Is The Bubble Going To Burst?

[ray23]

This is an article from Udonmap.com I don't know the original author. But if does seem to be factual from from what I can see happening around me. The questions:

Is it to late to avoid the inevitable infaltion?

what will this do Thailand?

Are we looking at another crash?

How will that efffect farrangs?

Are there farrangs on the site that were here in 97?

If so would you please share your experience?

Article:

Reality of costly fuel hits home

Security officials are preparing to curtail services, police are scratching for every baht they can find and businesses are pressuring the authorities to raise prices as oil costs bite deep into every aspect of life in Thailand.

Highway officials say the oil crisis is already affecting the security measures they provide to VIPs including cabinet members, foreign guests, and royal family members.

Police General Angkul Klaiklu-eng, commander of the Southern Highway Police Division 7, said yesterday security measures have had to be refined, but without any decline in standards, as fuel budgets were unable to cope with the rising cost.

The Northeast Regional Highway Office is finding it a lot tougher than the South, Police General Nirand Luamsri said. With the second quarter of the Thai fiscal year having just ended, the region's Bt2 billion annual budget for fuel had already been spent, he said. That meant the office was running up huge debts with local petrol stations.

But the credit line was gradually being cut, he said, as the petrol stations could not afford to carry the burden.

"More than 30 per cent of petrol stations in five provinces - Khon Kaen, Udon Thani, Sakon Nakhon, Roi Et and Loei - have already cut our credit. We are just going to have to seek more funds from the central highways office. They will just have to find money from somewhere else for us," Nirand said.

Somsak Tulayachat, the owner of a petrol station that services the highways office in Khon Khaen, said he could no longer shoulder the burden for the office as its debt had hit Bt600,000.

"We pay cash [for supplies] but have to give credit to the office for as long as six months," he said.

Angkul said the situation in the South was a little bit better as his office had received extra funds from some governors in the region.

At Sakon Nakhon and Chaiya-phum provincial offices, delayed payments from the central authorities had also caused credit at petrol stations to either be cut or

minimised, which was starting to affect services, senior officials said.

"Even though we have had a monthly credit deal for fuel from the stations contracted to us for 10 years, they told us in March that the bills must be cleared within two weeks. We're trying to resolve this problem by using the small amount we have in our reserve budget, but this can only be a temporary solution as we've spent almost half of the Bt20,000 already," Prathak Srisroi, a senior officer in Sakon Nakhon said.

"Any authorities that cannot clear their bills within 15 days will no longer get any more credit," said Ladda Wongyai, a petrol station owner in Surachai Borikarn in Chaiyaphum.

Industries in the South are feeling the pinch in different ways. Salil Totabthiang, managing director of the popular "Poom Pui" canned fish, said the company was being seriously affected by rising fuel costs.

Apart from much higher transport costs, expensive fuel had forced many fishing boats to stay in port, which was causing a raw material supply problem for the company's factory.

Pluang Sahaviriya of Had Thip Plc - a major producer and distributor of carbonated drinks in the South - said the company would add Bt1 to the cost of all its drinks from today after getting approval from the Commerce Ministry.

Surat Thani Chamber of Commerce chairman Jumphol Laikosit said tourism in the province had been badly affected, with about 70 per cent of the industry suffering.

Pong-adul Kritsanaraj, senior director of the Bank of Thailand (Southern Branch), said a range of statistics, including an 9-per-cent drop in new motorcycle registrations, showed people in the region were earning less money.

_________________

[opothai]

thailand are in the process of supplying iran with a few 1000 tons of rice, in readiness for a possible strike from the us so that should be good for the rice producing areas.

maybe if thailand can persuade iran to take a few chickens then they could get some cheap oil

but seriously the economy needs a boost and they desperately need to steer clear of inflation, which is looking doubtfull.

[marshbags]

You only have to look around Ray.

Everyone has new cars,motor bikes, houses, h.extentions ect. ect. and no one is paying for them.

Multiply that by bigger figures for the multi businesses and their unpaid loans , all given at ridiculous

rates and conditions without security and that must tell us all what the ending is going to be.

It,s not if but when in my humble opinion.

Thai philosophy and reasoning, your guess is as good as mine...............................................

marshbags

[britmaveric]

Def a burst is coming ala 98.

[marshbags]

Def a burst is coming ala 98.

Big time B.M. so let,s all keep a control of our transfers and purchases this time around.

Only keep here what you need for now is my take on the ala 98........ 97 when it first surfaced, or there abouts.

marshbags

[samran]

I think one fundamental difference here that everyone is ignoring is that Thailand doesn't have a fixed currency any more and is less obliged to defend the the baht.

As such, the BOT doesn't have to use interest rates to defend the bahts value. The headline rate back in 1997 was about 17% or 18% to attract buyers of the baht. Today they are closer to 5%. Hardly recession inducing interest rates.

Back in 1997, borrowers which included large companies and private individuals were using the artifically strong baht to cheaply borrow off-shore where interest rates were a lot lower. However their income stream was in THB and they bet on the fact that the baht would be fixed at 25 to the USD forever.

Then the baht was floated, and their loans called in, all of a sudden what they owed doubled almost overnight, and any source of revenue to pay off their loans dried up as well. Hence, many people defaulted and this had multiplier effects through out the country.

Today the BOT uses interest rates to fight inflation, somthing it is slowly doing, and quite cautiously as higher fuel prices are already slowing down economic activity. Credit has to remain somewhat liquid to ensure a soft landing. This in combination with tighter lending controls will probably mean that any dip in growth will be minor...if it happens at all.

[samran]

This is an article from Udonmap.com I don't know the original author. But if does seem to be factual from from what I can see happening around me. The questions:

Is it to late to avoid the inevitable infaltion?

what will this do Thailand?

Are we looking at another crash?

How will that efffect farrangs?

Are there farrangs on the site that were here in 97?

If so would you please share your experience?

Article:

Reality of costly fuel hits home

Security officials are preparing to curtail services, police are scratching for every baht they can find and businesses are pressuring the authorities to raise prices as oil costs bite deep into every aspect of life in Thailand.

Highway officials say the oil crisis is already affecting the security measures they provide to VIPs including cabinet members, foreign guests, and royal family members.

Police General Angkul Klaiklu-eng, commander of the Southern Highway Police Division 7, said yesterday security measures have had to be refined, but without any decline in standards, as fuel budgets were unable to cope with the rising cost.

The Northeast Regional Highway Office is finding it a lot tougher than the South, Police General Nirand Luamsri said. With the second quarter of the Thai fiscal year having just ended, the region's Bt2 billion annual budget for fuel had already been spent, he said. That meant the office was running up huge debts with local petrol stations.

But the credit line was gradually being cut, he said, as the petrol stations could not afford to carry the burden.

"More than 30 per cent of petrol stations in five provinces - Khon Kaen, Udon Thani, Sakon Nakhon, Roi Et and Loei - have already cut our credit. We are just going to have to seek more funds from the central highways office. They will just have to find money from somewhere else for us," Nirand said.

Somsak Tulayachat, the owner of a petrol station that services the highways office in Khon Khaen, said he could no longer shoulder the burden for the office as its debt had hit Bt600,000.

"We pay cash [for supplies] but have to give credit to the office for as long as six months," he said.

Angkul said the situation in the South was a little bit better as his office had received extra funds from some governors in the region.

At Sakon Nakhon and Chaiya-phum provincial offices, delayed payments from the central authorities had also caused credit at petrol stations to either be cut or

minimised, which was starting to affect services, senior officials said.

"Even though we have had a monthly credit deal for fuel from the stations contracted to us for 10 years, they told us in March that the bills must be cleared within two weeks. We're trying to resolve this problem by using the small amount we have in our reserve budget, but this can only be a temporary solution as we've spent almost half of the Bt20,000 already," Prathak Srisroi, a senior officer in Sakon Nakhon said.

"Any authorities that cannot clear their bills within 15 days will no longer get any more credit," said Ladda Wongyai, a petrol station owner in Surachai Borikarn in Chaiyaphum.

Industries in the South are feeling the pinch in different ways. Salil Totabthiang, managing director of the popular "Poom Pui" canned fish, said the company was being seriously affected by rising fuel costs.

Apart from much higher transport costs, expensive fuel had forced many fishing boats to stay in port, which was causing a raw material supply problem for the company's factory.

Pluang Sahaviriya of Had Thip Plc - a major producer and distributor of carbonated drinks in the South - said the company would add Bt1 to the cost of all its drinks from today after getting approval from the Commerce Ministry.

Surat Thani Chamber of Commerce chairman Jumphol Laikosit said tourism in the province had been badly affected, with about 70 per cent of the industry suffering.

Pong-adul Kritsanaraj, senior director of the Bank of Thailand (Southern Branch), said a range of statistics, including an 9-per-cent drop in new motorcycle registrations, showed people in the region were earning less money.

_________________

All this article says to me is that people will drive their car for a couple more years rather than buying a new one. Instread Mercs, people will buy Honda's or Toyota's. Consumption habits will change, but consumption won't stop.

[ray23]

I would never pretend that I now anything about economics, simply because I don't. But I do see this, that people here in Issan with full time jobs are not driving cars because they can't buy gas. I guess if I read the article correctly that would include the goverment.

But maybe that is part of the plan, beyond me I'm afraid.

I appreciate the explanation, would it be correct to belive that coruption did not help the situation and a few in Thailand actually became very wealthy as a result of the last crash?

[Heng]

Ray,

Many average Joe (Somchai) exporters did quite well after the last "crash" just because of market conditions. 8 full years (ending this year) of 40+ Baht per dollar exports at virtually the same original 25 Baht era overhead, acquiring property and reinvesting with absolutely no financing, more than enough to last a lifetime IMO, all in a few short years. More than enough of a gift for any exporter, no corruption required, thanks anyway. I don't know about other business folks but last time around we lucked into the crash... For the next one, whenever it comes (I doubt it'll be soon), we're hedged the other way as well with decent sized import operations as well. Just like anywhere else in the world, being prepared and getting a little bit of luck goes a long way. It's not all about corruption (given, it's huge and out there). I've been here in business for almost a decade now and I haven't even seen the opportunity -for myself- to be corrupt.

[ray23]

Thanks for the info, Heng actually I was referring to some very high level banking folks when I was speaking of corruption.

If in business and opportunities arise that is just good luck, has nothing to do with being corrupt.

Personally since I deal on the level of the average Thai I hope there isn't a crash. To be very honest the only crash that would harm me, is if there is one in the states. I don't think the world market would let that happen, at least not in my lifetime.

At the moment I see very hard working pwoplw here in Issan who were looking at what appeared to eb a very bright future and I was happy for them. Today as someone mentioned some are losing the investment properties the family pickups that 6 or 7 got together to buy. Learning why it's not best to buy with credit cards.

It wasn't that ong ago that we were being approached almst daily to get credit cards. Now we have everyhting we need and most of what we want, so credit cards we rejected. But people here had a new opportunity to finance thier lives and did so in huge numbers . Now a weeks work won't fill the tanks of those family pickups.

The project where I bought is not huge by any means maybe 160 units, just a few years old. Lot of governement empoyees who could buy with a little a 90K down. Already an easy three percent of the homes are in repossesion by the bank. I got a brand new house 400K under the market, simply because the finanacing fell apart. I assume the original buyer who could got in for 140K got his money back I hope so. But I have no idea.

Is this typical of the Thia economy at the moment I have no idea but it does paint a bleak picture here.

[Plus]

It appears that the government is running out of money to pay its bills. It's not really a crash situation. They just need to budget carefully for the next year.

[ilyushin]

All government purchases were subject to 100% barter trade if more than Baht 300 million. That now has been reduced to Baht 100 million transactions.

In addition , the Agricultural Co-op has supplied farm goods ( barter trade) without repayment from the MOC and MOF for all the deals they have concluded.

Keep a mixture of currencies, pay off high interest debts, use less everything.

Ice prices will increase tomorrow and so will your drinks.

[OldAsiaHand]

What happened after the baht was floated in '97 and the Thai economy hit the wall, the OP asked? As a practical matter, absolutely nothing. As a number of other posters above have all observed in different ways, just look around you.

Yes, there was short-term exchange rate instability. Yes, the baht is weaker now than when it was being artificially supported by the BOT. Yes, the SET went into a downtrend for several years. All of those things are true, but it is also true that the economy here has continued growing significantly every year, the equity and fx markets have continued to work as they always have, and tons of money have been made over the last ten years by people who have made accurate judgments with respect to both.

The real lesson here is that short term financial goals will almost always burn you, but that meeting long term goals is easier than most people think.