Thailand's Free-falling Economy

[observer21]

Frankly,

this article is another piece of turgid turd in the guise of economic analysis written by an incompetent, economically inarticulate, financially inept and numerically challenged moron with a computer who passes himself off as a ''freelance" journo. I mean, I've seen some bad attempts at economic analysis, but this bloke is simply worse than amateur in his analysis. And his article shows him up for the depths that this bloke has to sink when he wants to sell an article to a second rate newspaper.

Let's get some facts on the table before we continue shall we? Yes, the Thai economy is not performing as well as it historically has. And, yes, Thailand is at a point where it needs to make some challenging economic and policy choices which - whoever is in government - will never go down well politically speaking.

To suggest that economy should continue gangbuster-ish growth is both irresponsible and ignores important factors such as inflation and wage and factor cost explosions.

But, let's continue looking at this article shall we?

A series of policy missteps have badly undermined foreign-investor confidence in the military-appointed government's economic stewardship, including the imposition of capital controls on foreign currency, equity and bond transactions, proposed nationalistic amendments to the Foreign Business Act, and the nationalization of foreign-held media assets.

Yeah, give him that one in a broad sense, but it is old news and the market pretty much has reacted - and the recovered from this news. The SET has grown about 8% in the past 12 months and many good and well managed Thai companies on the index have done much, much better. It also ignores the recent court decisions banning TRT, and the calm aftermath. But hey, all these points are debatable, and I am a glass half full kinda man.

Private consumption fell to its lowest level since the second quarter of 1999, contracting for both durable goods and services, according to recent Phatra Securities research.

Well, sonny, this is what happens when a government stops the unaffordable practices of the former government pump priming parts of the economy via handouts and cheap loans which do nothing for establishing long term productivity for the economy (i.e. education and training) but do everything to please the rural north east to continue voting for you.

Rather than ramping up growth, the CNS declared its intention to put the economy on what it referred to as a more sustainable growth trajectory. Toward that end, the military-appointed government put on ice several of the US$43 billion worth of megaprojects Thaksin had designed to pump up the local economy in anticipation of slowing global demand for Thai exports and a cyclical downturn in the housing market.

yep, $43 billion of projects, a good 20% of which was set to go into his cronies pockets, and the remaining 80% having questionable long term strategic advantage for the economy. Fancy a slightly used, overpriced airport built on marshland anyone? The old one still works; it just needed a refit, and would have done the same job!

Despite last year's 17% appreciation of the Thai currency, the baht, against the US dollar, Thai exports had performed strongly, expanding more than 17% year on year in 2006. That strong trend has continued into 2007, accounting for a $5.5 billion current-account surplus in the first quarter

Ya can't have it both ways, Eddie ole chap. The economy is either doing well or it is not. So do we have an export sector here doing well - in spite of a high baht - or don't we?

To date, those surpluses have provided Thailand's ruling generals with a financial cushion from souring foreign-investor sentiment. However, exports are expected to soften significantly in the coming months, witnessed in the meager $400 million current-account surplus recorded in April, meaning the economy must soon find growth from other sources to avoid a slide into recession. (Exports contribute more than 65% of Thailand's total gross domestic product.)

Slide into recession??

I mean, isn't a recession two successive quarters of negative growth?? And what have we got? 4.3% growth with upgraded forecasts in the high 4 percent range! I mean really!

And where did you get this 65% of exports from? You mean in between beer bars you did a Google search and came up with the first internet site with some official looking numbers? I wouldn't happen to be this one would it?? Asian Development Bank

I mean, you didn't even look at it hard enough did you? It is the Net Exports column you should be look at, which takes into account exports minus imports. In that case, net exports only account for 14.7% of GDP, not 65%. Meaning that 85% of the Thai economy has no reliance whatsoever on exports! I mean, there is even a big fugg-off equation at the top of the ADB web page telling you how to calculate GDP properly! But hey, don't let that get in the way of a good 'economic' argument shall we - especially when that beer is getting cold and there are bills to pay.

And so you go on, spouting 'world bank studies' to make you seem credible, and an opportune comment from the BOT governor to seemingly 'seal the deal' on your sieve of an argument.

But I'm sure you were paid handsomely for this inept piece of journalism, and punters will continue to swallow the tripe that you write.

Phew, wouldnt like to get on the wrong side of this moderator

[ThaiGoon]

http://www.nationmultimedia.com/2007/06/20...ss_30037316.php

Light at the end of the tunnel

Despite the harm done by the recent political turmoil, Thailand's industrial operators believe their operational results will grow continuously over the next six months, a new survey by the Federation of Thai Industries (FTI) shows.

The Thai Industries' Sentiment Index made a strong recovery last month on the back of more orders and lower interest rates after plunging to a five-year low in April, the federation said. The index rose to 86.1 last month, from 77 in April.

[cclub75]

Oh no!!! They've escaped from the news clippings forum... aaaaaaaaaaaaaaaaaaargh!

Send them back, send them back!!

Yes, we are your worst nightmare.

As for this thread, well... excepted personal insults... I think the article on AsiaTimes is a good "summary" of the situation. Probably a bit harsh or sensationalist (ah those journalists...), but full of common sense.

The title "Thailand’s free-falling economy" is indeed sensationalist.

Ok folks, I'll return now to my home sweet home, the thread : The Thai Economy Is In Crisis.

Original is always better.

[Robski]

Phew! Best thing you've said all day. Thanks.

Edited June 19, 2007 by Robski

[sriracha john]

Is this thread somehow someway different than the current thread:

The Thai Economy Is In Crisis

[samran]

Phew, wouldnt like to get on the wrong side of this moderator

hmm, I must have been chanelling Paul Keating before I hit the sack last night....

[Mid]

ignore

Edited June 20, 2007 by Mid

[Mid]

There's still a lot to be done in terms of education and R&D in Thailand but these are a few examples that we know the problems and are trying to fix them. Of course, some ignorant fools living in Thailand are oblivious to all these and it's easier and more fun for them to just ridicule and insult Thailand and act as if they know it all on an internet forum.

look to the big picture , your on the right track

as to the rest ,

what do you expect when you try to negate the big picture with one off examples ??

it's of no consequence to you but I live here because I've made the country my home , as such I'm very concerned over the direction the country is going and will speak out .

[Furbie]

Without delving into the relative merits of the article or the author's economic competencies; while it's all well and good to have strong export growth, it will invariably lead to a stronger currency, this combined with the foolish reserve requirements are sending (have sent) the baht to harmful levels.

More problematic, however, is that export revenues are not being used to make future investments - meaning that current policies are basically destroying the future competitiveness of the Thai economy. Make no mistake, this is the real problem – there is too little investment, and when export growth slows as a result, real problems will come to the surface and the currency is going to go pop unless the government pulls off an amazing balancing act.

[ThaiGoon]

Without delving into the relative merits of the article or the author's economic competencies; while it's all well and good to have strong export growth, it will invariably lead to a stronger currency, this combined with the foolish reserve requirements are sending (have sent) the baht to harmful levels.

More problematic, however, is that export revenues are not being used to make future investments - meaning that current policies are basically destroying the future competitiveness of the Thai economy. Make no mistake, this is the real problem – there is too little investment, and when export growth slows as a result, real problems will come to the surface and the currency is going to go pop unless the government pulls off an amazing balancing act.

By the way, imports just went up last month and it signaled that the private investment is coming back. I'm not sure what you are on about.

And Mid, what do you mean one off examples? The gov't efforts to systematically increase the level of R&D in Thailand and the revamping of Thai universities are one off examples? What?

And my home is Thailand. I'm only in the US to get a degree.

[Mid]

TG whilst you continue to deny the gravity of the situation you will continued to be ridiculed.

[Scott]

Meanwhile, back at the economy.....

One of the serious problems that I find--and I am not an economist by any stretch of the mind, is that there is so much mis-information out there. I listen to the evening radio news on my way home (English-7:00 p.m.) and when the business news is on, they always paint this quite rosy picture--and always have.

Yet, some of my (Thai) friends/colleagues/associates all seem to be crying the blues about the economy and they are in very different sectors. A large metal works factory for example is forcasting a 20% drop in production due to slack demand. This is a harder hit than 1997 was and one of the largest since WWII. Since this is just one sector, I can't gauge much from it, but people in other areas seem to be complaining more and sentiment seems to be muted.

So facts are helpful and appreciated. Also analysis by those who are in the know.

[ThaiGoon]

it's of no consequence to you but I live here because I've made the country my home , as such I'm very concerned over the direction the country is going and will speak out .

It's funny that I never see anyone who often offers constructive criticism of Thailand on here uses this line. It's always only you, cclub75 and the like who always use it. Hmmm Very interesting.

[Mid]

It's funny that I never see anyone who often offers constructive criticism of Thailand on here uses this line

the most constructive criticism I can offer is for Thailand to accept that there are grave problems with the current picture ,

only then will the healing process start , your and others denial is not constructive mearly argumentative .

[samran]

Without delving into the relative merits of the article or the author's economic competencies; while it's all well and good to have strong export growth, it will invariably lead to a stronger currency, this combined with the foolish reserve requirements are sending (have sent) the baht to harmful levels.

More problematic, however, is that export revenues are not being used to make future investments - meaning that current policies are basically destroying the future competitiveness of the Thai economy. Make no mistake, this is the real problem – there is too little investment, and when export growth slows as a result, real problems will come to the surface and the currency is going to go pop unless the government pulls off an amazing balancing act.

It is like you say, lack of investement and the inability to increase productivity of the Thai economy due to lack of micro economic reform which can only come about by deregulating industries which for all intents and purposes are monopolies . I'm talking banking, ports, railways, telecommunications, energy production and distribution and a bunch of other key infrastructure bottlenecks. This, in addition to better education and training.

I think these are the core problems Thailand, so it is frustrating to see people concentrating on the peripherals - such as exports and the exhange rate - which are reliant on the core fundamentals that I have outlined above.

[ThaiGoon]

TG whilst you continue to deny the gravity of the situation you will continued to be ridiculed.

I never deny that the economy is down. My point is that it's neither in a free fall or a crisis. There's still plenty of good news and signs that the Thai economy will still be all right for at least the next 5 years.

And me getting ridiculed by people of your intellect and knowledge? Right.

[Mid]

I never deny that the economy is down.

first time you,ve acknowledged it , to my knowledge .

[Mid]

I think these are the core problems Thailand, so it is frustrating to see people concentrating on the peripherals - such as exports and the exhange rate - which are reliant on the core fundamentals that I have outlined above.

corruption is not a core problem ??

[ThaiGoon]

It's funny that I never see anyone who often offers constructive criticism of Thailand on here uses this line

the most constructive criticism I can offer is for Thailand to accept that there are grave problems with the current picture ,

only then will the healing process start , your and others denial is not constructive mearly argumentative .

Mid, please try to think about what I said (if you can.) Please. I said the gov't is trying to step up the R&D in Thailand. There will be attempts to improve the education. Given all that, you still think we, Thais, don't know that we need to improve all these to stay competitive in the global market? After you read what I posted, please try to think along as well . Please.

[ThaiGoon]

I never deny that the economy is down.

first time you,ve acknowledged it , to my knowledge .

I acknowledged it ages ago. Go back and read the "economy is in crisis" post. Read more.

And Samran I thought the Klong Toey port has been managed by a private company a while ago? Also the SRT, from what I understand, is drawing up plans to let private sector handle a lot of their busineses in the near future. (They need to do this. They are in huge debt and need to be reorgainzed.) As for the privatization of EGAT, it will never happen. And it's a national security issue. Though they are urging a lot more private companies to provide electricity in the forms of IPPP's (I might got the acronym wrong.) I personally don't see much good in privatizing the whole thing either. I mean just look at Enron and what happened in Argentina a while ago. The banking sector might need to be more open to foreign investors...

Edited June 20, 2007 by ThaiGoon

[samran]

I think these are the core problems Thailand, so it is frustrating to see people concentrating on the peripherals - such as exports and the exhange rate - which are reliant on the core fundamentals that I have outlined above.

corruption is not a core problem ??

It is a huge problem, but how do you fix it?

I am of the view that you create a more transperent and competitive envioronment first - and in some ways, corruption takes care of itself. Thailand in many ways is still a bit of a licensed raj, you need a permit to do a lot of things, and that is where the scope for corrupton to come in.

Telco concessions are a case in point. Varied deals depending on who paid who more. Every man and his dog should be allowed to be a telco operator if he wanted to - and theys should be able to go about this with a minimum of fuss. Rules on concession payments make a level playing field a joke. A license should be an agreement that you will adhere to certain rules and regulations, rather than some sort of magic wand that allows you to do something others aren't - unless the have the money.

Ports and logistics are another one. Decreased and simplifed tariffs would go a long way to stamping out scope for corruption, cause rules would be similar. As would additional competition. Laem Chabang port is much more productive than Bangkok port due to the fact that there are 5(?) private operators there versus Bangkok port where it is a goverment monopoly.

Rail here is a joke, cause the main prupose of SRT these days is a landlord. Bribes there are for property deals. You spin off SRT properties, and the railways will become the default focus of the SRT.

I could go on, but I won't. My main point is that to attack corruption, about 10 other related things have to change first before you can effectively stamp it out

[Mid]

It is a huge problem, but how do you fix it?

simple answer

Education

[samran]

It is a huge problem, but how do you fix it?

simple answer

Education

only if the world were really that simple, mid.

Definetly part of the solution, but you have to take away the incentives as well.

[Mid]

cheers guys ,

good point to end on .

[JimmyCA]

Good article ... in 3 years the baht will be back where it belongs 1USD = 50 BHT

[ThaiGoon]

Rail here is a joke, cause the main prupose of SRT these days is a landlord. Bribes there are for property deals. You spin off SRT properties, and the railways will become the default focus of the SRT.

The main problems with SRT, I think, are huge corruption and their labour union. The properties you talked about in reality don't generate that much revenue for SRT, because sadly majority of it goes to the pockets of mafia within that organization. And education alone is not gonna solve these problems.

[Prakanong]

Mid talking about education and logical thought

thanxs for demonstrating yours .................

Hey leave the lonely bairn alone - he can not even afford to come home for a year!

Its a lonely stool in that room!

[Prakanong]

I think these are the core problems Thailand, so it is frustrating to see people concentrating on the peripherals - such as exports and the exhange rate - which are reliant on the core fundamentals that I have outlined above.

corruption is not a core problem ??

It is a huge problem, but how do you fix it?

I am of the view that you create a more transperent and competitive envioronment first - and in some ways, corruption takes care of itself. Thailand in many ways is still a bit of a licensed raj, you need a permit to do a lot of things, and that is where the scope for corrupton to come in.

Telco concessions are a case in point. Varied deals depending on who paid who more. Every man and his dog should be allowed to be a telco operator if he wanted to - and theys should be able to go about this with a minimum of fuss. Rules on concession payments make a level playing field a joke. A license should be an agreement that you will adhere to certain rules and regulations, rather than some sort of magic wand that allows you to do something others aren't - unless the have the money.

Ports and logistics are another one. Decreased and simplifed tariffs would go a long way to stamping out scope for corruption, cause rules would be similar. As would additional competition. Laem Chabang port is much more productive than Bangkok port due to the fact that there are 5(?) private operators there versus Bangkok port where it is a goverment monopoly.

Rail here is a joke, cause the main prupose of SRT these days is a landlord. Bribes there are for property deals. You spin off SRT properties, and the railways will become the default focus of the SRT.

I could go on, but I won't. My main point is that to attack corruption, about 10 other related things have to change first before you can effectively stamp it out

so there is no solution to the corruption - or the solution is too painful as its endemic in the backward culture it springs from?

Kasikorn has it right - telling their Thai customers to invest in Vietnam!

Property boom - council houese go fo more in Singapore than top end Thai condo's!

[shochu]

Funny - even with a strong baht - thailand is exporting volumes - Did you hear that bingo-MATIC - volumes with their exports up - VOLUMES!

Sorry - couldn't help myself with the bingster.

Baht was always stronger to the dollar than even now and I expect it to rise against the dollar perhaps to the old region of 20-1.

Edited June 20, 2007 by shochu

[Aujuba]

It's sad. The poor will have it the worst. They probably won't have much more than wild papaya, rice and insects to eat. Oh, wait that's what they eat now!