. I was able to sell some customers on the quality, on the safety of not being knocked off, on delivery reliability, but eventually when the premium started to push 20% or more I either was forced to move them or lose them.

About a year ago when it got really bad, I started to find all my vendors closing up and moving. Either to China or Vietnam I was losing about three factories a week out of my stable. Despite all this blood, there was nothing but wonderful news in the papers, both English and Thai. I thought about an economy that is 60% based on exports, the strange disconnect from what I was experiencing versus what is in the paper, and an assumption that if it is happening to me the little guy, what are others doing that I am not, what are they seeing that I am not. Time to do some homework.

So over the past year, as my export business out of Thailand has all but stopped, I went to work trying to determine where we are and where we are going as an economy based 60% on exports. Why? First because I would rather leave the business and do something else rather than move to China and second, because I have always thought that the Chinese would eventually burn themselves in a global arena making Thailand the new Asian tiger again. In my little head, I have the suspicion that China will go after Formosa one day and grossly underestimate the consequences. When that happens, I want to be established in Thailand. Unfortunately, I missed Vietnam as I now think that with current policies and practices, Thailand will be behind Vietnam quicker than we think.

So now, let me address your remarks. I address them in the spirit of desperately hoping you are right. I am looking for that argument that indeed tells me that Thailand can survive and prosper 20,30, or 40% higher in price than China. If they lose that competitive edge, I am looking for what is going to replace that 60% of the economy. Perhaps its not on the horizon yet, maybe its going to be a baby who dies from radiated pacifiers out of China. Maybe the Thais will invent a substitute for oil, or an AIDS vaccine, but I am pretty sure that it will not be an economy of massage parlors and beauty salons.

If that forecast is valued in US dollars, which I think it is, hold on tight cause its going to get a lot bumpier than July.

I enjoyed reading your posts and you views abou the economy.

I disagree with your analisis of the use of the USD to measure exports. as it was used in previous years.. it was also used 3 and 4 years ago when the Baht was very low compared with the dollar.

as it has been used for so many years it does give a comperative state of growth.

Highdiver, this is simply inane. Fours years ago exports were growing in very real terms and the baht was appreciating very slightly. I am sorry, but when you measure anything in some bogus foreign currency you are measuring more of the currency change than real goods and services. That argument is simply a straw man, we have to know what exports are doing in real actual good volume to get any clear idea of the trend. Exports have slowed dramatically this year and shrunk in July in real good terms. If you want to feel better, I am dead serious here, use Zimbabwe dollars, they have depreciated 2000% just this month. It is stupid, foolish and misleading to use another currency, any other currency. REAL TERMS, imports are slowing dramatically and projected to shrink this year as compared to last. That is in line with what I am seeing and hearing. A quick check with shipping companies would confirm this. Large companies are hedging, fighting and struggling, some have really stepped to the task and are excelling. I would not expect otherwise. Overall, even those companies have had significant reductions in gross profit but are still viable. My question is how much more pain can they endure than me.

the growth itself is still evident and it seems that you can understand that there is a diference between export going down as in less then last year to export growth decline as in it is still up from last year but not at the same growth rate.

However Thailand export growth in 2007 is up until July. in July the growth rate was 5%. it was less then the expexted growth. but it is still growth..

considering the crisis in the world that started in June and exploded in August.. the figures are well understood.

Sorry, exports dont happen overnight. Believe me, I know. Some do, people come here on buying trips getting jewelry and furniture and the like. Overall, its not the export market, a very small segment. Again, IN REAL TERMS, if they projecting 12.5% export growth in US dollar terms this year and the dollar depreciates 12.5% or more as is expected, real goods shipped and baht income will have shrunk. Stop with the dollar already, you cant see trends when you obscure the facts with useless extraneous information. Which by the way, using the dollar is in itself foolish, the US is not the largest trading partner. I would feel more comfortable if they used yen but would still want to know the REAL exports.

I will grant you this. Our retail businesses in the US began to slow down dramatically in June. We did begin to pull in the reigns in July but we commit for 90% of our goods out at least three months and in some cases a year. You will begin to see the subprime mess hit world production (if it does at all) just starting in August and really taking hold in December. Using the subprime mess to talk about July results makes no sense to anyone with any practical experience. Hey ThaiVisa members, someone argue this point with me with good on the ground experience. Not tourism either, tourism can take a hit in a day as 9/11 and the tsunami proved.

No, the figures are not well understood and we need to understand them. I think thats the reason for all the special meetings to discuss them and the review of customs records going on. I think I understand them but thats why I am here, to see if I am wrong.

As per your assumprions about the 6 month delay influence on exports.. i disagree with you as well. todays market is higly sofisiticated and exporteres use hedging as well as dervitives to controll and adress risks. so they dont wait ffor 6 months to see the impact they adress every chanfe imidiatly.

Six months is the time it will take for the subprime to effect consumers, retailers to adjust inventory and orders, manufacturers to see the results. Hedging and derivatives have nothing to do with that process. We still have current purchase orders that were cut this year in which the stores and buyers had no inkling of the subprime mess and decreased liquidity. In some cases they might be able to reduce them, but we simply wont see the effects of a slowing US consumer UNTIL IT SLOWS.

your observation about real estaste are well of as well and this point was debated in detail in the realestate forum.. there are many buidings and aprtments in bangkok that are vacent. they are not in use and the owners keep them because they want to have a flat in bangkok. they keep them as non preforming assets. they are not interested in having them return on investment and they are not interested in renting them out. this is something that cn be seem in many resort destinations in Europe as well. people buy thiose houses as a second home or a hoilday home because they want to and not as as investment.

I absolutely dont disagree with any of the above. In fact, I am sometimes simply taken back by how wealthy the top 6% are. They can afford to buy cities in Issarn and leave them vacant without noticing. What I am commenting on is the NPL problem I seem to come across with a large majority of properties I look at. How many are left over from the 97 crisis that are draining resources from banks and government funds. I am not referring to new luxury condos, I know nothing of that market. I am talking about shop houses, warehouses, factories, and older rooms and small condos. I throw out that experience looking for someone to say honestly "hey I am in Real Estate and that the oldest trick in the book to get you interested, everything is paid in full" or some such. I can see the machine that is going to take its toll in the US and burn most of those involved along with the innocent who became embroiled through hubris in a bad market, but I cant see that machine here, all I see are empty rooms that have a "problem". At what point will it become a serious "problem" again? How far does an export based economy have to shrink before resources become to thin to be able to comfortably ignore that pesky "problem". Maybe we can lose 20% of GDP and it wont matter, maybe its already too late. I dont care about the wealthy and their second or fifth homes, they are irrelevant to the long term vision. I seriously care about NPLs and how they are handled if things get tougher.

As for Car manufacturing and exports. thailand is becoming a centrl player in this field. Toyota, ford and BMW manufactur in thailand and this year there are billions pouring in to open new facilities and upgrade old ones.

many of those cars are designed for export and will contribute in the long run to the economy as well as to the export growth.

I dont disagree. The Japanese are deadly serious about what they are building here and their commitment. Wish I could say the same for Ford and BMW but as I am not a board member either corporation I will have to see what transpires. Just remember that decisions to invest in car production are very long term, what we are seeing now is because of the wonderful vision and forward thinking of Japanese companies decades ago. I am not privy to their board meetings as well but I can guess at a few things. Having been there, I can tell you that the strengthening baht does not make them more inclined to produce here. Being a huge multinational with diverse resources worldwide, they have little men in cubicles who crunch numbers every second of the day. Those heartless automons dont give a rats arse if Thaksin is in control, the military or the pope, when the currency becomes more painful than another plant somewhere else, one gets ramped down, one gets ramped up. Efficiency and cost control are the mantra, profit is the god. It takes time to implement as I laid out in some other post, but count on it Highdiver, at some point it will be implemented. I dont know where that point is, but the Japanese executives I have spoken with are in the process of ramping down which leads me to believe that we have past that point. Not closing mind you, just adjusting to reduced demand and escalating costs. If I am right, we will start to see that by year end.

As per Palms reaction... I dont think he was refering to you in particular... I have a good idea who he was refering to..

but his point is valid..

Thailand has a very strong balance of payments, good and stable GDP growth, low inflation, low unemployment, booming exports, and all this despite the current 'government', high oil costs and a strong baht. These are economic fundamentals.

i will add to that that the trading deifeerence between exports and imports is also possitive hence thailand is exporting more then its importing... how many western countries have that ratio???

there are those members who have as palm so fibdly adressed as "so much economic expertise, they are forced to live in 10,000 baht-a-month 'slum' apartments" have been telling us that the economy is in crisis since this thread started in May...

I agree and disagree. I agree that Thailand has a very strong balance of payments. We are coming off some very good years and have a great bank account. I cant see that evaporating quickly or perhaps not at all.

Good and stable GDP growth? I personally think that wishing for 4% growth in such a small and dynamic country is simply miserable. I think 4% is going to be tough, and it is always couched in terms like IF the sun shines and IF we get a good clean government and IF consumer spending comes back. My experiences is that IF is hard to cash at a bank. Perhaps we can get 4% but thats pretty miserly for a country with so much potential.

Low inflation, I have a tendency to agree. In terms of goods and services, I have not really seen anything rise unusually. With gross profit shrinking however, all my Thai vendors are trying desperately to raise prices, unfortunately they are caught between a rock and hard place on this one. Dont forget that many things are price controlled by the government, that helps to keep down inflation but can begin to cause distortions. I have been watching for that but dont have any real examples, yet.

Despite the current "government", well dont give them too much credit yet. The things they do dont show up in the economy for some time. The FBA even if passed would have taken years to work its damage. I think they as military people have been a bit clueless on the economy, on world relations, on legitimacy. I would not expect otherwise from any military junta anywhere in the world. The good news is that they seem intent on wielding power behind the curtain where they have been the last 100 years.

Yes, Thailand is exporting more than it is importing. Imports here are tightly controlled by the elite and the reason most things from outside the country cost a fortune. Thats not rocket science. A country that produces such a monstrous abundance of food and where the large majority is kept in poverty is a pretty sure bet to have a positive trade balance. What does a positive trade balance do for us if we dont invest that surplus in infrastructure, productivity advances, education, health. If its used to buy luxury condos to keep empty or build more golf courses that no one will play, what good exactly is a trade surplus. Remember, trade surpluses end up in the pocket of exporters, not in government coffers. Trade surpluses do indeed create wealth, but exactly who is getting wealthy on them here?

I wont comment on the name calling but I do try to listen carefully to the complete cacophony, even the low caste. When in a theater and someone yells fire, it is not in my nature to review credentials first. Now, outside the theater, I want to know what they saw, are they rational, is there smoke, did anyone else see it, or can I go back to my show.

I must tell you, I do not believe that the Thai economy is in crisis. I desperately hope that innovation and human nature will overcome the adversity that is piling up, it most certainly will to some extent. I do believe that in this export based economy that is suffering from a completely irrational appreciation of the baht while competing with the ruthless Chinese manufacturing machine that I am smelling smoke. If there is no fire, I am going back to enjoy the show. If there is a fire, I dont planned on getting burned.

since this is the initial post lets get back to the subject. Thailand is not in an econmical crisis.. far from it.!!!

I agree, Thailand is not in an economic crisis, but I think we are much much closer than you think.

Impressive post and comments xbusman!

I've seen quite a few people like yourself 'forced' to leave Thailand, business wise, including myself and that was even longer ago. I don't have to sum up the reasons as you did so already.

But, all in all, you paint a very good picture about the reality in nowadays -business- Thailand, for foreign businessmen that is. I'm not talking large [Japanese for instance] internationals here since they demand, and get, incentives because of their major investments.

But your comments about those companies are spot on, next to the fact that the 'profits' of these internationals are flowing to the Mother companies, back in their own country, not Thailand...

So, news that car exports are up some 36% in July doesn't mean or change very much for the Thai economy since the profits, reached by those exports, do not flow back into the Thai economy.

LaoPo

[xbusman]

Still the auto industry has a massive follow on effect. There are hundreds, maybe thousands of Thai companies that produce parts or provide services for the auto builders. It is currently still strong and a major source of support. My contention is that at some point, and at think we have already reached it, the evil accounting empire drones in the basement of Toyota corporate headquarters will begin to ramp it down in favor of other manufacturers.

To give you an idea of how inconsequential labor can be in the manufacture of an auto, there is only 83 manhours of labor in the highest end Lexus. If the Japanese labor rate is $70 burdened, the Thai labor rate is probably around $20 burdened. Thats only about $4000 in an $80,000 car. A lot of things start eating up that labor rate difference such as transport, foreign double taxation, shipping parts from Japan to Thailand, and of course currency expenses. Things like the CRV and Yaris are made under 40 hours of direct labor making the differential much closer.

Local car factories are opened generally in the attempt to reduce exporting, moving those cars after they are built are one of the major expenses. The Japanese have developed manufacturing systems that are quickest to respond to changes in demand and the economy. Lets see what production does in December when they have ramped up or down. There may indeed be a dramatic increase in demand in the middle east and this is a pretty good location for filling that demand. With oil so high thats where I would be sending my salesmen starting last year.

[cclub75]

Highdiver, this is simply inane. Fours years ago exports were growing in very real terms and the baht was appreciating very slightly. I am sorry, but when you measure anything in some bogus foreign currency you are measuring more of the currency change than real goods and services. That argument is simply a straw man, we have to know what exports are doing in real actual good volume to get any clear idea of the trend. Exports have slowed dramatically this year and shrunk in July in real good terms.

I share your views Xbusman.

However, I would like to add that we do have figures regarding volumes (for some sector), from the BOT (until june).

Here for volume and value in USD.

And here for volume and value in THB.

Pineapple, sugar, cement, shrimp, tin and even rice are going up.

But tobacco, tapioca are going down sharply.

And by the way, it's interesting to see for instance (we talked a lot previously about car industry here) that "Vehicles, Parts and Accessories" represent only 1/10 of total exports (in value) !

This simple data allows us for instance to debunk people who believe that the car industry will save thai exports...

The datas, the figures... everything is there, in front of our eyes.

[highdiver]

Well, lets start by going back to basics and work from there.

When I started coming to Asia some twenty years ago, I was struck by how controlled the press is throughout asia. Not only does government meddle fiercely, but I have come to believe that culturally the asian prefer a muted and optimistic press. Being raised in the west, we are privy to a wide range of highly conflictive news sources. With hundreds of opposing views, occasionally if we remain open minded we can get vague outlines of the truth in three dimensions. Not so here. Of all the asian countries (excluding Japan of course) I think Thailand does a fair job of presenting things, enough for you, me and somchai anyway. In the end, who cares if the runway has cracks, if we are the hub of fashion, or if the navy buys an aircraft carrier.

But, and a large but, third world countries and Thailand in particular have a history of suddenly and brutally twisting the economy or their population with little to no warning. With that track record, I think it behooves those of us who wish to remain in the kingdom for whatever reasons to keep a watchful eye on economics and our welcome here (read as visas).

Now I think we can agree that the press is pretty poor at best, outright misleading at times, and on rare occasions correct. Even reporting for surveys done by Chulongkorn and the like while perhaps accurate you would foolish to completely trust the methodology.

So we start in the press and try to determine trends, then apply your practical experience and talk with a wide variety of people on the ground. For me, this forum plays a part of the ground. I can reach a wide variety of individuals with diverse backgrounds and amazing experience.

This leads to my experience as an exporter. Five years ago I had a booming business and was unable to handle the calls. Over the past five years, I have been forced to move each and every product out of Thailand into China and India. As the baht appreciated, I moved product, laid off staff, reduced overhead, cut expenses, and despite our best efforts to place products in Thailand with only one exception have been completely unable to do so for almost a year now. I was able to sell some customers on the quality, on the safety of not being knocked off, on delivery reliability, but eventually when the premium started to push 20% or more I either was forced to move them or lose them.

About a year ago when it got really bad, I started to find all my vendors closing up and moving. Either to China or Vietnam I was losing about three factories a week out of my stable. Despite all this blood, there was nothing but wonderful news in the papers, both English and Thai. I thought about an economy that is 60% based on exports, the strange disconnect from what I was experiencing versus what is in the paper, and an assumption that if it is happening to me the little guy, what are others doing that I am not, what are they seeing that I am not. Time to do some homework.

So over the past year, as my export business out of Thailand has all but stopped, I went to work trying to determine where we are and where we are going as an economy based 60% on exports. Why? First because I would rather leave the business and do something else rather than move to China and second, because I have always thought that the Chinese would eventually burn themselves in a global arena making Thailand the new Asian tiger again. In my little head, I have the suspicion that China will go after Formosa one day and grossly underestimate the consequences. When that happens, I want to be established in Thailand. Unfortunately, I missed Vietnam as I now think that with current policies and practices, Thailand will be behind Vietnam quicker than we think.

So now, let me address your remarks. I address them in the spirit of desperately hoping you are right. I am looking for that argument that indeed tells me that Thailand can survive and prosper 20,30, or 40% higher in price than China. If they lose that competitive edge, I am looking for what is going to replace that 60% of the economy. Perhaps its not on the horizon yet, maybe its going to be a baby who dies from radiated pacifiers out of China. Maybe the Thais will invent a substitute for oil, or an AIDS vaccine, but I am pretty sure that it will not be an economy of massage parlors and beauty salons.

If that forecast is valued in US dollars, which I think it is, hold on tight cause its going to get a lot bumpier than July.

I enjoyed reading your posts and you views abou the economy.

I disagree with your analisis of the use of the USD to measure exports. as it was used in previous years.. it was also used 3 and 4 years ago when the Baht was very low compared with the dollar.

as it has been used for so many years it does give a comperative state of growth.

Highdiver, this is simply inane. Fours years ago exports were growing in very real terms and the baht was appreciating very slightly. I am sorry, but when you measure anything in some bogus foreign currency you are measuring more of the currency change than real goods and services. That argument is simply a straw man, we have to know what exports are doing in real actual good volume to get any clear idea of the trend. Exports have slowed dramatically this year and shrunk in July in real good terms. If you want to feel better, I am dead serious here, use Zimbabwe dollars, they have depreciated 2000% just this month. It is stupid, foolish and misleading to use another currency, any other currency. REAL TERMS, imports are slowing dramatically and projected to shrink this year as compared to last. That is in line with what I am seeing and hearing. A quick check with shipping companies would confirm this. Large companies are hedging, fighting and struggling, some have really stepped to the task and are excelling. I would not expect otherwise. Overall, even those companies have had significant reductions in gross profit but are still viable. My question is how much more pain can they endure than me.

the growth itself is still evident and it seems that you can understand that there is a diference between export going down as in less then last year to export growth decline as in it is still up from last year but not at the same growth rate.

However Thailand export growth in 2007 is up until July. in July the growth rate was 5%. it was less then the expexted growth. but it is still growth..

considering the crisis in the world that started in June and exploded in August.. the figures are well understood.

Sorry, exports dont happen overnight. Believe me, I know. Some do, people come here on buying trips getting jewelry and furniture and the like. Overall, its not the export market, a very small segment. Again, IN REAL TERMS, if they projecting 12.5% export growth in US dollar terms this year and the dollar depreciates 12.5% or more as is expected, real goods shipped and baht income will have shrunk. Stop with the dollar already, you cant see trends when you obscure the facts with useless extraneous information. Which by the way, using the dollar is in itself foolish, the US is not the largest trading partner. I would feel more comfortable if they used yen but would still want to know the REAL exports.

I will grant you this. Our retail businesses in the US began to slow down dramatically in June. We did begin to pull in the reigns in July but we commit for 90% of our goods out at least three months and in some cases a year. You will begin to see the subprime mess hit world production (if it does at all) just starting in August and really taking hold in December. Using the subprime mess to talk about July results makes no sense to anyone with any practical experience. Hey ThaiVisa members, someone argue this point with me with good on the ground experience. Not tourism either, tourism can take a hit in a day as 9/11 and the tsunami proved.

No, the figures are not well understood and we need to understand them. I think thats the reason for all the special meetings to discuss them and the review of customs records going on. I think I understand them but thats why I am here, to see if I am wrong.

As per your assumprions about the 6 month delay influence on exports.. i disagree with you as well. todays market is higly sofisiticated and exporteres use hedging as well as dervitives to controll and adress risks. so they dont wait ffor 6 months to see the impact they adress every chanfe imidiatly.

Six months is the time it will take for the subprime to effect consumers, retailers to adjust inventory and orders, manufacturers to see the results. Hedging and derivatives have nothing to do with that process. We still have current purchase orders that were cut this year in which the stores and buyers had no inkling of the subprime mess and decreased liquidity. In some cases they might be able to reduce them, but we simply wont see the effects of a slowing US consumer UNTIL IT SLOWS.

your observation about real estaste are well of as well and this point was debated in detail in the realestate forum.. there are many buidings and aprtments in bangkok that are vacent. they are not in use and the owners keep them because they want to have a flat in bangkok. they keep them as non preforming assets. they are not interested in having them return on investment and they are not interested in renting them out. this is something that cn be seem in many resort destinations in Europe as well. people buy thiose houses as a second home or a hoilday home because they want to and not as as investment.

I absolutely dont disagree with any of the above. In fact, I am sometimes simply taken back by how wealthy the top 6% are. They can afford to buy cities in Issarn and leave them vacant without noticing. What I am commenting on is the NPL problem I seem to come across with a large majority of properties I look at. How many are left over from the 97 crisis that are draining resources from banks and government funds. I am not referring to new luxury condos, I know nothing of that market. I am talking about shop houses, warehouses, factories, and older rooms and small condos. I throw out that experience looking for someone to say honestly "hey I am in Real Estate and that the oldest trick in the book to get you interested, everything is paid in full" or some such. I can see the machine that is going to take its toll in the US and burn most of those involved along with the innocent who became embroiled through hubris in a bad market, but I cant see that machine here, all I see are empty rooms that have a "problem". At what point will it become a serious "problem" again? How far does an export based economy have to shrink before resources become to thin to be able to comfortably ignore that pesky "problem". Maybe we can lose 20% of GDP and it wont matter, maybe its already too late. I dont care about the wealthy and their second or fifth homes, they are irrelevant to the long term vision. I seriously care about NPLs and how they are handled if things get tougher.

As for Car manufacturing and exports. thailand is becoming a centrl player in this field. Toyota, ford and BMW manufactur in thailand and this year there are billions pouring in to open new facilities and upgrade old ones.

many of those cars are designed for export and will contribute in the long run to the economy as well as to the export growth.

I dont disagree. The Japanese are deadly serious about what they are building here and their commitment. Wish I could say the same for Ford and BMW but as I am not a board member either corporation I will have to see what transpires. Just remember that decisions to invest in car production are very long term, what we are seeing now is because of the wonderful vision and forward thinking of Japanese companies decades ago. I am not privy to their board meetings as well but I can guess at a few things. Having been there, I can tell you that the strengthening baht does not make them more inclined to produce here. Being a huge multinational with diverse resources worldwide, they have little men in cubicles who crunch numbers every second of the day. Those heartless automons dont give a rats arse if Thaksin is in control, the military or the pope, when the currency becomes more painful than another plant somewhere else, one gets ramped down, one gets ramped up. Efficiency and cost control are the mantra, profit is the god. It takes time to implement as I laid out in some other post, but count on it Highdiver, at some point it will be implemented. I dont know where that point is, but the Japanese executives I have spoken with are in the process of ramping down which leads me to believe that we have past that point. Not closing mind you, just adjusting to reduced demand and escalating costs. If I am right, we will start to see that by year end.

As per Palms reaction... I dont think he was refering to you in particular... I have a good idea who he was refering to..

but his point is valid..

Thailand has a very strong balance of payments, good and stable GDP growth, low inflation, low unemployment, booming exports, and all this despite the current 'government', high oil costs and a strong baht. These are economic fundamentals.

i will add to that that the trading deifeerence between exports and imports is also possitive hence thailand is exporting more then its importing... how many western countries have that ratio???

there are those members who have as palm so fibdly adressed as "so much economic expertise, they are forced to live in 10,000 baht-a-month 'slum' apartments" have been telling us that the economy is in crisis since this thread started in May...

I agree and disagree. I agree that Thailand has a very strong balance of payments. We are coming off some very good years and have a great bank account. I cant see that evaporating quickly or perhaps not at all.

Good and stable GDP growth? I personally think that wishing for 4% growth in such a small and dynamic country is simply miserable. I think 4% is going to be tough, and it is always couched in terms like IF the sun shines and IF we get a good clean government and IF consumer spending comes back. My experiences is that IF is hard to cash at a bank. Perhaps we can get 4% but thats pretty miserly for a country with so much potential.

Low inflation, I have a tendency to agree. In terms of goods and services, I have not really seen anything rise unusually. With gross profit shrinking however, all my Thai vendors are trying desperately to raise prices, unfortunately they are caught between a rock and hard place on this one. Dont forget that many things are price controlled by the government, that helps to keep down inflation but can begin to cause distortions. I have been watching for that but dont have any real examples, yet.

Despite the current "government", well dont give them too much credit yet. The things they do dont show up in the economy for some time. The FBA even if passed would have taken years to work its damage. I think they as military people have been a bit clueless on the economy, on world relations, on legitimacy. I would not expect otherwise from any military junta anywhere in the world. The good news is that they seem intent on wielding power behind the curtain where they have been the last 100 years.

Yes, Thailand is exporting more than it is importing. Imports here are tightly controlled by the elite and the reason most things from outside the country cost a fortune. Thats not rocket science. A country that produces such a monstrous abundance of food and where the large majority is kept in poverty is a pretty sure bet to have a positive trade balance. What does a positive trade balance do for us if we dont invest that surplus in infrastructure, productivity advances, education, health. If its used to buy luxury condos to keep empty or build more golf courses that no one will play, what good exactly is a trade surplus. Remember, trade surpluses end up in the pocket of exporters, not in government coffers. Trade surpluses do indeed create wealth, but exactly who is getting wealthy on them here?

I wont comment on the name calling but I do try to listen carefully to the complete cacophony, even the low caste. When in a theater and someone yells fire, it is not in my nature to review credentials first. Now, outside the theater, I want to know what they saw, are they rational, is there smoke, did anyone else see it, or can I go back to my show.

I must tell you, I do not believe that the Thai economy is in crisis. I desperately hope that innovation and human nature will overcome the adversity that is piling up, it most certainly will to some extent. I do believe that in this export based economy that is suffering from a completely irrational appreciation of the baht while competing with the ruthless Chinese manufacturing machine that I am smelling smoke. If there is no fire, I am going back to enjoy the show. If there is a fire, I dont planned on getting burned

since this is the initial post lets get back to the subject. Thailand is not in an econmical crisis.. far from it.!!!

I agree, Thailand is not in an economic crisis, but I think we are much much closer than you think.

first its so nice to see a real debate on economy versus "dooms day" posts that have nothing but to entice flaming.

I hope you stay on this forum as even if we disagree on some points. i belive the debate is educating.

I agree to some of the points and disagree with others... but i will not extand this as we seem to agree or better "not disagree" on many of the points.

for those we disagrre . I wil let go as it will turn into a never ending ping pong game.

As this thread has been going on for a few months its subjetct was the Thai econmy is crisis.... as we both agree that it isnt.. then we can disucss the Baht apreciaition and its impacts...

I and i have posted it a long time before belive that this appreciation is under lead by the huge inflow of leverged capital taking positions on the thai stock market. and as expected when this hot money pours out there will be a depreciation in the baht.

if the world does slip into recession... which I hope it will not ..but the chances are the Debt load of the Americans will drive the world down at some point.. i belive Thailand as a food, garment and even electronic producer will still be able to hold it head above water as the world will still need something to wear and something to eat.

I agree with you that the chineese bubble will deflate at some point and thailand has a strong potential if becoming the next Tiger..

[xbusman]

I submit that between extremes therein lies truth, and truth is defined according to beliefs and not a firm fixed object. The police will be happy to prove to you that beyond any doubt, eyewitnesses are by far the most unreliable evidence.

In economics we are all eyewitnesses to various crimes and misdemeanors. Where we stand and our experiences give rise to wide differences in how we interpret the events. As an exporter, the world is at an end, all is lost, man the lifeboats. As an importer, life could not be better, time to expand, buy that extra luxury condo in Hua Hin and get two more mia nois. As a general, time to buy Fiji. As an Issarn farmer.......

While the question is about "crisis in Thailand" the discussion is about the evaluation of root causes which might lead some to believe that Thailand is in crisis. I think that after 104 pages of armchair blather without access to real data (I include myself in that league, no offense intended) we can agree that this irrational and meteoric rise of the baht has created seismic shocks to the Thai economy. I think we can discount the tsunami, bird flu, military juntas, speculative real estate tycoons, drug wars, bombs in the south, and other assorted "typical" bumps in the road with more to come. Thats just life.

The question ultimately is, at what point will it become a crisis and how close are we to that point. Can we divert it, can we find new paths, or is the possibility so remote at any exchange rate that we need to listen to our Thai friends and "not worry too mut!".

The world will at some point slip into recession. An infectious disease will again ravage the world. Another tsunami come ashore and another volcano will erupt with great loss of life, another hurricane is on the horizon, someday you and I will die. We know those things. Really, the good news is that despite wanting to, we dont know when. We do our best to guess, but its only a guess (unless you talk to that lady, third from right at Erawan, she has it cold). The best way to prepare for the future is a cold hard assessment of the reality of today. The past is a wonderful tool for explaining the future after its happened. We know Thailand can ignite a crisis. We know any country can ignite a crisis including the US, but Thailand has a more fertile ground and a proven ability to really torch things off. If I live on a volcano, I dont worry about bird flu.

So ultimately, we are talking about how close to the crisis are we and the direction we are moving. We have to assume that a crisis is possible (we have history to prove it) and we also know that export based economies are terrifically dependent on .... exports. Without exports, well lets not go there. See, there is the problem I am having. Coming from the west, when currency appreciates I travel more, have a few more nights out. When it depreciates, I travel less, cut down on my golf by a game or two a year. Not relevant to a non export based economy. In asia though, as I learn more, in my opinion its only about exports. No raw materials to exploit like Australia and Russia, no real intellectual powerhouse like India (yet), no creative flair like France (ever) no focus on perfection as an art like Japan, just raw labor for manufacturing for years to come. Will that come, eventually I think, but in the interim it is manufacturing and exports. That work now sustains life, creates wealth, and has made huge changes throughout asia in the last two decades. Those changes could be as quickly undone but for the majority of asians, there is no going back to the collective farm despite the best intentions of our new sufficiency economy. I think China red understands that far better than our leaders.

The more conversations we raise about signs, the more experience we can tap into, all contribute to better decisions in this difficult game with high stakes. Thailand is a bit of a mystery even in the very best of times. Talking with some of the most experienced expats you quickly learn that the more you know about Thailand the less you really understand.

The ramifications of another potential crisis in Thailand would be serious, far more serious than the blip in 97. Think about it for a moment and see if you agree. What do you think the IMF is going to say next time? How do you think the South and Issarn will react if this group that evicted Thaksin allow the economy to implode. This is not just an economics discussion as reflected in 104 posts and 44,000 views. This is the volcano burping and grumbling under our feet.

[quiksilva]

Don't worry the Democrats will save us.

(lights touch paper and stands well back)

[nothingleftbutfaith]

I submit that between extremes therein lies truth, and truth is defined according to beliefs and not a firm fixed object. The police will be happy to prove to you that beyond any doubt, eyewitnesses are by far the most unreliable evidence.

In economics we are all eyewitnesses to various crimes and misdemeanors. Where we stand and our experiences give rise to wide differences in how we interpret the events. As an exporter, the world is at an end, all is lost, man the lifeboats. As an importer, life could not be better, time to expand, buy that extra luxury condo in Hua Hin and get two more mia nois. As a general, time to buy Fiji. As an Issarn farmer.......

While the question is about "crisis in Thailand" the discussion is about the evaluation of root causes which might lead some to believe that Thailand is in crisis. I think that after 104 pages of armchair blather without access to real data (I include myself in that league, no offense intended) we can agree that this irrational and meteoric rise of the baht has created seismic shocks to the Thai economy. I think we can discount the tsunami, bird flu, military juntas, speculative real estate tycoons, drug wars, bombs in the south, and other assorted "typical" bumps in the road with more to come. Thats just life.

The question ultimately is, at what point will it become a crisis and how close are we to that point. Can we divert it, can we find new paths, or is the possibility so remote at any exchange rate that we need to listen to our Thai friends and "not worry too mut!".

The world will at some point slip into recession. An infectious disease will again ravage the world. Another tsunami come ashore and another volcano will erupt with great loss of life, another hurricane is on the horizon, someday you and I will die. We know those things. Really, the good news is that despite wanting to, we dont know when. We do our best to guess, but its only a guess (unless you talk to that lady, third from right at Erawan, she has it cold). The best way to prepare for the future is a cold hard assessment of the reality of today. The past is a wonderful tool for explaining the future after its happened. We know Thailand can ignite a crisis. We know any country can ignite a crisis including the US, but Thailand has a more fertile ground and a proven ability to really torch things off. If I live on a volcano, I dont worry about bird flu.

So ultimately, we are talking about how close to the crisis are we and the direction we are moving. We have to assume that a crisis is possible (we have history to prove it) and we also know that export based economies are terrifically dependent on .... exports. Without exports, well lets not go there. See, there is the problem I am having. Coming from the west, when currency appreciates I travel more, have a few more nights out. When it depreciates, I travel less, cut down on my golf by a game or two a year. Not relevant to a non export based economy. In asia though, as I learn more, in my opinion its only about exports. No raw materials to exploit like Australia and Russia, no real intellectual powerhouse like India (yet), no creative flair like France (ever) no focus on perfection as an art like Japan, just raw labor for manufacturing for years to come. Will that come, eventually I think, but in the interim it is manufacturing and exports. That work now sustains life, creates wealth, and has made huge changes throughout asia in the last two decades. Those changes could be as quickly undone but for the majority of asians, there is no going back to the collective farm despite the best intentions of our new sufficiency economy. I think China red understands that far better than our leaders.

The more conversations we raise about signs, the more experience we can tap into, all contribute to better decisions in this difficult game with high stakes. Thailand is a bit of a mystery even in the very best of times. Talking with some of the most experienced expats you quickly learn that the more you know about Thailand the less you really understand.

The ramifications of another potential crisis in Thailand would be serious, far more serious than the blip in 97. Think about it for a moment and see if you agree. What do you think the IMF is going to say next time? How do you think the South and Issarn will react if this group that evicted Thaksin allow the economy to implode. This is not just an economics discussion as reflected in 104 posts and 44,000 views. This is the volcano burping and grumbling under our feet.

Xbusman, you are a wise man indeed.

[VegasVic]

Don't worry the Democrats will save us.

(lights touch paper and stands well back)

Making a statement like that you definately need to be whistling past the graveyard

[Mid]

Thai rice exports may slow on high costs-exporters

By Apornrath Phoonphongphiphat

Reuters

Last updated 02:28pm (Mla time) 08/24/2007

BANGKOK -- Thai rice exports in 2007 may not reach the target of 8.5 million tons despite strong demand as soaring freight costs and a firmer Thai baht disrupt exports, Thai Rice Exporters Association President said on Friday.

snip

business.inquirer.net

[Mid]

Master plan focuses on operational knowledge

Published on August 25, 2007

The Industry Ministry will spend Bt1 billion to help businesses boost productivity and awareness of the knowledge-based aspects of operations during the first year of the Productivity and Intellectual Infrastructure Master Plan for 2008-2012.

snip

The International Institute for Management Development has found that Thailand is losing its competitive edge to other countries in the region.

snip

nationmultimedia.com

[A_Traveller]

Sorry to cross post, but surprised no has commented upon it.

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Regards

[Carmine6]

Sorry to cross post, but surprised no has commented upon it.

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Regards

Yup, hard to tell what the real story is there. The article says that place basically was in business because they were able to get contracts under Thaksin due to corruption. So it's unclear if they were taken down by just being uncompetitive, or if it's an indication of problems in the market, or both. I would think someone could pick up a nice new facility for a lot less then construction costs.

Would be nice the government stepped in to set up some kind of co-op to own this facility, giving some shares to farmers and other folks in rural areas.

[lannarebirth]

Sorry to cross post, but surprised no has commented upon it.

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Regards

Yup, hard to tell what the real story is there. The article says that place basically was in business because they were able to get contracts under Thaksin due to corruption. So it's unclear if they were taken down by just being uncompetitive, or if it's an indication of problems in the market, or both. I would think someone could pick up a nice new facility for a lot less then construction costs.

Would be nice the government stepped in to set up some kind of co-op to own this facility, giving some shares to farmers and other folks in rural areas.

I'd love to see this one lead back to Watana's family business, CP.

[LaoPo]

Sorry to cross post, but surprised no has commented upon it.

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Regards

Yup, hard to tell what the real story is there. The article says that place basically was in business because they were able to get contracts under Thaksin due to corruption. So it's unclear if they were taken down by just being uncompetitive, or if it's an indication of problems in the market, or both. I would think someone could pick up a nice new facility for a lot less then construction costs.

Would be nice the government stepped in to set up some kind of co-op to own this facility, giving some shares to farmers and other folks in rural areas.

Very good idea but it would be even better if some farmers stick their heads together and buy the rice-silo operation with help of some agricultural banks.

Someone has to take the lead though.

LaoPo

[Carmine6]

Sorry to cross post, but surprised no has commented upon it.

No one else see this?

President Agri Trading Co yesterday officially announced the shut down of its Bt650-million integrated rice-silo operation in Phichit - one of the biggest state-of-the-art rice silos in Asia - due to accumulated debts of billions of baht.... The Assets Examination Committee earlier launched an investigation into the company, due to the personal relationship between Apichat and former Commerce minister Watana Muangsook. ... The cash-strapped rice exporter will be fined by the Public Warehouse Organisation (PWO) for breaching a rice export contract, won in 2005 for the export of 700,000 tonnes of rice. Under the deal, the company had to remove all rice from the PWO's warehouses by August 17, and failing to do so, was to be fined Bt14 million a day. ... Since 2004, President Agri Trading won its biggest share of rice bidding from the Commerce Ministry. It monopolised all rice bidding, totalling 1.7 million tonnes of white rice, in 2004. At the time, Apichat said the monopoly made the company a profit of Bt1 billion from exports. ... In 2005, the company also won the biggest rice auction of 1.2 million tonnes, mainly focusing on jasmine rice, and the total rice export volume made the company Thailand's biggest exporter.

Nation

Link

Regards

Yup, hard to tell what the real story is there. The article says that place basically was in business because they were able to get contracts under Thaksin due to corruption. So it's unclear if they were taken down by just being uncompetitive, or if it's an indication of problems in the market, or both. I would think someone could pick up a nice new facility for a lot less then construction costs.

Would be nice the government stepped in to set up some kind of co-op to own this facility, giving some shares to farmers and other folks in rural areas.

Very good idea but it would be even better if some farmers stick their heads together and buy the rice-silo operation with help of some agricultural banks.

Someone has to take the lead though.

LaoPo

That was my first thought, but I'm guessing it would require pledging a lot of farmland for the banks to feel ok. Plus they'd want a good operator to be part of the package. Also we pretty much can guess that it'd be already rich Thais buying it and not a lot of small farmers. So that morphed into co-op and I'd spread shares way outside the local area as well.

My ex's family never seemed to really sell their rice, they had a whole outbuilding full of it. So every year the kids in the city chip in a few thousand baht each for the planting and harvesting, and the bags of rice in storage increase in number. Just a little return from the mill would make the farm financially self sufficient, but there's no way they could get together with other families and buy a mill. But they could buy a small amount of shares in a mill co-op. I think that would then entice them into turning that inventory they're holding into cash instead of being the insurance policy it is.

Edited August 24, 2007 by Carmine6