The Thai Economy Is In Crisis

[LaoPo]

Hmmmm, yes, that's the problem with Thailand.

Farmers and people (families) although they 'seem' close, are in fact very independent and a kind of 'solo' people and not united, especially in rural Thailand, unlike farmers and co-ops in the West.

They seem to be able to unite in politics (votes for Mr. T) but not in their daily business lives, but maybe I'm wrong.

LaoPo

Edited August 24, 2007 by LaoPo

[xbusman]

Okay, for the armchair economists club, here are the real people talking about the exact same things we have been for the past few months.

My comments in red.

Key panel seeks tax incentives

Govt convinced exports, growth still on track

Published on August 25, 2007

The Economic Steering Committee yesterday asked the Finance Ministry for tax incentives to encourage business to invest overseas, especially in research and development, brand creation and distribution.

This makes good sense and I am glad to see some innovative solutions being proposed. I hate to see tax breaks to Thai companies to outsource Research and Development but I think this is an admission that if something is not done to keep Thailand competitive that the long term prognosis is terrible. So, I think the Economic Steering Committee has done a fine and thoughtful job.

However, it did not seek tax breaks for factory relocation, said committee chairman Kosit Panpiemras, who is deputy prime minister and industry minister.

<deleted>? Tax breaks to move your factory OUT of the country? Think about this for a minute, have you ever heard of anyone in any country getting a tax break for leaving? On the contrary, governments of all ilk just about kill themselves giving tax breaks for anyone who wants to move into the country. Where in the world did this come from. Let me hazard a guess. The factories in Thailand are all owned, operated and controlled by the very very small elite, who are now in probably back in control of these committees and ministries. Who else could possibly benefit from inducing businesses to leave the kingdom. If I had to move my factories out of Thailand soon, I would also work hard on reducing the tax liability, that would be my job. But what other possible reason could this bill have? This tells me that plans are being made for a major exodus when I see things like this.

Kosit said after the meeting that the promotion of overseas investment would help the country achieve growth rate targets which otherwise may be hit by an expected deceleration in exports.

Kosit however said the government expected exports would grow in line with a predicted 12.5 per cent for the year, in spite of news that they expanded just 6 per cent year on year in July.

He said the steering committee considered a revision of export growth unnecessary, but the currency required attention - as did promotion of overseas investment by domestic companies.

Sounds like a cautious and reasonable assessment. Hard to argue with anything he says. If he still feels good about a 12.5% expansion in US dollar terms and is not concerned with the retraction in July then that means they were expecting this retraction, right? Cant have it both ways. I think they were expecting this contraction and he is being honest. I am worried about what he means by the currency "needing attention". Again, in beaurocratic terms, I am hearing him say that IF the creek dont rise and IF the sun dont shine we might make our goals BUT you, Mr Finance committee, must take active steps to see that happen through investment and currency controls.

Finance Minister Chalongphob Sussangkarn said the steering committee did not feel exporters required new assistance measures.

And the response by the Finance Minister? F-off Kosit. Now why would he shut him down so completely and quickly. Is the Finance Minister hot to offer tax incentives for moving out Thailand and Kosit is not supporting him? Perhaps the FM has a problem with the "not my idea" concepts put forth by Kosit. Perhaps they have bigger problems than exports or really dont care if they meet target. Perhaps they have no intention on meeting target, just dont want to talk about it yet in the press. My experience with steering committees is that it is always best to carefully listen to what they have to say, after all they are experts and you paid them big money to give you advice, then you thank them profusely, give them some certificate of appreciation, pat their behind, have a nice dinner, go home and throw the report in the waste bin if you dont agree with it. You dont tell them in a public meeting that they are wrong and their suggestions are "not required". That almost always come back to haunt you.

However, the panel has asked the Commerce Ministry to aid agriculture and food exports, growth of which has fallen below expectations.

Okay we go for plan B if plan A gets dumped that quickly. If we cant cure the patient, we have to at least stop the wound. So how about a compromise? Lets just help the farmers. I like this Kosit, he came prepared to deal with some pretty difficult people.

Chalongphob added that manufacturing was doing well. However, the export of some electrical appliances has fallen because firms are still making outdated television sets and video players.

Well thats a breath of really bad news. We know commodity products and low skill products have taken a terrible hit, but now our FM informs us that electrical appliances are falling too. They are our premier export after automobiles. How can this be? Perhaps the manufacturers like Sony and LG have stopped investing in their manufacturing here a year or two back leaving us with outdated models. What does the future of our export economy look like if we are allowing our electronics industry to disappear. Actually, this should have been guessed by anyone who thought about for a second or two. China has taken that market lock stock and barrel. Just drop by Tesco Lotus and see what I mean. Its only a matter of time, and not much time at that if we dont get models and efficiencies updated.

The steering panel viewed government plans to encourage investment overseas as "problematic".

Well, paying companies to leave Thailand could indeed be a bit "problematic". I could have come up with some other words for that idea and been found beheaded in a rubber plantation.

It recommended boosting private-sector "confidence", which the committee considered to be low. Many manufacturers suffer from limited capability and a government fillip is required.

OHHHH Okay, thats much easier. Boosting private sector "confidence", piece of cake. How in the world do they expect to do that? Can that actually be done? I always thought private sector "confidence" is the result of environmental situations, not the other way around. We dont drive an economy by trying to manage "confidence" we drive an economy by managing the economy and the scorecard results are measured in GDP and "confidence". Then they go on to say that manufacturers are suffering from limited capability and need government help. Capability to do what? How exactly is the government going to help? Are they all suffering from the same capability deficits? I would rather doubt it. Is it me or does this finance ministry sound like a bunch of factory owners trying to reduce taxes for their cut and run act while getting additional subsidies to survive until they get gone. So far in my book Kosit 1 Finance minister 0.

National Economic and Social Development Board secretary-general Ampon Kittiampon said industries seeking overseas relocation would not receive tax incentives.

He echoed the ministers' views that exports should grow 12.5 per cent in the full year and that gross domestic product would increase at least 4 per cent in the period.

Good for him, he is on the same page as Kosit and they are stepping in front of some pretty lame ideas. In these small lines and boring meetings are often acts of real bravery. Its a shame so many of them go unnoticed. The Finance Minister has some people wanting to move their factories out thailand but want to skip the taxes, these guys are on record as to not letting him off the hook. Good on em!

Chalongphob said that if the government started spending on new infrastructure and state enterprises drew down more money, the national economy would revive.

Uh oh, here come the IFs again. I thought old C phob just said that we are meeting targets and exporters required no additional help. Now he is saying that only the government can spend its way to making the national economy "revive"? I hope the thai translation is different in meaning than the english report, I bet it is. Because to revive something means its depleted, drained or dead. If we take this statement literally in its english form, they have more bad news for us coming. I would guess though, that this is nothing more than a statement of what we already knew couched in difficult language or reported tersely. That the export industry has been hammered and anything additional we do at this time will not help us with the current problems we are facing. That beating over the past year, has caused our "confidence" to plummet and private consumption along with it. Since we cant drive "confidence" we are not going to be able to get the private consumption we need to meet our goals. Therefore it is up to government to spend its way out of this hole. Now if its your turn at the trough and you only get a few months to feed, doesnt this sound like a great plan? I still am rooting for Kosit and Ampon though, those guys are interested in building for the future.

However, the Finance Ministry has been struggling to disperse Bt357 billion appropriated for state enterprises.

So far only 40.37 per cent of that money has been drawn down, prompting Deputy Finance Minister Sommai Phasee to summon chief executives of 17 state enterprises accounting for 93 per cent of spending.

Many of these are involved in projects that need cash but have been suspended by Assets Examination Committee probes into alleged graft committed during the tenure of the last government.

The enterprises include the National Housing Authority, TOT and Airports of Thailand.

UH-OH! Reality check here kids. Its easy to do armchair economic math but even ramping up government spending takes time. In fact, if you think changing production rates at an auto factory is time consuming, you ought to try getting the Land transport office to change one form among the millions needed to register a car. Now you want one of the slowest organizations on earth to ramp up spending by 10, 20 or even 30% in a matter of weeks? When you are already 20% below last years spending? Uh oh, I dont think much of old C-phobs chances in saving the Thai economy this year.

He has some advantages though. TOT is literally bankrupt and on the brink of insolvency. AOT can suck down money quicker than, well all references to Sukhumvit shall remain censored, and the NHA is a particularly good mechanism for redistributing wealth. The problem in my mind is though, how will pouring money into TOT to make it solvent increase GDP from government investment, its just paying the employees you have had on staff since Rama 5. What exactly will AOT do with the money, and honestly, they can do plenty. The rail line that progresses night and day to BKK is a prime example. Other than that, do we start to build another airport? I like the NHA, lots of construction jobs, good for the common people, thats money that would really pump into economy quickly and efficiently. But we would have to invest massively, and even if we began now we are talking about building houses, not likely to effect our GDP until much later this year. Dont forget about the damage ramping up the NHA will do to private reality all over Thailand which is none too happy right now.

No, its sounds lovely to blather about government coming to save the day but that it the oldest joke in the book.

Disruption is exacerbated by troubles in the electronic-auction process and natural disasters.

Sommai said the Cabinet would consider resolution of "widespread malfunctions" in e-auctioning at the central audit department in September.

Sommai expressed confidence that by the end of the year 68 per cent - or Bt229 billion - of the appropriations for state enterprises would be spent. At that time last year, spending was Bt246 billion.

Wow, 68% by the end of the year. That does not sound like the massive increase in government spending we all agreed was necessary to "revive" the economy. In fact, and I have to do the math, but my little brain leads me to believe that is a 32% reduction in government spending. If indeed that math works out. We are looking at anywhere from -5% to +5% growth in exports, reduction in private consumption of somewhere around -10% judging from car and home sales, and a reduction in government spending of around -32% IF we fix widespread malfunctions at the central audit department (there are those darn IFs again and I think I like this one least of all).

The Expressway and Rapid Transit Authority of Thailand has spend Bt15 billion on the Bang Phli-Suksawat motorway and Bt3.8 billion on the Airport Rail Link.

That is true, I see it almost every day. They are working hard on the RTA and highways all over Thailand. It will help.

Nevertheless, state enterprises will rely on the coming general election to spur consumption and aid liquidity and cash flow.

I am not sure how a ballot results in a low interest loan or additional cash reserves. I fail to see the connection even if it does happen. Just as the coup did little to change the market, returning to an elected government which will be simply a front for the junta will do even less overall. I might be wrong on this, we shall see if and when the elections take place. Anyway, even if it does help somehow, we are talking about this year and the current economy. Curing ailing patients is not facilitated by neglect.

Business is calling for cooperation between the private sector and the state to revitalise industry. It fears bankruptcies will lead to rising unemployment.

Well thats a statement of the obvious. When you cant compete, try to get government hand outs, when you cant get handouts you will fail and people become unemployed. I dont want to comment on the obvious or the whinings of Thai business.

Original-equipment manufacturers see the cost of labour rising and profit margins squeezing 5 per cent. As a result, they are in trouble, said Tayin Cord chairman Tamrong Kunopakarn.

Thats a lot. If he is talking about net profit for OEM builders, its all over. This has to be an exaggeration by an industry spokesman, I would discount it out of hand.

He said a handful of labour-intensive industries had struggled to survive for years because they failed to compete with lower-cost rivals in terms of price, quality and service.

When the baht appreciated sharply, they were hit hard and some have gone to the wall.

Tamrong suggested that the Industry, Labour and Public Health ministries and the Bank of Thailand listen to business and help it solve problems. Employers and employees should work together to improve productivity questions.

Textbook stuff, page filler for the Nation. Nothing that everyone has known for over a year.

In addition, the central bank should stabilise the currency in line with regional units such as the yuan and Vietnamese dong, he said.

"If we don't help each other, I believe the crisis will become protracted and more jobs will be lost," he added.

Ahhh, now we get to the beef. See, its not the dollar causing the problem, our industry spokesman has correctly identified the culprits, its the yuan and the dong. I am disturbed by the use of crisis here, when our industry spokesman uses the term "current crisis will become protracted" we have someone with better data disagreeing with Highdiver and xbusman by telling us we are indeed in a crisis. Lets hope he is over reacting as he is paid to do or that the translation did not soften the tone as the thai language is so very good at.

Thai-Israeli Chamber of Commerce president Saksit Chalermvongsavej said that without teamwork, both the state and private sectors would suffer and the country's competitiveness along with them.

"The public and private sectors are a partnership. If the private sector goes bankrupt, the public sector will not get taxes," he said. Private business has management, production and marketing problems. It has not improved production technologies or internal management, resulting in higher costs and losses.

Hey hey hey, whats all this loose talk about the private sector going bankrupt. Perhaps a few companies, but not the private sector. Having a private sector go bankrupt is called a crash. One thing that bothers me, this is from Thai-Israeli Chamber and it has been my experience that the Israelis are both direct and very good at business. Again though, sensational reporting from people that are paid to beat drums as loudly as possible.

Many companies have a few brand-name clients only and, as a result, are losing bargaining power and over extending themselves.

The central bank deputy governor in charge of monetary stability, Atchana Waiquamdee, said the Bank of Thailand had tried to slow baht appreciation to reduce effects on exports, which have been a "single economic engine".

Thats what I have come to believe and now I have the central bank telling me that is indeed the case. Our economy has a single economic engine called exports. Everything else is mostly irrelevant to GDP, including consumption and government spending. Thaksin also realized this and did his best to start and sustain the consumption side of the equation. In the end though, its only about exports for all extents and purposes.

Economic growth must be maintained at certain levels to sustain employment, she said. The bank spent US$18 billion (Bt619 billion) on currency intervention last year and $8 billion in the first half of this year.

In spite of that, rapid currency appreciation caused low-margin companies to go bust and sack staff.

Oh my god, 26 billion baht poured out in the last 18 months and the net effect was to go from 41.5 to 34.4? Thats a lot of money for those results. That leads me to believe that but for the tremendous battle fought by the BOT and the huge loss of money, they have only just staved off a complete and utter collapse. I would have never believed it was that bad.

"It is lucky the appreciating baht did not happen when the economy was in trouble and jobs were scarce," she said.

Well, this is a funny way of looking at it. The terrible depreciation of the baht was what made Thai manufacturers competitive enough to build a strong economy. The appreciating baht is the process whereby that will be reversed. She is head of the bank?

Anoma Srisukkasem,

Piyanart Sivalo

The Nation

I am not surprised by anything in this article other than the seemingly good reporting by the Nation. Not that the facts were accurate or spokesman were being true but by the fact that I can see the reporters jaundiced view while keeping to quotes.

It going to be an interesting year.

Edited August 25, 2007 by xbusman

[Mid]

Thai firm picks Decatur

Plastic container company to invest $160 million; plant to employ 100

By Bayne Hughes

A Thailand-based company manufacturing a chemical used in plastic beverage containers announced Friday it will build a plant in Decatur.

Indorama Polymers Group announced an estimated $160.6 million initial investment in AlphaPet Inc. plant on 30 acres off Finley Island Road. The plant will employ about 100 workers.

Construction is expected to begin in October and the schedule calls for completion in September 2009. During peak construction, about 500 people will be working on the plant with an estimated construction employee payroll of $9.25 million.

The plant will be the largest producer of polyethylene tere- phthalate, also known as PET resin, in North America and the first such plant in Alabama.

snip

decaturdaily.com

[VegasVic]

Okay, for the armchair economists club, here are the real people talking about the exact same things we have been for the past few months.

My comments in red.

Key panel seeks tax incentives

Govt convinced exports, growth still on track

Published on August 25, 2007

The Economic Steering Committee yesterday asked the Finance Ministry for tax incentives to encourage business to invest overseas, especially in research and development, brand creation and distribution.

This makes good sense and I am glad to see some innovative solutions being proposed. I hate to see tax breaks to Thai companies to outsource Research and Development but I think this is an admission that if something is not done to keep Thailand competitive that the long term prognosis is terrible. So, I think the Economic Steering Committee has done a fine and thoughtful job.

However, it did not seek tax breaks for factory relocation, said committee chairman Kosit Panpiemras, who is deputy prime minister and industry minister.

<deleted>? Tax breaks to move your factory OUT of the country? Think about this for a minute, have you ever heard of anyone in any country getting a tax break for leaving? On the contrary, governments of all ilk just about kill themselves giving tax breaks for anyone who wants to move into the country. Where in the world did this come from. Let me hazard a guess. The factories in Thailand are all owned, operated and controlled by the very very small elite, who are now in probably back in control of these committees and ministries. Who else could possibly benefit from inducing businesses to leave the kingdom. If I had to move my factories out of Thailand soon, I would also work hard on reducing the tax liability, that would be my job. But what other possible reason could this bill have? This tells me that plans are being made for a major exodus when I see things like this.

Kosit said after the meeting that the promotion of overseas investment would help the country achieve growth rate targets which otherwise may be hit by an expected deceleration in exports.

Kosit however said the government expected exports would grow in line with a predicted 12.5 per cent for the year, in spite of news that they expanded just 6 per cent year on year in July.

He said the steering committee considered a revision of export growth unnecessary, but the currency required attention - as did promotion of overseas investment by domestic companies.

Sounds like a cautious and reasonable assessment. Hard to argue with anything he says. If he still feels good about a 12.5% expansion in US dollar terms and is not concerned with the retraction in July then that means they were expecting this retraction, right? Cant have it both ways. I think they were expecting this contraction and he is being honest. I am worried about what he means by the currency "needing attention". Again, in beaurocratic terms, I am hearing him say that IF the creek dont rise and IF the sun dont shine we might make our goals BUT you, Mr Finance committee, must take active steps to see that happen through investment and currency controls.

Finance Minister Chalongphob Sussangkarn said the steering committee did not feel exporters required new assistance measures.

And the response by the Finance Minister? F-off Kosit. Now why would he shut him down so completely and quickly. Is the Finance Minister hot to offer tax incentives for moving out Thailand and Kosit is not supporting him? Perhaps the FM has a problem with the "not my idea" concepts put forth by Kosit. Perhaps they have bigger problems than exports or really dont care if they meet target. Perhaps they have no intention on meeting target, just dont want to talk about it yet in the press. My experience with steering committees is that it is always best to carefully listen to what they have to say, after all they are experts and you paid them big money to give you advice, then you thank them profusely, give them some certificate of appreciation, pat their behind, have a nice dinner, go home and throw the report in the waste bin if you dont agree with it. You dont tell them in a public meeting that they are wrong and their suggestions are "not required". That almost always come back to haunt you.

However, the panel has asked the Commerce Ministry to aid agriculture and food exports, growth of which has fallen below expectations.

Okay we go for plan B if plan A gets dumped that quickly. If we cant cure the patient, we have to at least stop the wound. So how about a compromise? Lets just help the farmers. I like this Kosit, he came prepared to deal with some pretty difficult people.

Chalongphob added that manufacturing was doing well. However, the export of some electrical appliances has fallen because firms are still making outdated television sets and video players.

Well thats a breath of really bad news. We know commodity products and low skill products have taken a terrible hit, but now our FM informs us that electrical appliances are falling too. They are our premier export after automobiles. How can this be? Perhaps the manufacturers like Sony and LG have stopped investing in their manufacturing here a year or two back leaving us with outdated models. What does the future of our export economy look like if we are allowing our electronics industry to disappear. Actually, this should have been guessed by anyone who thought about for a second or two. China has taken that market lock stock and barrel. Just drop by Tesco Lotus and see what I mean. Its only a matter of time, and not much time at that if we dont get models and efficiencies updated.

The steering panel viewed government plans to encourage investment overseas as "problematic".

Well, paying companies to leave Thailand could indeed be a bit "problematic". I could have come up with some other words for that idea and been found beheaded in a rubber plantation.

It recommended boosting private-sector "confidence", which the committee considered to be low. Many manufacturers suffer from limited capability and a government fillip is required.

OHHHH Okay, thats much easier. Boosting private sector "confidence", piece of cake. How in the world do they expect to do that? Can that actually be done? I always thought private sector "confidence" is the result of environmental situations, not the other way around. We dont drive an economy by trying to manage "confidence" we drive an economy by managing the economy and the scorecard results are measured in GDP and "confidence". Then they go on to say that manufacturers are suffering from limited capability and need government help. Capability to do what? How exactly is the government going to help? Are they all suffering from the same capability deficits? I would rather doubt it. Is it me or does this finance ministry sound like a bunch of factory owners trying to reduce taxes for their cut and run act while getting additional subsidies to survive until they get gone. So far in my book Kosit 1 Finance minister 0.

National Economic and Social Development Board secretary-general Ampon Kittiampon said industries seeking overseas relocation would not receive tax incentives.

He echoed the ministers' views that exports should grow 12.5 per cent in the full year and that gross domestic product would increase at least 4 per cent in the period.

Good for him, he is on the same page as Kosit and they are stepping in front of some pretty lame ideas. In these small lines and boring meetings are often acts of real bravery. Its a shame so many of them go unnoticed. The Finance Minister has some people wanting to move their factories out thailand but want to skip the taxes, these guys are on record as to not letting him off the hook. Good on em!

Chalongphob said that if the government started spending on new infrastructure and state enterprises drew down more money, the national economy would revive.

Uh oh, here come the IFs again. I thought old C phob just said that we are meeting targets and exporters required no additional help. Now he is saying that only the government can spend its way to making the national economy "revive"? I hope the thai translation is different in meaning than the english report, I bet it is. Because to revive something means its depleted, drained or dead. If we take this statement literally in its english form, they have more bad news for us coming. I would guess though, that this is nothing more than a statement of what we already knew couched in difficult language or reported tersely. That the export industry has been hammered and anything additional we do at this time will not help us with the current problems we are facing. That beating over the past year, has caused our "confidence" to plummet and private consumption along with it. Since we cant drive "confidence" we are not going to be able to get the private consumption we need to meet our goals. Therefore it is up to government to spend its way out of this hole. Now if its your turn at the trough and you only get a few months to feed, doesnt this sound like a great plan? I still am rooting for Kosit and Ampon though, those guys are interested in building for the future.

However, the Finance Ministry has been struggling to disperse Bt357 billion appropriated for state enterprises.

So far only 40.37 per cent of that money has been drawn down, prompting Deputy Finance Minister Sommai Phasee to summon chief executives of 17 state enterprises accounting for 93 per cent of spending.

Many of these are involved in projects that need cash but have been suspended by Assets Examination Committee probes into alleged graft committed during the tenure of the last government.

The enterprises include the National Housing Authority, TOT and Airports of Thailand.

UH-OH! Reality check here kids. Its easy to do armchair economic math but even ramping up government spending takes time. In fact, if you think changing production rates at an auto factory is time consuming, you ought to try getting the Land transport office to change one form among the millions needed to register a car. Now you want one of the slowest organizations on earth to ramp up spending by 10, 20 or even 30% in a matter of weeks? When you are already 20% below last years spending? Uh oh, I dont think much of old C-phobs chances in saving the Thai economy this year.

He has some advantages though. TOT is literally bankrupt and on the brink of insolvency. AOT can suck down money quicker than, well all references to Sukhumvit shall remain censored, and the NHA is a particularly good mechanism for redistributing wealth. The problem in my mind is though, how will pouring money into TOT to make it solvent increase GDP from government investment, its just paying the employees you have had on staff since Rama 5. What exactly will AOT do with the money, and honestly, they can do plenty. The rail line that progresses night and day to BKK is a prime example. Other than that, do we start to build another airport? I like the NHA, lots of construction jobs, good for the common people, thats money that would really pump into economy quickly and efficiently. But we would have to invest massively, and even if we began now we are talking about building houses, not likely to effect our GDP until much later this year. Dont forget about the damage ramping up the NHA will do to private reality all over Thailand which is none too happy right now.

No, its sounds lovely to blather about government coming to save the day but that it the oldest joke in the book.

Disruption is exacerbated by troubles in the electronic-auction process and natural disasters.

Sommai said the Cabinet would consider resolution of "widespread malfunctions" in e-auctioning at the central audit department in September.

Sommai expressed confidence that by the end of the year 68 per cent - or Bt229 billion - of the appropriations for state enterprises would be spent. At that time last year, spending was Bt246 billion.

Wow, 68% by the end of the year. That does not sound like the massive increase in government spending we all agreed was necessary to "revive" the economy. In fact, and I have to do the math, but my little brain leads me to believe that is a 32% reduction in government spending. If indeed that math works out. We are looking at anywhere from -5% to +5% growth in exports, reduction in private consumption of somewhere around -10% judging from car and home sales, and a reduction in government spending of around -32% IF we fix widespread malfunctions at the central audit department (there are those darn IFs again and I think I like this one least of all).

The Expressway and Rapid Transit Authority of Thailand has spend Bt15 billion on the Bang Phli-Suksawat motorway and Bt3.8 billion on the Airport Rail Link.

That is true, I see it almost every day. They are working hard on the RTA and highways all over Thailand. It will help.

Nevertheless, state enterprises will rely on the coming general election to spur consumption and aid liquidity and cash flow.

I am not sure how a ballot results in a low interest loan or additional cash reserves. I fail to see the connection even if it does happen. Just as the coup did little to change the market, returning to an elected government which will be simply a front for the junta will do even less overall. I might be wrong on this, we shall see if and when the elections take place. Anyway, even if it does help somehow, we are talking about this year and the current economy. Curing ailing patients is not facilitated by neglect.

Business is calling for cooperation between the private sector and the state to revitalise industry. It fears bankruptcies will lead to rising unemployment.

Well thats a statement of the obvious. When you cant compete, try to get government hand outs, when you cant get handouts you will fail and people become unemployed. I dont want to comment on the obvious or the whinings of Thai business.

Original-equipment manufacturers see the cost of labour rising and profit margins squeezing 5 per cent. As a result, they are in trouble, said Tayin Cord chairman Tamrong Kunopakarn.

Thats a lot. If he is talking about net profit for OEM builders, its all over. This has to be an exaggeration by an industry spokesman, I would discount it out of hand.

He said a handful of labour-intensive industries had struggled to survive for years because they failed to compete with lower-cost rivals in terms of price, quality and service.

When the baht appreciated sharply, they were hit hard and some have gone to the wall.

Tamrong suggested that the Industry, Labour and Public Health ministries and the Bank of Thailand listen to business and help it solve problems. Employers and employees should work together to improve productivity questions.

Textbook stuff, page filler for the Nation. Nothing that everyone has known for over a year.

In addition, the central bank should stabilise the currency in line with regional units such as the yuan and Vietnamese dong, he said.

"If we don't help each other, I believe the crisis will become protracted and more jobs will be lost," he added.

Ahhh, now we get to the beef. See, its not the dollar causing the problem, our industry spokesman has correctly identified the culprits, its the yuan and the dong. I am disturbed by the use of crisis here, when our industry spokesman uses the term "current crisis will become protracted" we have someone with better data disagreeing with Highdiver and xbusman by telling us we are indeed in a crisis. Lets hope he is over reacting as he is paid to do or that the translation did not soften the tone as the thai language is so very good at.

Thai-Israeli Chamber of Commerce president Saksit Chalermvongsavej said that without teamwork, both the state and private sectors would suffer and the country's competitiveness along with them.

"The public and private sectors are a partnership. If the private sector goes bankrupt, the public sector will not get taxes," he said. Private business has management, production and marketing problems. It has not improved production technologies or internal management, resulting in higher costs and losses.

Hey hey hey, whats all this loose talk about the private sector going bankrupt. Perhaps a few companies, but not the private sector. Having a private sector go bankrupt is called a crash. One thing that bothers me, this is from Thai-Israeli Chamber and it has been my experience that the Israelis are both direct and very good at business. Again though, sensational reporting from people that are paid to beat drums as loudly as possible.

Many companies have a few brand-name clients only and, as a result, are losing bargaining power and over extending themselves.

The central bank deputy governor in charge of monetary stability, Atchana Waiquamdee, said the Bank of Thailand had tried to slow baht appreciation to reduce effects on exports, which have been a "single economic engine".

Thats what I have come to believe and now I have the central bank telling me that is indeed the case. Our economy has a single economic engine called exports. Everything else is mostly irrelevant to GDP, including consumption and government spending. Thaksin also realized this and did his best to start and sustain the consumption side of the equation. In the end though, its only about exports for all extents and purposes.

Economic growth must be maintained at certain levels to sustain employment, she said. The bank spent US$18 billion (Bt619 billion) on currency intervention last year and $8 billion in the first half of this year.

In spite of that, rapid currency appreciation caused low-margin companies to go bust and sack staff.

Oh my god, 26 billion baht poured out in the last 18 months and the net effect was to go from 41.5 to 34.4? Thats a lot of money for those results. That leads me to believe that but for the tremendous battle fought by the BOT and the huge loss of money, they have only just staved off a complete and utter collapse. I would have never believed it was that bad.

"It is lucky the appreciating baht did not happen when the economy was in trouble and jobs were scarce," she said.

Well, this is a funny way of looking at it. The terrible depreciation of the baht was what made Thai manufacturers competitive enough to build a strong economy. The appreciating baht is the process whereby that will be reversed. She is head of the bank?

Anoma Srisukkasem,

Piyanart Sivalo

The Nation

I am not surprised by anything in this article other than the seemingly good reporting by the Nation. Not that the facts were accurate or spokesman were being true but by the fact that I can see the reporters jaundiced view while keeping to quotes.

It going to be an interesting year.

Thanks once again for the informative and entertaining presentation xbusman! I saw this coming back in March and warned Palm and the rest of the rose colored glasses brigade that the strong baht would bring nothing but devestation to both the export sector and to tourisim. I also told them that they would not see the full effect that the strong baht would have on exports until Q3 results were out around October and that if the baht maintained its strength (in fact it has gotten stronger) then there would be a substantial drop in tourist spending this coming winter season. I was especially amused with the part about "the report recomended boosting private sector confidence which the committee considered to be low" now this has got to be the Mt. Everest of understatements. Its kind of like all of a sudden realizing that the toothpaste is out of the tube and then telling your staff "OK all we need to do is get that toothpaste back in the tube" The government needs to start pumping billions into public work projects immediatly and take whatever measures necessary (prayer) to weaken the baht ASAP!

[palm]

Thanks once again for the informative and entertaining presentation xbusman! I saw this coming back in March and warned Palm and the rest of the rose colored glasses brigade that the strong baht would bring nothing but devestation to both the export sector and to tourisim. I also told them that they would not see the full effect that the strong baht would have on exports until Q3 results were out around October and that if the baht maintained its strength (in fact it has gotten stronger) then there would be a substantial drop in tourist spending this coming winter season. I was especially amused with the part about "the report recomended boosting private sector confidence which the committee considered to be low" now this has got to be the Mt. Everest of understatements. Its kind of like all of a sudden realizing that the toothpaste is out of the tube and then telling your staff "OK all we need to do is get that toothpaste back in the tube" The government needs to start pumping billions into public work projects immediatly and take whatever measures necessary (prayer) to weaken the baht ASAP!

Ahh yet more bitter nonsense from the man who claims manufacturing is moving to Belize (probably the most laughable post on TV in the past 5 years), and his 'pal' whose business failed here.

Since when is a 6-8% year on year growth in exports 'devastation'? If that is the case, then the vast majority of countries around the world are experiencing a devastating economy.

How 'clever' of you to forecast effects of a stronger baht - as if this is some kind of achievement. Maybe if you took some time to look at the fundamental economic data of the Thai economy, you'd see a country hit from a year of problems, yet still in great shape to continue expanding in 2008.

Just because you all live in some grubby little world where you feel its impossible for Thais and Thai people to run very successful businesses, no matter how many times you post, it just makes your bitterness clearer about how you feel about Thailand, or indeed any non-USA country.

Even countries like China don't escape your bitterness, despite having insane records of growth and increase in wealth.

What is it with all you washed-up, bitter foreigners? Maybe if you save up enough cents, you can move to Cambodia or Vietnam and live on your $5000 a year incomes.

Edited August 26, 2007 by palm

[tim77]

From CNN news Sunday (26 Aug 07) . . .

HARARE, Zimbabwe (Reuters) -- Zimbabwe's government introduced a bill Thursday to give Zimbabweans majority ownership of foreign companies, a move critics say will deepen the economic crisis.

Critics of the Zimbabwe government fear a bill against foreign companies will worsen the economic crisis.

If passed it would give the government sweeping powers over how foreign companies, including mines, operate in Zimbabwe.

Critics accuse veteran leader President Robert Mugabe of trying to push through the empowerment bill to extend his patronage and focus attention from Zimbabwe's economic turmoil. Mugabe is seeking another five-year term in presidential elections next year.

Indigenisation and Empowerment Minister Paul Mangwana told parliament the bill would create an environment that would increase the "participation of indigenous people in Zimbabwe".

The draft was passed to a parliamentary legal committee shortly after it was introduced. It is likely to pass because Mugabe's ZANU-PF party dominates parliament, analysts say.

Critics say it is reminiscent of Mugabe's controversial policy of seizing white-owned farms to give to landless blacks, which many say triggered the economic crisis.

Empowerment of Zimbabwean companies could drain what little confidence there is left in the country and step up pressure on Mugabe to show he is in control, analysts say.

"There was no doubt they would push it through before the elections because it's designed to garner votes," said economic commentator Eric Bloch.

"What remains to be seen is how vigorously they are going to implement it, but it's certainly going to discourage investors."

[palm]

From CNN news Sunday (26 Aug 07) . . .

HARARE, Zimbabwe (Reuters) -- Zimbabwe's government introduced a bill Thursday to give Zimbabweans majority ownership of foreign companies, a move critics say will deepen the economic crisis.

Ahhh good old Zimbabwe. When in doubt, quote what's happening in Zimbabwe. Why not mention North Korea too?

Meanwhile, here is a well-balanced sober article from AsiaTimes July 07, covering Thailand's economic situation:

Instead, foreign investors are now focusing on Thailand’s increasingly strong economic fundamentals, which on many fronts have never looked quite so good.

http://www.atimes.com/atimes/Southeast_Asia/IG07Ae01.html

Edited August 26, 2007 by palm

[nothingleftbutfaith]

Thanks once again for the informative and entertaining presentation xbusman! I saw this coming back in March and warned Palm and the rest of the rose colored glasses brigade that the strong baht would bring nothing but devestation to both the export sector and to tourisim. I also told them that they would not see the full effect that the strong baht would have on exports until Q3 results were out around October and that if the baht maintained its strength (in fact it has gotten stronger) then there would be a substantial drop in tourist spending this coming winter season. I was especially amused with the part about "the report recomended boosting private sector confidence which the committee considered to be low" now this has got to be the Mt. Everest of understatements. Its kind of like all of a sudden realizing that the toothpaste is out of the tube and then telling your staff "OK all we need to do is get that toothpaste back in the tube" The government needs to start pumping billions into public work projects immediatly and take whatever measures necessary (prayer) to weaken the baht ASAP!

Ahh yet more bitter nonsense from the man who claims manufacturing is moving to Belize (probably the most laughable post on TV in the past 5 years), and his 'pal' whose business failed here.

Since when is a 6-8% year on year growth in exports 'devastation'? If that is the case, then the vast majority of countries around the world are experiencing a devastating economy.

How 'clever' of you to forecast effects of a stronger baht - as if this is some kind of achievement. Maybe if you took some time to look at the fundamental economic data of the Thai economy, you'd see a country hit from a year of problems, yet still in great shape to continue expanding in 2008.

Just because you all live in some grubby little world where you feel its impossible for Thais and Thai people to run very successful businesses, no matter how many times you post, it just makes your bitterness clearer about how you feel about Thailand, or indeed any non-USA country.

Even countries like China don't escape your bitterness, despite having insane records of growth and increase in wealth.

What is it with all you washed-up, bitter foreigners? Maybe if you save up enough cents, you can move to Cambodia or Vietnam and live on your $5000 a year incomes.

Xenophobia is a cosy refuge for the simple minds.

[Maxi101]

Thank you very much @xbusman for his based on facts opinion as best he can and that he takes the time and work to let us know.

I apologize for the "gorking" statements who are trying to water the clear statements down.

Thanks to for the honesty and humour in you statements.

... please keep going, I love to learn.

[ray23]

Xbusman thanks for your views in a clear and concise manner.

I'm not an economist by any means, but I have followed this from the beginning. Every now and then some good information comes forward. Yours was a good example of that. I think in the end none of really knows the real situtuation and can only venture a guess at what is really happening.

The one thing that I'm hoping that I'm really worrying on is I do see some factors similar to 97. The blame game is in full play. Many of decesion makers are more much intersted in saving face then solving the problem. There seems to be a mindset especially with stocks for outside interest to solve the problems ( hedge funds) A huge driving force to in increasing the value of the currency. One which it became very apparent that the banks here were playing in as well. NPL's sorry guys was no yet cleaned up from 97. Now are we going to round two?

We see one week that a huge corporation is expanidng in Thailand, to be followed up in a few week that have put the project on hold.

One thing that really confused me, when the mortgage mess hit. Why were funds pulled and placed back in dollars? Surely they are just as bad a they were just a bad as they have been for the past two years. I think I klnow the answer they needed dollars to pay thier dollar loans and the loan well had dried up. When the fed made made it's changes what happened the baht start to appreciate adain, Why? Could it be we are back to the original game again?

What else did I learn this mortgage mess, it goes far beyond America. Does what happens in America have an effect. Judging what we saw instantly in Thailand stocks my guess is yes it does. So I for one am not having a great time watching the states fall on it's face. It's hurting the world.

Now I'm just an average guy, bring in 1.2 million a year. live in a house with a vlaue of about two million a own a nice truck and some good bikes. No I'm not in business here really shouldn't need to be with that income. I'm very happy with my Udon life and wouln't trade it in heart beat for Bangkok, or the tourist areas. If I wanted something different I would go get it. Has the baht hurt my lifestyle no, but it has effected my savings.

I would say this if you have to have the best house on the block, the finest cars or whatever more power to you. But you looking down on people who don't think the same as you do I have to question. I believe the standard by which I choose to live is my buisness, doesn't make me good or bad, just what I like.

So if anyone stumbles on the truth please post it I don't think we have seen it yet.

But there are a few on here that are really trying and I appreciate your efforts.

[VegasVic]

Thanks once again for the informative and entertaining presentation xbusman! I saw this coming back in March and warned Palm and the rest of the rose colored glasses brigade that the strong baht would bring nothing but devestation to both the export sector and to tourisim. I also told them that they would not see the full effect that the strong baht would have on exports until Q3 results were out around October and that if the baht maintained its strength (in fact it has gotten stronger) then there would be a substantial drop in tourist spending this coming winter season. I was especially amused with the part about "the report recomended boosting private sector confidence which the committee considered to be low" now this has got to be the Mt. Everest of understatements. Its kind of like all of a sudden realizing that the toothpaste is out of the tube and then telling your staff "OK all we need to do is get that toothpaste back in the tube" The government needs to start pumping billions into public work projects immediatly and take whatever measures necessary (prayer) to weaken the baht ASAP!

Ahh yet more bitter nonsense from the man who claims manufacturing is moving to Belize (probably the most laughable post on TV in the past 5 years), and his 'pal' whose business failed here.

Since when is a 6-8% year on year growth in exports 'devastation'? If that is the case, then the vast majority of countries around the world are experiencing a devastating economy.

How 'clever' of you to forecast effects of a stronger baht - as if this is some kind of achievement. Maybe if you took some time to look at the fundamental economic data of the Thai economy, you'd see a country hit from a year of problems, yet still in great shape to continue expanding in 2008.

Just because you all live in some grubby little world where you feel its impossible for Thais and Thai people to run very successful businesses, no matter how many times you post, it just makes your bitterness clearer about how you feel about Thailand, or indeed any non-USA country.

Even countries like China don't escape your bitterness, despite having insane records of growth and increase in wealth.

What is it with all you washed-up, bitter foreigners? Maybe if you save up enough cents, you can move to Cambodia or Vietnam and live on your $5000 a year incomes.

Ahh yes there is my old friend Palm still donning those rose colored glasses and full of anger and bitterness as usual. Poor lad, you can't see the forest for the trees are in the way. Thank you very much for caring about my situation I am still here in Arizona slugging out a tough and meager existence, life in the states is really hard these days. By the way I don't know anyone who has a busines that failed in Thailand, nor am I familiar with your Belize reference, but then again with those thick rose colored glases that you choose to constantly wear perhaps you mistook me for someone else. I hope someday you will "wake up and smell the coffee", and you will recognize what a disasterous effect the strong baht has had on the Thai economy, it seems even the Generals in BK are waking up to that fact. Anyway I do hope that your life improves and you get your self respect back so you don't feel the need to be so defensive all the time. Good luck my friend, reality is just around the corner should you decide to take a walk!

[highdiver]

Thanks once again for the informative and entertaining presentation xbusman! I saw this coming back in March and warned Palm and the rest of the rose colored glasses brigade that the strong baht would bring nothing but devestation to both the export sector and to tourisim. I also told them that they would not see the full effect that the strong baht would have on exports until Q3 results were out around October and that if the baht maintained its strength (in fact it has gotten stronger) then there would be a substantial drop in tourist spending this coming winter season. I was especially amused with the part about "the report recomended boosting private sector confidence which the committee considered to be low" now this has got to be the Mt. Everest of understatements. Its kind of like all of a sudden realizing that the toothpaste is out of the tube and then telling your staff "OK all we need to do is get that toothpaste back in the tube" The government needs to start pumping billions into public work projects immediatly and take whatever measures necessary (prayer) to weaken the baht ASAP!

Ahh yet more bitter nonsense from the man who claims manufacturing is moving to Belize (probably the most laughable post on TV in the past 5 years), and his 'pal' whose business failed here.

Since when is a 6-8% year on year growth in exports 'devastation'? If that is the case, then the vast majority of countries around the world are experiencing a devastating economy.

How 'clever' of you to forecast effects of a stronger baht - as if this is some kind of achievement. Maybe if you took some time to look at the fundamental economic data of the Thai economy, you'd see a country hit from a year of problems, yet still in great shape to continue expanding in 2008.

Just because you all live in some grubby little world where you feel its impossible for Thais and Thai people to run very successful businesses, no matter how many times you post, it just makes your bitterness clearer about how you feel about Thailand, or indeed any non-USA country.

Even countries like China don't escape your bitterness, despite having insane records of growth and increase in wealth.

What is it with all you washed-up, bitter foreigners? Maybe if you save up enough cents, you can move to Cambodia or Vietnam and live on your $5000 a year incomes.

Ahh yes there is my old friend Palm still donning those rose colored glasses and full of anger and bitterness as usual. Poor lad, you can't see the forest for the trees are in the way. Thank you very much for caring about my situation I am still here in Arizona slugging out a tough and meager existence, life in the states is really hard these days. By the way I don't know anyone who has a busines that failed in Thailand, nor am I familiar with your Belize reference, but then again with those thick rose colored glases that you choose to constantly wear perhaps you mistook me for someone else. I hope someday you will "wake up and smell the coffee", and you will recognize what a disasterous effect the strong baht has had on the Thai economy, it seems even the Generals in BK are waking up to that fact. Anyway I do hope that your life improves and you get your self respect back so you don't feel the need to be so defensive all the time. Good luck my friend, reality is just around the corner should you decide to take a walk!

Vegas

usualy your coment on economy are very sensible. even though debatable they are clearly defining your views about economy.

the above post however was not.

I belive it will be difficult for all of us living in Thailand to coment on the satae of economy is the USA if we dont live there.

We live here and some of us that you so fondly call "Rosy glasses"are business owners and investors in Thailand. some of us are actually making good profits and working very hard to addept to the rapid changes that world economy presents us every day.

for me its very disturbing to see coment on this forum that present thailand as going through "Armagadon"... it is not!!

As with any country some businesses are doing good and some are not. but when you look at the general state of an econmy as Palm sugested you must look at the macro factorss. and the bottom line is Thailand is not in a crisis.

Thsi froum has been going on since May and tehn the doom speculators were posting the same that thailnds economy is "down".. "collapsing" and "crashing"

Thailand has been exposed in the last year to a coup, an apreciating Baht... (not so the baht as more the decline of the dollar)

competition from emerging countries and a subprime crisis (created by the wonderfull USA hedge funds and investment houses that are spending money on loans that will never be payed back). that will have an impact on credits as well.

As Plam pointed out you can econmicly reason any prediction you want but Thailand is still doing very well despite of all the above problems

and all those Dooms day predictions as Palm pointed out are usually made by those who have no understanding of the local situation, those that dont even live here and only get info from the media, or those special members are not even in the game. of business and finances but have so much to say......

[xbusman]

Palm, thanks for the link. I think we should post that article and discuss.

This was dated July 7, since then we have had the subprime mess which took a bite out of everyones stock exchange. In Thailand, it was July that saw our exports contract and confidence reach new lows. I think this article argues that we are at the bottom of the cycle. I too am hoping that July was the bottom of the cycle and that Crispin was right.

ASIA HAND

From political darkness, economic optimism

By Shawn W Crispin

BANGKOK – After nearly two years of political doom and gloom, suddenly Thailand’s economic prospects are brightening. Foreign investors have ushered in the 10th anniversary of Thailand’s spectacular 1997 collapse with a buying binge, recently bidding up the local bourse and currency to 10-year highs. But should foreign punters be so optimistic?

Foreign capital is rushing into the country, with foreign equity inflows so far this year exceeding US$3.7 billion, including an

inrush of US$600 million over the last fortnight. Foreign direct investments (FDI) has also exceeded expectations, and some economic analysts believe those capital inflows could accelerate in the months ahead as the government approves more foreign applications to produce so-called “eco-cars”.

Absolutely correct, we have had massive foreign equity inflows all year, the herd is betting on us to outperform. We had a big chunk leave but still way up over the start of the year and their leaving had little or nothing to do with anything that is happening in Thailand. Its just big money covering bad gambles elsewhere. When they say FDI exceeded expectations I really hate that terminology. I want to hear FDI is up 21% or 7 gazillion baht. When a beaurocrat tells me that FDI exceeded expectations the first thing I assume is that expectations were painfully low and we managed to squeeze in a few more baht than that. Sometimes I am wrong but growth is usually trumpeted and failure usually "exceeds expectations". We know FDI is dropping, lots of worry about that Foreign Business Act and I think Vietnam is really chewing into our piece of pie. Still, I bet its pretty acceptable.

Political uncertainty and policy miscues have this year weighed against the Thai bourse’s performance, which on a price-equity ratio basis has lagged badly most other global emerging markets. Now with deposed Prime Minister Thaksin Shinawatra fading from view, and the ruling military junta that ousted him sticking to its promise to hold democratic polls by year’s end, investors see new clarity in the country’s political outlook.

I dont really know enough about how equity markets react to things, I am not really a trader. I do know that I watch Bloomberg and on any give day fifty traders will give sixty different interpretations of the same event and ninety different predictions for the future. We do know that the SET has one of the best price/earnings ratios in the world, its very strong, and that is very good.

“It’s clear now that Thailand is not going to fall off the cliff anytime soon,” says Cem Karacadag, an economist with Credit Suisse. “And it’s the cheapest market in Asia.”

I like these kind of statements and take them pretty seriously. A trained economist who probably does not have a vested interest in offering an analysis is appreciated. It just worries me that its only clear now that Thailand wont fall off cliff, did he think that possibility existed earlier? I would have like to see the full context of his comments but this is a pretty serious guy telling us that we are not going crash soon, that the worst dangers have past. Good news I would say.

To be sure, the economic recovery hasn’t yet shown up in the statistics. Private consumption, private investment and new bank lending are either stagnant or contracting. Consumer confidence fell for a seventh straight month in May, dragging local sentiment to its lowest level since February 2002. The crucial construction sector continues to contract.

While I think this is accurate, that is a pretty harsh statement using terms like stagnant or contracting. In the end, we here at the armchair economics club know that private consumption particularly in housing has been stagnant or contracting all year, no big surprise. Consumers just do this when things are "nervous" its hard on GDP but that is reflected adequately in the 4% that is projected. Not really an issue because the consumer side of GDP here is so small and actually, on reflection, a good thing. If your economy is slowing down, do you really want to increase building houses or importing luxury goods? Of course not, that is the type of behavior that causes crashes. So while harsh, it appears to me to be accurate, beneficial and irrelevant.

Yet a consensus is clearly building among foreign investors that the local economy has nearly bottomed and that a domestic demand-driven cyclical upturn will coincide with when general elections are held later this year. Phatra Securities economist Supavud Saicheua notes in a recent research report that the Stock Exchange of Thailand (SET) has rallied in the run-up and immediate aftermath of eight out of the past nine democratic elections in Thailand - regardless of which party won.

Well, I have a tendency to disagree with this. I dont see a demand driven cyclical upturn by the domestic market immediately following elections. Here we have a securities broker trying to link statistics as causal effects to SET performance. It may be true, it may be his job to promote local sales of securities, it may be that there is a statistical link but not a causal link. It probably is that the SET has risen steadily for the past 20 years except for the big crash. If I were to guess, and Kohn Thai help me out here, is that for the Thai folk, they pretty much feel that every government is the same same but different. Same generals, different faces. I dont think after the next election that domestic Thai investors will be dancing in the street and running up the stock market, foreign investors, maybe, but Kohn Thai?

Foreign investors, perhaps ironically, also drove up the SET in the direct aftermath of last September’s coup, where the military seized power from Thaksin’s pro-business government. They were later spurned when the junta-appointed interim administration unexpectedly imposed capital controls on all foreign equity, currency and bond transactions, in an effort to stem the local currency’s recent rise against the US dollar.

Som nam na foreigners, its emerging markets, get used to it. Thailand has the sovereign right to impose capitol controls if you flood their market with liquidity and threaten its economy. I dont that "spurned" investors already in the market, I think that spurned new investors that wanted to take advantage of the currency appreciation as well as the SET returns. This has been discussed at great length here, whether or not it was a good idea or properly executed, it was Thailands right to do so. Also, and this is key, it was not retroactive. Just like me, if I want to business here I have to get a work permit, dont like it well dont let the door hit your arse on the way out. Its when they change the rules mid game that hurts and the capital controls did not apply to already invested funds.

Foreigners were also irked by the military government’s stated intention to implement King Bhumibol Adulyadej’s “sufficiency economy” concept, which prescribes a more inward-looking approach towards economic policy. In retrospect, the military’s pronouncements were more rhetorical flourish than guiding principle, and most market analysts have since discounted the risk of a possible lurch towards more market protectionism.

Well, while I agree with most of this, the recent FBA was a terrible lurch toward protectionism. While mostly dead, I think protectionism is alive and well and working hard to grow roots in the NLA. I think the analysts that have since discounted this risk are a little premature back in July. We may yet get past it but I think its a bit early to say.

Instead, foreign investors are now focusing on Thailand’s increasingly strong economic fundamentals, which on many fronts have never looked quite so good. Reflecting on the country’s 1997 financial implosion, US credit rating agency Moody’s Investor Services said in a recent report that record foreign exchange reserves, robust current account surpluses and moderate inflation have greatly restored economic stability.

Moreover, underlying risks are now immediately reflected in the free floating baht, which was fixed in the run-up to the crisis and hence allowed economic distortions to build up undetected. The credit rating agency – which like others wholly failed to predict the region’s spectacular 1997-98 collapse – also says Thailand’s once lax and corrupt banking systems have now established more sophisticated and rigorous risk management systems.

Well Highdiver and Palm have a pretty good argument when Moodys Investor services backs them up. Honestly, I think thats a pretty good appraisal for the conditions today. We have taken some pretty hard hits and yet the boat is still floating. I do like that line about Moodys completely missing to predict the 97 crash, but really Moodys is not in the business to predict, only to report on the fundamentals and their consistency for investors to make decisions from.

Revisionist history

All of these factors, economic analysts say, have underpinned the rally on the stock market and strengthening of the baht - despite the junta’s recent economic policy miscues. So, then, how much does the ruling junta owe to Thaksin’s economic legacy for the present bullish sentiment?

Thaksin famously took political credit for the country’s economic turnaround and restoration of the national finances during his five year tenure. But many economic analysts now argue that the populist leader’s economic legacy was - at best - a mixed bag. They say he deserves credit for implementing fiscal policies that revived the moribund housing sector and helped to restore consumer confidence.

Although well-marketed and popular, Thaksin’s various populist policies aimed at the grass roots economy in reality contributed scarcely to real gross domestic product and were dwarfed in comparison to the hundreds of billions worth of baht his government opaquely and selectively allocated to bail out his indebted business cronies.

Revisionist economic history will show that Thailand’s post-1997 economic recovery owed chiefly to disciplined export-oriented corporations, whose global competitiveness was enhanced by the baht’s sharp devaluation, and who studiously de-leveraged their foreign debt exposure, a process that began in 1998 and persists in Thailand even as other crisis-hit regional countries resume leveraging.

I am sorry, but I agree with all of these statements in detail. I see the post 97 years exactly this way which is why I am so unconcerned about the state or ability of the government and so concerned with the health and well being of exports.

Economists say that those trade surpluses [1] did more than any government policy to restore the national accounts and stabilize the banking sector, economists say. It is often forgotten that Thaksin rose to political power on a nationalistic Thais-love-Thais ticket and that after taking power he moved in populist fashion to undo many of the market-oriented reform measures the then ruling Democrat party implemented to contend with the crisis.

Thaksin’s critics - including most significantly the military junta who deposed him – have alleged that he allowed and even encouraged the corrupt official and business practices that contributed to the country’s 1997 collapse. Yet there are growing indications that senior junta members are sustaining rather than eradicating those alleged corrupt practices, either through skimming secret budgets or exerting undue influence as board members of state-owned enterprises.

Many foreign analysts anticipate that the Democrat Party will notch enough votes to form the core of the next democratic government, and hope that its leaders will have enough electoral clout to resume many of the market-friendly reforms they initiated nearly a decade ago. But the Democrats notably also have a storied history of official corruption, for which they were driven from power in 1995. And the military – either through direct representation or political proxy – will also likely be heavily represented in the next ruling coalition.

Again, in my mind, a brilliant and accurate piece of writing. Wish I had written it.

Now - as in the past - foreign investors are willing to pay a premium for perceived political stability and overlook poor governance for fast financial returns.

Sounds like investors the world over for the past 2000 years, should not surprise anyone.

Note

1. Exports currently account for nearly 70% of Thai GDP, a higher ratio than the 55%-60% experienced during the 1980s and 1990s when rapid manufacturing-oriented, export-driven growth catapulted the country among the ranks of the world's fastest-growing economies.

This little note scares me to death. I have never heard it reported that high but with the slowdown in consumer spending and government spending, it would be simple math causing the export percentage to rise. However, that also means that we are even more exposed to problems in the export market than we were just a few years ago. Again, its only about exports, forget the military, forget tourism, forget the fashion hub, its exports to survive.

Shawn W Crispin is Asia Times Online's Southeast Asia editor.

(Copyright 2007 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

Good article Palm, I think Crispin really hit some nails on the head. Lets hope he is right, that we see the bottom this summer and honestly, if this is the bottom it aint all bad.

[A_Traveller]

I'd have difficulty finding it in the 100 + pages but I'm sure that this article was discussed herein contemporaneously. The 70% export thing struck me then as curious, on the basis of what number I can get to, though having to allow for the enthusiasm for 'stepping on them' my calculations for exports are 58.6 to 62.3 % GDP.

Regards

/edit PS around page 65 //

Edited August 26, 2007 by A_Traveller

[xbusman]

Travellor, I agree with your numbers, they fit my reckoning on the back of an envelope somewhere around here. It just bothers me that from such a careful and seemingly accurate piece of work that Crispin would make a special note of that fact. The only thing that comes to me quickly is that we know Consumer spending has shrunk, probably alot. We know the government spending (actually disbursements) is way down and even if they want to increase gov spending it will take a god awful amount of time. So if those two are way down, the percentage of GDP represented by exports would have to increase simply because of math. If a pie has three equal pieces, and two pieces are made smaller, the third piece has to get bigger even if the pie is smaller.

I think it should be around 60% and thats a normal balance for Thailand. We may be out of balance this year which however you look at it, increases the importance of exports.

[Old Man River]

If a pie has three equal pieces...

At the risk of sounding nit-pickly, but anyway just for the record, there are 4 pieces to the pie. The formula for GDP is Consumer Spending + Gross Private Domestic Investment (residential, non residential and changes in business inventories) + Government Spending + Net Exports (Exports minus Imports).

[xbusman]

Not nitpicky at all. Actually if I remember correctly, its a very complicated formula in all its glory. For purposes of simplicity, I tend to look at the three major pieces here and the point being is that if exports make up 70% then there really is only one major piece thats needs most of the attention.

[cclub75]

1. Exports currently account for nearly 70% of Thai GDP, a higher ratio than the 55%-60% experienced during the 1980s and 1990s when rapid manufacturing-oriented, export-driven growth catapulted the country among the ranks of the world's fastest-growing economies.

This little note scares me to death. I have never heard it reported that high but with the slowdown in consumer spending and government spending, it would be simple math causing the export percentage to rise.

Why don't you check the figures ?

Here, thanks to the BOT.

And you can download a XLS file, for historical datas back to... 1993.

Yes, without doubt, the ratio is going higher.

And no, the governement spendings are going up...

[Mid]

Slowing Thai exports seen pressuring FY growth if trend persists - economists

Published : Mon, 27 Aug 2007 05:54

BANGKOK (Thomson Financial) - Exports, a pillar of strength in Thailand's wobbly economy, have suddenly slowed due to cooling foreign demand and a strong currency, raising fears the kingdom will miss already modest growth targets.

Thailand counts on exports for 60 percent of its economy. It is the world's biggest exporter of rice and also a major producer of cars, textiles, electrical appliances, fruit and shrimp.

But exports in July grew a modest 5.9 percent year-on-year to 11.8 billion dollars, the lowest level in 29 months, amid a slump in demand in the United States and Japan, the kingdom's top trading partners.

'Exports grew slower than our target of above eight percent in July because of the strong baht and a decline in demand abroad,' said Tanyalak Surapol, a senior economist at the private Kasikorn Research Centre.

US-bound shipments in July dropped by 13.6 percent from a year earlier, while exports to Japan edged up just 1.7 percent in the month, the commerce ministry said.

The weak July data came as a particular shock as exports had been rising over 18 percent each month since January this year.

snip

abcmoney.co.uk

[xbusman]

1. Exports currently account for nearly 70% of Thai GDP, a higher ratio than the 55%-60% experienced during the 1980s and 1990s when rapid manufacturing-oriented, export-driven growth catapulted the country among the ranks of the world's fastest-growing economies.

This little note scares me to death. I have never heard it reported that high but with the slowdown in consumer spending and government spending, it would be simple math causing the export percentage to rise.

Why don't you check the figures ?

Here, thanks to the BOT.

And you can download a XLS file, for historical datas back to... 1993.

Yes, without doubt, the ratio is going higher.

And no, the governement spendings are going up...

cclub, I was speaking to this year and while the government has indeed made the commitment to increase spending, it appears that disbursements is way behind schedule. My question is this, if the Government signs a purchase order, does that add to GDP or do they have to pay for it before the money is included in GDP. With exports and consumption its easy, the money moves when the transaction takes place, withing reasonable limits anyway. I am guessing that the money used for government to prime the pump as it were would have to be paid so as to enter the economy. Perhaps not, in most cases a government contract is as good as cash for most banks to lend against.

If I am trying to understand how something works, I often look at the extremes to determine what makes best sense. If in January, the government sets a budget that is 100 times bigger than last year, do we determine that GDP growth in January is 100 times more than last year? If at the end of the year they find they did not spend a single penny and put all contracts out until five years later, would the GDP portion of Government shrink to 0% for the year?

It would be appear to me, from guessing, that as an economist I would not want to be outguessing government intentions. Instead, I would want to be looking at actual tax revenues and disbursements, with the resultant debt or surplus. That would give me more information on the actual effects to GDP than anything else.

So I believe you are right, government intention to spend, and budgets to do so, have risen, probably quite a lot. I think however, that tax collections are down, probably way down, and we know disbursements have gotten very far behind.

Someone with more knowledge might be able to help us out here.

[highdiver]

1. Exports currently account for nearly 70% of Thai GDP, a higher ratio than the 55%-60% experienced during the 1980s and 1990s when rapid manufacturing-oriented, export-driven growth catapulted the country among the ranks of the world's fastest-growing economies.

This little note scares me to death. I have never heard it reported that high but with the slowdown in consumer spending and government spending, it would be simple math causing the export percentage to rise.

Why don't you check the figures ?

Here, thanks to the BOT.

And you can download a XLS file, for historical datas back to... 1993.

Yes, without doubt, the ratio is going higher.

And no, the governement spendings are going up...

cclub, I was speaking to this year and while the government has indeed made the commitment to increase spending, it appears that disbursements is way behind schedule. My question is this, if the Government signs a purchase order, does that add to GDP or do they have to pay for it before the money is included in GDP. With exports and consumption its easy, the money moves when the transaction takes place, withing reasonable limits anyway. I am guessing that the money used for government to prime the pump as it were would have to be paid so as to enter the economy. Perhaps not, in most cases a government contract is as good as cash for most banks to lend against.

If I am trying to understand how something works, I often look at the extremes to determine what makes best sense. If in January, the government sets a budget that is 100 times bigger than last year, do we determine that GDP growth in January is 100 times more than last year? If at the end of the year they find they did not spend a single penny and put all contracts out until five years later, would the GDP portion of Government shrink to 0% for the year?

no it is not

The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time. so a budget is not final goods. when the goverment actually pays it goes into the GDP.

It would be appear to me, from guessing, that as an economist I would not want to be outguessing government intentions. Instead, I would want to be looking at actual tax revenues and disbursements, with the resultant debt or surplus. That would give me more information on the actual effects to GDP than anything else.

no it does not as "creative accounting" can create less tax revenue whilst the profits are actually higher.

So I believe you are right, government intention to spend, and budgets to do so, have risen, probably quite a lot. I think however, that tax collections are down, probably way down, and we know disbursements have gotten very far behind.

Someone with more knowledge might be able to help us out here.

The most common approach to measuring and understanding GDP is the expenditure method:

GDP = consumption + investment + (government spending) + (exports − imports)

so goverment spending is only a part of this equasion. a goverment can attemt to compensate any loss in one sector by making goverment expenses in projects and inferstructure.

[xbusman]

1. Exports currently account for nearly 70% of Thai GDP, a higher ratio than the 55%-60% experienced during the 1980s and 1990s when rapid manufacturing-oriented, export-driven growth catapulted the country among the ranks of the world's fastest-growing economies.

This little note scares me to death. I have never heard it reported that high but with the slowdown in consumer spending and government spending, it would be simple math causing the export percentage to rise.

Why don't you check the figures ?

Here, thanks to the BOT.

And you can download a XLS file, for historical datas back to... 1993.

Yes, without doubt, the ratio is going higher.

And no, the governement spendings are going up...

cclub, I was speaking to this year and while the government has indeed made the commitment to increase spending, it appears that disbursements is way behind schedule. My question is this, if the Government signs a purchase order, does that add to GDP or do they have to pay for it before the money is included in GDP. With exports and consumption its easy, the money moves when the transaction takes place, withing reasonable limits anyway. I am guessing that the money used for government to prime the pump as it were would have to be paid so as to enter the economy. Perhaps not, in most cases a government contract is as good as cash for most banks to lend against.

If I am trying to understand how something works, I often look at the extremes to determine what makes best sense. If in January, the government sets a budget that is 100 times bigger than last year, do we determine that GDP growth in January is 100 times more than last year? If at the end of the year they find they did not spend a single penny and put all contracts out until five years later, would the GDP portion of Government shrink to 0% for the year?

no it is not

The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. It is also considered the sum of value added at every stage of production of all final goods and services produced within a country in a given period of time. so a budget is not final goods. when the goverment actually pays it goes into the GDP.

Thats what I thought Highdiver, thanks for that.

It would be appear to me, from guessing, that as an economist I would not want to be outguessing government intentions. Instead, I would want to be looking at actual tax revenues and disbursements, with the resultant debt or surplus. That would give me more information on the actual effects to GDP than anything else.

no it does not as "creative accounting" can create less tax revenue whilst the profits are actually higher.

But I think creative accounting takes place year to year and I cant imagine how you would compensate for it in the numbers. I think its normally the case that profits are higher than reported everywhere, so in the end I think you would look strictly at tax revenues as a hard and fast transparent number that should give you indications of trends.

So I believe you are right, government intention to spend, and budgets to do so, have risen, probably quite a lot. I think however, that tax collections are down, probably way down, and we know disbursements have gotten very far behind.

Someone with more knowledge might be able to help us out here.

The most common approach to measuring and understanding GDP is the expenditure method:

GDP = consumption + investment + (government spending) + (exports − imports)

so goverment spending is only a part of this equasion. a goverment can attemt to compensate any loss in one sector by making goverment expenses in projects and inferstructure.

Well I did know that formula anyway. My question is, will the governments commitment to prop up the losses in the other two sectors take effect this year if disbursements are way behind. I think the work is in process, and I think for example that the wages will get paid somehow at TOT, but if the work gets done and not paid for how is it added to GDP. I would think the only way they could actually measure it accurately is by measuring the disbursements. So in effect, is it possible for the government to ramp up, let more contracts, get more work done and yet show government spending decreasing because disbursements are held up due to the ongoing investigations? If so, they we wont be able to count on government spending, where is the growth going to come from in the numbers this year?

[Mid]

Election to generate massive cash flow

(BangkokPost.com) - The University of the Thai Chamber of Commerce saw the bright side of holding the election on December 23 as an economic expert there believed the polls will result in many political parties jump-starting their political campaigns and thus generating 30-40 billion baht in cash flow.

“This will also give a much needed injection to the flagging economy,” said Thanawat Polwichai, chief of the center for economics and business forecasting, “and we may be able to enjoy an increased GDP growth by 0.2%.”

snip

bangkokpost.com

[chinthee]

Election to generate massive cash flow

(BangkokPost.com) - The University of the Thai Chamber of Commerce saw the bright side of holding the election on December 23 as an economic expert there believed the polls will result in many political parties jump-starting their political campaigns and thus generating 30-40 billion baht in cash flow.

"This will also give a much needed injection to the flagging economy," said Thanawat Polwichai, chief of the center for economics and business forecasting, "and we may be able to enjoy an increased GDP growth by 0.2%."

snip

bangkokpost.com

Democracy Now! Christmas ornaments?

[Mid]

ECONOMIC DATA / EXPORTS

Refineries at fault for July figures

PARISTA YUTHAMANOP

Tuesday August 28, 2007

The sharp decline in export growth in July reflected in part lower exports of refined oil to Singapore due to refinery maintenance, Bank of Thailand governor Tarisa Watanagase said yesterday.

Export growth in US dollar terms dropped to 5.9% in July from the same month the year before, a sharp drop from the 18% average posted in the first half and the slowest pace of monthly growth since February 2002.

''The decrease of exports in July resulted from refinery maintenance, which resulted in oil exports falling by 60%. Rice exports also fell,'' Dr Tarisa said.

snip

bangkokpost.com

[Mid]

RAYONG

Downturn in the economy driving more to suicide

Apiradee Treerutkuarkul

Tuesday August 28, 2007

The economic problems plaguing the country have caused an increase in the number of suicides in Rayong, prompting mental health experts to focus on suicide prevention in the area.

Mental Health Department deputy director-general Apichai Mongkol said yesterday the problems in the eastern province were "worrying", and were partly due to the economic downturn which had affected workers on industrial estates in Rayong.

snip

bangkokpost.com

[Carmine6]

ECONOMIC DATA / EXPORTS

Refineries at fault for July figures

PARISTA YUTHAMANOP

Tuesday August 28, 2007

The sharp decline in export growth in July reflected in part lower exports of refined oil to Singapore due to refinery maintenance, Bank of Thailand governor Tarisa Watanagase said yesterday.

Export growth in US dollar terms dropped to 5.9% in July from the same month the year before, a sharp drop from the 18% average posted in the first half and the slowest pace of monthly growth since February 2002.

''The decrease of exports in July resulted from refinery maintenance, which resulted in oil exports falling by 60%. Rice exports also fell,'' Dr Tarisa said.

snip

bangkokpost.com

Did they ever square up the discrepancy between what Customs reported and what the trade groups reported? Rice was one of the categories with a big discrepancy. Trade groups said there was an increase in rice export volume and Customs said there was a decrease.

[A_Traveller]

Election to generate massive cash flow

(BangkokPost.com) - The University of the Thai Chamber of Commerce saw the bright side of holding the election on December 23 as an economic expert there believed the polls will result in many political parties jump-starting their political campaigns and thus generating 30-40 billion baht in cash flow.

"This will also give a much needed injection to the flagging economy," said Thanawat Polwichai, chief of the center for economics and business forecasting, "and we may be able to enjoy an increased GDP growth by 0.2%."

snip

bangkokpost.com

Democracy Now! Christmas ornaments?

I can see them now, Samak crackers, you pull them apart and with a bang small book shaped elements explode out, on fire naturally.

Regards

/edit PS Carmine6 eh... no they didn't///

Edited August 28, 2007 by A_Traveller

[esbobes]

Actually I do belive this sub prime discusion is relevant as it has effected the economy here as well. One of the great joy's of moving to Thailand was affordable housing I lived in L.A. before, Simply crazy there and how do you really make money. Sell the house get out. Move to a more restrained area if you can.

Even the little area around Udon has shown unrealistic costs increases for this area. Basic farm land here now is as expensive as the states and in most cases really more expensive for unimproved land, in a state like Texas.

Condo's in Bangkok way out my reach. Some Thai people here owe more in monthly payments on trucks and houses then they earn. Where was the money coming from outside Issan, workers in the factories Ect. So in the end it would appear that overreaching was happening here as well. Those factories where simi skilled workers were employed are in jeopardy.

Eventually the prices have to be paid.

Stop making fun of us Thai people We can grow rice or rubber tree to cover the cost. In England and US

unble to grow rice or rubber.

How can you compare Ubon to Texas everyone in Thai known Ubon is better and rich atleast Geroge Bush not from Ubon.

[LaoPo]

Southeast Asia's Safe Harbors

BANGKOK, Thailand -- With the world's financial markets still wary of more fallout from the U.S. credit crunch, some economists and analysts are pointing to some Southeast Asian stock markets, notably those in Thailand and the Philippines, as potential havens for investors.

Prospects for consumer demand are improving in both Thailand and the Philippines, these analysts say, and prices of blue-chip stocks such as Bangkok Bank, Thai oil refiner PTT and Philippine malls-to-telecoms conglomerate Ayala Corp. are looking less expensive than they have in months. Since their peaks for the year in July, the main Thai index has fallen 10% ...

• THE FULL WSJ.com ARTICLE IS ONLY AVAILABLE TO SUBSCRIBERS.

http://online.wsj.com/article/SB1188240525...=googlenews_wsj

Note: anybody who has access to the full article ?

LaoPo

Edited August 28, 2007 by LaoPo