Economic Report

[Joel Barlow]

As the world-at-large grows more and more to resemble Huxley’s “Brave New World”, Thailand increasingly looked a safe-haven to many. Laws against foreign ownership are easily enough circumvented, the cost of living remains competitive – at least with safety and security factors considered in, and the Internet ameliorates sense of isolation and distance. Globalization means one didn’t have to eat Thai – not as exciting or satisfying when routine. Satellite TV and radio mean no need to bother learning Thai. But as the Japanese learned building hotels in Yangon in the ‘90s, it’s much easier to bring money in than to take money out.

Only ten years after the “Thaitanic” economic meltdown, people are desperate, ready to grasp at straws. Jatukam-Ramatep medallions with nick-names like “Get Rich - without working” have become a hugely popular phenomenon (much like the deposed populist administration).

Thailand’s large-scale industrial and commercial enterprises, meant to be supported by superior technical know-how, strong financial position and efficient management, are supposed to be corporate parts of a modern, knowledge-based business world, and thus have attracted heavy investment. But the strong baht has hurt most Thai-owned export related industries, primarily food, textile, jewelry and furniture production. Local industries reliant on domestic materials no longer show export growth.

Meanwhile, the internal economy is suffering a significant slow-down. The local retailing sector has been outclassed by foreign-owned chain-stores; countless ‘mom-and-pop’ stores - loathed as parasitical and Chinese - are now redundant, losing viability, and closing down. The multinationals offer diversity, variety, wholesale pricing, and cost-efficient, modern venues, but discount tent-outlets and traditional fresh-produce markets still thrive – by minimizing overhead, and profit.

The multinationals also have problems, which are reflected in the failures of the tourism industry. Directed by Prime-Minister Taksin to enhance high-end attractiveness, realities on the ground were ignored. Five-star service has not been provided, so Thailand has not become the five-star destination envisioned. Failure of education in Thailand precluded success here – not only is sufficient foreign-language usage and understanding lacking, but standards of service and quality simply aren’t high enough, not even in restaurant cooking. Similarly, the chain-stores fail to provide the exactly what locals typically both need and demand - bargains.

Demographics, never of high exactitude here, were completely neglected when freely disposable income was high, and status-symbols a high priority. But, the fashion of status-symbol involvement is beginning to dissipate, with unsustainably high household debt levels, inflation real though well hidden, and hard times from a weakened economy widespread.

Investment in new plants, more productive machinery and equipment, infrastructure and mega-projects has been the chief contributor to GDP (gross domestic product) growth - but a corresponding rise in productivity hasn’t occurred. Thailand is losing competitiveness to other countries, in education, technology, the race to world markets, and in prestige. But despite the weakening economy and declining tax revenues, the baht has strengthened to pre-Thaitanic (1997) levels. The weak dollar and yen provide insufficient explanation; politics, long-term planning and investor strategy are all that offer what little viable explanation has been provided. Meanwhile, much touted foreign investment, 100 billion baht in the 1st half of 2007, will surely fall well below government projections.

Hard-working Asians usually consume much less than they produce, but perhaps somewhat due to the specter of inflation (and of cost-of-living and of expectation increases), savings have become almost non-existent. As wages fall in terms of purchasing power, China floods local markets with low-quality goods - while also propping up the dollar, the hegemonic fiat currency whose fall lends to lowered purchasing power of other currencies. Thus China basically confronts a volatile situation from two sides, and gains substantial control of it – though at unsustainable cost. China ‘captures’ markets, but undersells scarce raw materials they’re even now trying to latch onto in Africa. Quality problems undermine faith and – perhaps most importantly – low wages increasingly alienate long-oppressed workers energized with largely naïve hopefulness. As Thailand looks to China for trade, China begins to appear increasingly undependable.

The strengthening of the baht, over 20% in 2 years, 23% in 30 months, has been almost twice as much as comparable regional currencies. This is attributed mainly to inflow into the stock exchange, with investors shifting funds out of the US. The strong baht somewhat off-sets rising energy prices, but hurts the all-important export of goods (exports make up over 60% of GDP), while encouraging a rise in imports.

Falling consumption, vacant rental properties, lowered demand for Thai exports, alienation of foreign investors through nationalistic policy making, reduced government spending, and infrastructure concerns contribute to weakened competitiveness. Expensive and clumsy goods-transport and local finance, continued corruption (especially in importing), and ineffective central policy-making (instead of promised decentralization) compound economic gloom. Roads through to China, once expected to brighten the picture, now promise only a flood of cheap, low-quality goods attractive to the cash-poor majority, but detrimental to local manufacturing. That less than 10% of the Thai population receives the gain from 90% of all economic growth has led to overinvestment in supply to insufficient demand, in sports-utility vehicles (SUVs) and muscle trucks, glossy magazines, spas, exercise clubs, luxury hotels, jewelry and other inessential goods. Now money-circulation has slowed, and stop-gap measures on the part of many consumers threaten economic stability.

Sex-related tourism brings in at least 1% of total Gross Domestic Product (income), but this particular hard-currency revenue provides ready cash which moves around much faster than the mega-funds of the super-rich. It supports many important economic sectors, without which the tax-base begins to collapse, loans cannot be repaid, and merchandise becomes so dated as to be un-sellable. Continued contempt for the poor, and for truthfulness and the concept of transparency exacerbate the situation, while an authoritarian bureaucracy focused primarily on power preservation stifles hope for democratic change. A recent TV report yesterday said many prostitutes can no longer find customers, even at lowered prices.

With no more ‘mad money,’ ‘disposable’ income, ready cash, or impulse buys, small entrepreneurs cannot survive. Thousands of small businesses are going bankrupt. When Latin American economies - in particular, that of Mexico - have experienced this situation, with the majority of money held by the super-rich, sudden outpourings of money have occurred, as was rumored the case in Thaitanic fiasco of 1997. The situation has now again become inherently unstable, and realities in Africa certainly testify that mega-loans are not the answer.

Thailand quite well alienated the House of Saud a decade and a half ago, and remains an outsider to the City of London, Bush family and other global banking/armaments (Rockerfeller/Rothchild) consortiums. The Rockefellers invested heavily here long ago, at the height of the Cold War, but have been superseded by Chinese businessmen and technological giants. The Thai ruling clique apparently feels compelled to favour China’s financial alternative offer to all the Western mega-corporate corruption, while maintaining their own fraudulence and duplicity…

Extrajudicial killings, rape, land confiscation, and other violations of basic human rights have displaced over 100,000 Myanmar villagers, who have fled into Thailand as refugees, but Thailand’s EGAT electricity monopoly seems determined to attract more. The notorious Yadana Pipeline, of questionable economic or utilitarian justifiability, is now to be extended, with EGAT’s help. Thailand didn’t need energy produced by Yadana gas when the project was begun: forecasts of demand were exaggerated by 40%, to justify this support for the oppressive, widely disparaged military regime. Now that Thailand also has a military regime, this support is to be renewed. Electricity from Laos remains cheaper, but EGAT is now investing in two more large natural gas deposits in Myanmar: in the Bay of Bengal and in the Gulf of Martaban. These project, dubbed Shwe (pronounced Shu-wii, gold in Burmese) are reputedly to supply for consumption in Thailand, but again, need is being overestimated (and alternative sources - like solar and wind - neglected). Thailand's energy reserve margin for 2006 was 7% percent higher than international standard, a clear case of economic mismanagement. Also, it’s EGAT itself which estimates demand – a clear case of conflict of interest. The new pipeline will be four times the length of the first, with corresponding disruption not only to people but to environment, including to endangered species. Despite large financial settlements paid out by Unocal and Total for their involvement in the first pipeline, corporate interest remains high. Thailand's gas imports from Burma are in excess of US$1.5 billion per year, providing the Myanmar’s military junta with 30 % of its hard currency, and accounting for most of Thailand’s 70 billion baht (US$2 billion) trade deficit with Myanmar for the last year – the first since the late 1980s.

The pipelines, especially during construction, are vulnerable to sabotage – from environmentalists, insurgents from Thailand’s south or Myanmar tribal groups, or even someone hoping to protect work with a private force like Blackwater, which supplies approximately as many ‘security’ workers (mercenaries) in Iraq as foreign governments have soldiers there. This seems to bother the sponsors as little as did the fact that the original line didn’t even carry gas for the first year after completion.

But that’s just the proverbial tip of the iceberg. Drug production is largely seen as removed to Afghanistan and Latin America, but the Golden Triangle remains hot. Like with heroin for the French and Vietnamese in the 50s, then with the USA into the 70s, amphetamines are used for political suppression, and to perpetrate an appearance of need for militarization. What once entered Thailand in its north now enters – through the passenger bus concession awarded Drug Warlord Khun Sa (Zao Khun-sah, the legendarily dark “Prince of Prosperity” originally named Chan Cheefu or Zhang Qifu) – along the southern part of Thailand’s western border, where it becomes accessible to angry young Islamic speakers of a non-Thai native language, people history books incorrectly say were conquered by King Ramkamhaeng of ‘Sukhothai’ (Sukotai) before 1300 CE, despite preponderance of evidence to the contrary. Angry people, indeed, already, and perpetrating violence long endemic.

It’s all part of efforts at increased control: to reduce self-sufficiency, expand tax base, coerce people into factory work and keep a lot of young men in the military – and thus well controlled and away from harem-supply. Meanwhile, Chinese control in Southeast Asia and especially of the Myanmar economy gets enhanced, not only as refineries are in their hands, but because the military regimes need Chinese military assistance. The end result will inevitably be Myanmar becoming forced into the market economy, tourism increasing with globalization and a switch from self-sufficiency to regimented living.

This power-mad idea is antithetical to the Thai King Bhummipon’s sufficiency economy idea; it’s meant to brainwash folk into expensive debt, media addiction, impulse buying, and most particularly, a perpetual state of fear: both of “terrorist enemies” and financial insolvency. That setting all this up requires massive banking and currency exchange fraud, rigged politics and media, and the inordinate gullibility of an uneducated, desperate populace is clearly not seen by politicians as a problem.

Exports of fruit, rice, tea and oil have been supplemented with technological, manufactured commodities: telecommunications equipment, computers, vehicles, clothing, junk foods and skin crèmes, the markets for which are less reliable. Both the export economy, and internal consumption, must grow, according to global financiers – perhaps mostly because idle hands remain the Devil’s dangerous Workshop! The Clash of Cultures which replaced peace after the Soviet break-up holds no more reality than the Communist Menace ever did – both were financed by the same families, by the same compulsion to control, power augmentation and on, to the insane lust for total power. Now a universal currency is proposed…

So far, people in Burma and Laos pay taxes only to their government. Many of the rest of us pay to unions and banks, and whether or not unions take root in Southeast Asia, banks already have, and already people living on $60/month are paying $10/month in interest to them – somehow considered better than the “loan sharks” they used to pay to. Well, true, the interest is lower…

The trade dollar that once held value against commodities no longer does so, perhaps because even governments are governed by big banks, and weakened currencies support the major players. Money has become more powerful than any weaponry, except the secret weapon of behind-the-scenes manipulation.

When China cashes in its 1.2 trillion in US dollar reserves, abandoning bonds for other investments, perhaps purchasing US companies and stocks, and the yuan (rimnimbi) finally appreciates, the dollar will decline even more. Monies now supporting the baht may return to a currently rising, and cheaper due to the currency situation, US stock market, or go to developing Africa, the various –istans, or perhaps even Mongolia. Surely, Australia, South Africa and even India will offer better havens for large-scale investment moneys (hedge funds) than the Stock Exchange of Thailand. Without release of power and control by Bangkok’s ruling elite, the foolish spending habits of Thailand’s small middle class (SUVs – gas-guzzling ‘sports utility vehicles - instead of prudent home-improvement improvements, expensive but inept schooling, gambling and foreign-buying jaunts, imported electrical appliances, watches, batteries, cosmetics, cigarettes, alcoholic beverages, even imported fruits and vegetables – all contributing to trade deficit) will grind to a halt - as workers finally unionize and successfully demand the more they’ve been indoctrinated to not only desire but expect.

Rehabilitating old equipment for use in industries that don’t require hi-tech machinery, as with production of dehydrated fruit, could help, as might an up-grade in standards, but without extensive decentralization, land redistribution, democratization in neighboring countries and an increase in governmental and business transparency in the South-east Asian region as a whole, not only will lending institutions again collapse (and soon), but so will the tax base.

The government seems to think it can simply increase taxes and lending (with lower rates, despite repayment problems), resume lavish spending on mega-projects and simply print more money. Printing more money might just help, but will bring about further inflation. Today I paid B50 for a plate of khao-man-gai which would have been B25 only 6 or 7 years ago. Without good governance here, by Thais, guidance by Chinese will become the norm, as seems to be happening in Africa already, although the adjective ‘good’ certainly cannot be applied to Chinese guidance there.

Currently, rich Thais can purchase more imports, and travel abroad more, further weakening the ‘sufficiency economy’. Thai Military Bank has reported a loss for the first half of ’07, and been downgraded by Moody’s 2 notches to B1. A repeat of ’97 has begun. A major producer of ready-to-wear sports clothing lines for global brands including Nike and Adidas closed, briefly, reportedly to move to Vietnam, where labour has become cheaper… but has reopened with subsidies. 12%of workers did not return. The Thai garment industry is facing a crisis more serious than the 1997 financial meltdown, as Thailand’s competitive edge gives way to cheaper labour elsewhere (China, Vietnam, India, Indonesia, even Cambodia is attracting some investment now). The stronger baht also adds other problems including increased production costs and product prices.

Creative bookkeeping and sweeping unpleasant reality under convenient carpeting can’t long postpone reckoning, and certainly increase the cost of the original problem. Thailand is currently benefiting from economic and political folly elsewhere (particularly the USA), but it can’t last. India’s recent successes alone preclude that, and substantial holdings may soon find their way to Latin America. Burma and Indonesia may or may not find good governance, and doubtless the dollar won’t recover anytime soon (if ever), but Thailand cannot simply rely on foreign good-will. Not even if it quits snubbing, thumbing its nose at, it, and using foreigners as a scapegoat for all its ills.

[tayto]

Don't know about anyone else bit I have no intention of reading this.

[goski]

I managed as far as "As the world-at-large..."

[Jingthing]

Joel, are you the author, or if not, what is the source? An interesting perspective. There are indeed some very dark realities in today's Thailand. And scant evidence anything real is being done about it.

Edited July 18, 2007 by Jingthing

[Prakanong]

Don't know about anyone else bit I have no intention of reading this.

When I saw it i thought bugger that but Jingthing reccommended it so i have put it into MS Word, created paragraphs and might read it later!

[Erwin1011]

Don't know about anyone else bit I have no intention of reading this.

I managed as far as "As the world-at-large..."

Quickly, move faster...you both lost the latest Fox News Sound Bite.... so you're no longer up to date....

[sceadugenga]

Only problem with the baht Joel, is you and I don't have enough of them.

[mumbojumbo]

Marathon posts from Joel again

[Jimjim]

I still pay baht 25 for chicken with rice. Where are you eating? As for the rest, great theories but it's just that.

[bobbin]

A very interesting read. Always appreciate the fruit of a good mind at work.

As for the negative posters, I am surprised you were willing to go public with that closed-mind mentality. You are the intellectual equivelants of "salad-dodgers"

[tayto]

Hey <deleted> u I ain't no salad dodger, I quite like a nice salad especially a nice Thai one.

Edited July 28, 2007 by tayto

[sceadugenga]

A very interesting read. Always appreciate the fruit of a good mind at work.

As for the negative posters, I am surprised you were willing to go public with that closed-mind mentality. You are the intellectual equivelants of "salad-dodgers"

Pavlov's dogs. Automatic reaction when certain people post. Welcome to the Chiang Rai Forum.

[mumbojumbo]

A very interesting read. Always appreciate the fruit of a good mind at work.

As for the negative posters, I am surprised you were willing to go public with that closed-mind mentality. You are the intellectual equivelants of "salad-dodgers"

Pavlov's dogs. Automatic reaction when certain people post. Welcome to the Chiang Rai Forum.

Why do you keep defending this man with these massive posts?? He has books out that say the same thing.

mumbo

[sceadugenga]

A very interesting read. Always appreciate the fruit of a good mind at work.

As for the negative posters, I am surprised you were willing to go public with that closed-mind mentality. You are the intellectual equivelants of "salad-dodgers"

Pavlov's dogs. Automatic reaction when certain people post. Welcome to the Chiang Rai Forum.

Why do you keep defending this man with these massive posts?? He has books out that say the same thing.

mumbo

There shouldn't be any need to defend him; what happens is called bullying and I won't tolerate it in real life and I won't tolerate it on the 'net.

Nearly every time Joel Barlow posts anything the same three or four members rush in to have a sneer.

He has the good sense to ignore it but I can't, maybe I'm the one with Pavlov's dogs syndrome.

There are people on this site who I consider post appalling rubbish and I have a simple method of not upsetting myself over it.

I don't read it.

[Tim207]

A very interesting read. Always appreciate the fruit of a good mind at work.

A long diatribe under a heading of "Economic report" does not indicate a good mind at work. Although I agree with many of his points, it is obvious that it is just someone's opinions and assumptions cloaked in a long winded article, although well written article. It seems to me to be an attempt to deliver one person's views disguised as facts. It is hardly as stated, an "Economic Report", which makes me wonder why the author felt the need to disguise it as such.

I did read most of it and noted several comments that seemed silly but there was a point where the silly comments got to be too much and I couldn't take it seriously anymore. The legitimate points lost all credibility for me since I don't know what facts may have been made up in the authors head with no references or basis in reality.

[jasreeve17]

I appreciate the postee's time of putting "pen to paper". (Or cut and paste)

I read through it and agreed with some parts whilst disagreeing with other parts. I'll chomp over some of the ideas, which will help to further refine my own. Just the thinking process itself is quite pleasant.

Agressively dismissing all the ideas in the article seems a bit silly to me, as does attacking the author for being himself. I wouldn't take anybody's words on Thaivisa as fact, so this postee is no different than any other in that respect. It's only his "report", or indeed his reply to another report.

If you don't agree with some of the ideas then explain why. If you don't like it and don't want to explain why then move on to another post...

[tayto]

A very interesting read. Always appreciate the fruit of a good mind at work.

As for the negative posters, I am surprised you were willing to go public with that closed-mind mentality. You are the intellectual equivelants of "salad-dodgers"

If it is so interesting, then buy his books and don't be encouraging people to put long winded excerps on this forum.

Surely Thai Visa's Chiang Rai forum is boring enough without the like of this.

Why can't we get back to the origin of this forum, helping each other out, giving information to newbies, having lively discussions, posting local events and recommending various businesses.

Let's try to get this forum back on track.

[sceadugenga]

A very interesting read. Always appreciate the fruit of a good mind at work.

As for the negative posters, I am surprised you were willing to go public with that closed-mind mentality. You are the intellectual equivelants of "salad-dodgers"

If it is so interesting, then buy his books and don't be encouraging people to put long winded excerps on this forum.

Surely Thai Visa's Chiang Rai forum is boring enough without the like of this.

Why can't we get back to the origin of this forum, helping each other out, giving information to newbies, having lively discussions, posting local events and recommending various businesses.

Let's try to get this forum back on track.

Yeah, how dare it masquerade as a "lively discussion", which obviously means you and your mates slagging of who ever you please without any protest. I'm going to take a leaf from Joel Barlow's book and ignore it from now on, in fact I'll ignore the whole forum.

Anyone with any interest in my views can see me in the Chiang Mai forum et al.

Sceadugenga folds tent and rides into sunset, oblivious to boos, hisses or standing ovations.

[mumbojumbo]

Good bye and good luck-stay in CM and quit meddling in our affairs.

[captainstabbin]

Good bye and good luck-stay in CM and quit meddling in our affairs.

How is he actually 'meddling in you affairs' by posting something on the web?

[tayto]

I'm really sorry you are leaving as you have had a great input into this forum.

As regards my friends and I , unfortunitly I don't have any friends here.

Would you like to be my friend?

[captainstabbin]

I'm really sorry you are leaving as you have had a great input into this forum.

As regards my friends and I , unfortunitly I don't have any friends here.

Would you like to be my friend?

What does this mean?

[tayto]

Sorry, not meant for you captainstabbin.

Just Chiang Rai humour.

[captainstabbin]

Sorry, not meant for you captainstabbin.

Just Chiang Rai humour.

Clearly..

[goski]

I usually find these dramatic exits quite enjoyable. More often than not it's people that are new to webforums, who takes everything that's written down in cyberspace as seriously as they possibly can. When the skin is hardened and the tongue sharpened I welcome you back to the harsh climate of the Chiang Rai forum