Thai politics: Govt banks on investments as engine for economy

[webfact]

BURNING ISSUE
Govt banks on investments as engine for economy
SASITHORN ONGDEE

BANGKOK: -- ALONG WITH tourism, investment seems to have become the high hope of the Prayut Chan-o-cha government as the engine to drive the Thai economy.

Amid high expectations from him, Deputy PM Somkid Jatusripitak, who is also in charge of overseeing economic affairs, recently announced efforts to rejuvenate the country's investment growth at 10 per cent like in the glory days, pushing Thai economic growth to 5-6 per cent. This is intended to have "multiplier effects" on the economy.

Exports, which accounted for 60-70 per cent of gross domestic product (GDP), are now powerless to drive growth, and have seen contraction for nine months in a row.

The new Cabinet, with Somkid heading the economic ministers, has launched a series of stimulus measures by injecting money directly into the system and providing more tax incentives. The measures cover low-income earners, small and medium-sized enterprises, middle-class people, and foreign and domestic corporates.

That's a good start after the government had zoomed in on what sectors it would focus on as "future" sectors. They are: next-generation cars; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food; robotics for industry; logistics and aviation; biofuels and biochemicals; digital; and medical.

In the meantime, several mass-transit projects that are part of the infrastructure projects worth Bt1.7 trillion were also scheduled to kick off next year. To quicken the pace of the projects, the consideration process via the "super" fast lane under the Public Private Partnership (PPP) scheme will be shortened to less than 12 months from over two years previously.

The Chinese-Thai railway development project, which involves an investment of B0t400 billion, also moves on after the Cabinet on Tuesday approved a draft framework of cooperation.

The next round of the two nations' meeting will be held in Bangkok next month. If the funding rate can be finalised between the two countries, project construction could begin next year.

Statistically speaking, when investment growth was around 9-10 per cent, the country enjoyed GDP growth rate of 5-6 per cent a year.

The Board of Investment recently revealed a poor investment ratio, saying only 38 per cent of total projects that received BoI's tax incentives last year actually materialised.

A PricewaterhouseCoopers survey on CEOs' confidence in the Asia Pacific in 2015 showed some interesting findings that Thailand, despite ranking seventh among the top 10 industries favoured for investment over the next 12 months, lagged behind its Vietnam and Indonesia.

"Confidence" and "discontinuity" in addition to uncontrollable external factors such as a slowdown in the global economy and terrorism are the fear factors for investors. How can they plan long-term investments under a government that has only a short time left? In Thai politics, policies are always changed when the government changes, resulting in the discontinuity.

However, irrespective of how long the present government stays in power, and when a new government is elected, one way or the other we can see an influx of private investments again.

Source: http://www.nationmultimedia.com/politics/Govt-banks-on-investments-as-engine-for-economy-30273357.html


-- The Nation 2015-11-20

[waldroj]

Without exports the country will need to focus on local demand for its products! Consequently, it should stick with those existing sectors that can satisfy this need, instead of dreaming about risky "future" ventures.

Also, the question should not be "How can investors plan long term investments when the government has only a short time left"?

Rather it should be, "How can the government plan long term projects if, as suggested, it only has this short term left"?

If this is so, should it only be trying to manage day to day activities and short-term projects, instead of proposing to implement sweeping reforms and grandiose schemes that (just like past administrations) may have negative impacts on the economy for years to come?

As past history can show, investors in Thailand are only going to have confidence to plan long term once the military hand politics back to the people. So, in the meantime, it (the military) should just sit back, smile, and try not to break anything until a real government comes back.

[TheMacMan]

It's an old 'moan' but maybe more relevant now then ever....

the powers are clamping down on visas, on re-entries, on farang owned companies.

Thai ownership must be at 51% of your hard earned and invested money.

Apparently you have to report your location even if you are an already registered foreigner that may go and visit another area of the land of smiles and stay overnight in a B&B or hotel (yes I am aware that the hotel management are MEANT to do this for you), report your home address and where you are whenever you come back after travelling around Thailand, despite it maybe being a persons address for 3 years running, or maybe even their own property.

Let's see.... cannot own land, even for a property you spend millions on, cannot own your own business 100% even though you may also spend millions on that...

Cannot trust the channotte for your property, business or land even if issued by the local government and checked by lawyers, because later the 'big' government can say that the legally issued paperwork was in fact not legal, not allowed, the lawyer and the government was wrong to issue it.... and the investor loses everything and it's his/her own fault! (despite a lawyer checking and the local government checking and issuing paperwork!)

Tourism down, (despite what the TAT say, the locals tell me a very different story) hotels and B&Bs being sold or looking for someone to sell to (not sure who is buying now though!)

Problems with beaches (can you or cannot you avoid sunburn and cancer by having umbrellas and loungers in the shade?) dirty and littered beaches, but apparently to be legal you need to have a permit to be a volunteer 'beach cleaner' to actually comply to the letter of the law...

Various rapes, muggings and murders around Thailand making high profile news (yes I am aware that this happens in every country!)

Many articles like the recent ones of the police giving themselves the reward for information regarding the Bangkok shrine bombing (have they caught the person yet that they took the reward money for?)

Human rights, slave trade, fishing ultimatums and deadlines from other countries.... the list is very long....

All this is negative, so the question is with ASEAN movement/trade now almost effective right now.... where is the positive news? the positive change? the ATTRACTIVENESS for investment?

Thai investors and investment, yes this is good news for them!...... but what is the incentive for foreign investment now?

Especially when you can't even trust government paperwork and lawyers stamps as they might be deemed illegal at a future point!

How is Thailand going to improve, expand, be a leader.....??

That said, I love Thailand, but for investment, legal security, future prosperity and peace of mind.....??? I have to wonder!

Edited November 20, 2015 by TheMacMan

[Bob12345]

That's a good start after the government had zoomed in on what sectors it would focus on as "future" sectors.

Governments around the world are notoriously bad at predicting which sectors will be the growth engines of the future. One exception might be South-Korea which smartly focused on ship building and later on electronics (or maybe they just had a lucky streak there).

The role of the government therefore should be to give flexible companies everything they need to grab an opportunity when one comes along. America is not leading in IT because the government chose Facebook, Google, Microsoft, and Apple to be the focus on growth, they are leading because they created a business climate where companies like Facebook, Google, Microsoft, and Apple could grab their opportunities when those opportunities presented themselves. And companies that were unable to compete were able to go bankrupt (or chapter 11 to restructure) instead of being kept on life support and destroy opportunities for other companies.

What the government should focus on is creating a business environment where private companies can flourish. Some things they might want to pay attention to:
- education: if you want to lead in any sector you need human capital

- expats: if you don't have the human capital yet you need to open the border so companies can "import" that human capital (immigrants are the main drivers behind London's prosperity and huge percentages of successful entrepreneurs in the US are foreigners who started working with a green card)

- rule of law, stability, predictability: if you invest billions in a company the investors needs to know they can reap the benefits of their investments 20-50 years down the line. In Thailand the government makes announcements weekly, retracts them the week after, chooses to enforce laws which they never enforced before, etc, all at the whim of whatever pops up in their head. Besides, Thailand really needs to lay down the rule of law where police officers are accountable, judges follow the laws, and your status or wealth does not influence the outcome of a legal battle.

- privatize some government enterprises and limit government investments in certain sectors: this distorts how markets function and takes away opportunities from companies that could do better more efficiently

- improve the investment climate by the things "The MacMan" just mentioned: foreigners should be able to hold more than 49% of their own company, foreign investors should be able to hold land, etc.

[elgordo38]

It's an old 'moan' but maybe more relevant now then ever....

the powers are clamping down on visas, on re-entries, on farang owned companies.

Thai ownership must be at 51% of your hard earned and invested money.

Apparently you have to report your location even if you are an already registered foreigner that may go and visit another area of the land of smiles and stay overnight in a B&B or hotel (yes I am aware that the hotel management are MEANT to do this for you), report your home address and where you are whenever you come back after travelling around Thailand, despite it maybe being a persons address for 3 years running, or maybe even their own property.

Let's see.... cannot own land, even for a property you spend millions on, cannot own your own business 100% even though you may also spend millions on that...

Cannot trust the channotte for your property, business or land even if issued by the local government and checked by lawyers, because later the 'big' government can say that the legally issued paperwork was in fact not legal, not allowed, the lawyer and the government was wrong to issue it.... and the investor loses everything and it's his/her own fault! (despite a lawyer checking and the local government checking and issuing paperwork!)

Tourism down, (despite what the TAT say, the locals tell me a very different story) hotels and B&Bs being sold or looking for someone to sell to (not sure who is buying now though!)

Problems with beaches (can you or cannot you avoid sunburn and cancer by having umbrellas and loungers in the shade?) dirty and littered beaches, but apparently to be legal you need to have a permit to be a volunteer 'beach cleaner' to actually comply to the letter of the law...

Various rapes, muggings and murders around Thailand making high profile news (yes I am aware that this happens in every country!)

Many articles like the recent ones of the police giving themselves the reward for information regarding the Bangkok shrine bombing (have they caught the person yet that they took the reward money for?)

Human rights, slave trade, fishing ultimatums and deadlines from other countries.... the list is very long....

All this is negative, so the question is with ASEAN movement/trade now almost effective right now.... where is the positive news? the positive change? the ATTRACTIVENESS for investment?

Thai investors and investment, yes this is good news for them!...... but what is the incentive for foreign investment now?

Especially when you can't even trust government paperwork and lawyers stamps as they might be deemed illegal at a future point!

How is Thailand going to improve, expand, be a leader.....??

That said, I love Thailand, but for investment, legal security, future prosperity and peace of mind.....??? I have to wonder!

You should have gotten more "likes" solely based on your last statement alone. You spent a lot of time laying it out for us laymen to understand. Just be careful the government might haul you in and give you a shot of "truth serum" as you seem to have a bad case of the "truth flu" The "truth flu" can be more dangerous than dengue fever. When you connect the truth flu with your optic nerve well all is foretold.

[Srikcir]

It's not beyond impossible that the government can reorganize economic growth based solely on investment and tourism. But the difficulty is the investment sector.

The government is incapable of sustaining investments by itself unless it raises taxes and increases its tax collection rate from 40% to 90%. Conversely, the government has significantly decreased corporate and personal income tax rates, including numerous new exemptions and tax credits.Financing infrastruture with long-term debt from foreign nations will only drain the Thai treasury with no return. Domestic consumption is stalled with household debt at the highest in 9 years.

All that remains is foreign investment. But when foreign investors (and Thai investors for that matter) can realize higher returns in the other ASEAN-5 countries with less risk, investors will flee Thailand. It's just about money. Investors don't need to understand Prayut's roadmap to democracy nor appreciate his dreams of glory.

[Thai at Heart]

That's a good start after the government had zoomed in on what sectors it would focus on as "future" sectors.

Governments around the world are notoriously bad at predicting which sectors will be the growth engines of the future. One exception might be South-Korea which smartly focused on ship building and later on electronics (or maybe they just had a lucky streak there).

The role of the government therefore should be to give flexible companies everything they need to grab an opportunity when one comes along. America is not leading in IT because the government chose Facebook, Google, Microsoft, and Apple to be the focus on growth, they are leading because they created a business climate where companies like Facebook, Google, Microsoft, and Apple could grab their opportunities when those opportunities presented themselves. And companies that were unable to compete were able to go bankrupt (or chapter 11 to restructure) instead of being kept on life support and destroy opportunities for other companies.

What the government should focus on is creating a business environment where private companies can flourish. Some things they might want to pay attention to:

- education: if you want to lead in any sector you need human capital

- expats: if you don't have the human capital yet you need to open the border so companies can "import" that human capital (immigrants are the main drivers behind London's prosperity and huge percentages of successful entrepreneurs in the US are foreigners who started working with a green card)

- rule of law, stability, predictability: if you invest billions in a company the investors needs to know they can reap the benefits of their investments 20-50 years down the line. In Thailand the government makes announcements weekly, retracts them the week after, chooses to enforce laws which they never enforced before, etc, all at the whim of whatever pops up in their head. Besides, Thailand really needs to lay down the rule of law where police officers are accountable, judges follow the laws, and your status or wealth does not influence the outcome of a legal battle.

- privatize some government enterprises and limit government investments in certain sectors: this distorts how markets function and takes away opportunities from companies that could do better more efficiently

- improve the investment climate by the things "The MacMan" just mentioned: foreigners should be able to hold more than 49% of their own company, foreign investors should be able to hold land, etc.

Thailand is still stuck in the idea that if they have 2 or 3 massive family businesses in each major market the fact that these families make billions is actually good for the country.

You are correct in your ideas, but you are speaking a language Thai business and politics doesn't get. If a market cannot be controlled and exploited, Thai businesses don't want to play in it, and they also won't let foreigners play in that market in Thailand.

[digibum]

Without exports the country will need to focus on local demand for its products!

That is a good goal but it's not going to happen anytime soon. Exports is such an overwhelming part of the Thai GDP that even under optimal conditions it would take a decade or longer to really beginning to see any sort of impactful switch to domestic demand.

And then you have the fact that the average Thai household is up to its neck in debt. The government has tried so many programs to put cars, houses, and other big ticket items in the hands of the people that now there's no room left in the paycheck to create any domestic demand and, if anything, the very real risk that Thailand may experience its own credit bubble if the economy doesn't improve, wages rise, and people can pay for the stuff they already purchased under previous domestic demand stimulating policies.

[digibum]

It's not beyond impossible that the government can reorganize economic growth based solely on investment and tourism. But the difficulty is the investment sector.

The government is incapable of sustaining investments by itself unless it raises taxes and increases its tax collection rate from 40% to 90%. Conversely, the government has significantly decreased corporate and personal income tax rates, including numerous new exemptions and tax credits.Financing infrastruture with long-term debt from foreign nations will only drain the Thai treasury with no return. Domestic consumption is stalled with household debt at the highest in 9 years.

All that remains is foreign investment. But when foreign investors (and Thai investors for that matter) can realize higher returns in the other ASEAN-5 countries with less risk, investors will flee Thailand. It's just about money. Investors don't need to understand Prayut's roadmap to democracy nor appreciate his dreams of glory.

That ship has sailed. There's a chance that Thailand can call it back to port but the fact is most new money is going elsewhere within ASEAN.

For more than 40 years, Thailand enjoyed the designation of being the least messed up country in SEA. The US, Europe, and Australia pumped untold amounts of money into Thailand as a way for rewarding it for being the only democracy and western-friendly country in the region.

Obviously, the smart move would have been to take advantage of the opportunity and build a modern economy but instead a relatively few became insanely wealthy and everyone else remained relatively poor.

Likewise, the smart move would have been to create a vibrant business environment with the understanding that the money flowing through Thailand through foreign businesses would ultimately benefit everyone. Instead, Thailand doubled-down on xenophobia, anti-competitive business practices, restrictive laws for foreigners, and massive amounts of corruption.

Thailand's problem is that it always (and still does) believed that this era would never end. They thought the dumb foreigners would endlessly reward Thailand because Thailand is superior (in their minds) to everyone else in the region.

It's just not in the Thai DNA to give foreign businesses a fair shake. They would rather the entire economy collapse than let a foreigner own more than 49% of a business or allow foreigners to own and control land. As long as that mentality is in charge, more and more foreign investment will move towards rapidly developing countries in the region.