Thursday, July 31, 2008

Web 2.0 is changing banking in Thailand

PATTAYA : Web 2.0, the new Basel II directive and micro and mobile finance will all have an important role to play in Thailand's banking industry, though technology remains second to trust, according to Sun Microsystems.

Speaking at the Sun Financial Services Industry summit in Pattaya, director of financial services at Sun Microsystems Thailand Chan Kong Hoe said that in Thailand the consumer credit sector was still very much untapped with 81 per cent of banks' portfolios still in corporate banking and corporate loans. This is also true of Indonesia and the Philippines.

The new Basel II directive which continues the Basel accord on credit risk and changes certain processes reinforces this trend. It says banks must set aside more provisions for higher risk loans, but the main change is to give a lower risk factor when lending to consumers as opposed to lending to companies, hence banks will be forced to focus more on consumer loans to balance their portfolios.

Some of the hot trends that banks are now focusing on are business intelligence to provide better customer service, micro finance and Islamic finance. The other major trend is the rise in oil prices, and consequent inflation. Together, this has led to a large number of mergers and acquisitions as larger banks enjoy economies of scale and lower per transaction costs.

Chan said that Sun expected Thailand to slow down a bit as the US was a major export market for the Thai economy, though if the government can stick to a six per cent growth, that would be a decent figure. The announced tax breaks on mortgage transfers would spur the market, he said.

"Vietnam may have 7.7 to 8.0 per cent GDP growth, but their inflation is 10 per cent. You have to think differently when inflation exceeds GDP," he said.

Thai banks are also looking to grow fee-based revenues. Today, every branch generates around $300,000 of fee-based revenue per year, way below the one million dollar benchmark of better banks in the region.

But before banks start to get greedy, Chan warned of how Web 2.0 was rapidly changing the industry.

"Social lending sites like - if you have money, you post it there and someone who is interested can borrow it based on their credit score. The lending business is now being taken care of without banks. It started in the US and UK, and is now in Japan. You never know when it will come to Thailand," he said.

Another example is, where authors meet with fans and sign copies of books. However, the books are all pre-paid through PayPal, and no money changes hands at the signing.

"I've taken away your lending business. Now I'm taking away your payment business," he pointed out.

Web 2.0 and the blogosphere can have a profound impact on banks' reputations when people start to read blogs about where to bank the same way they read about where to buy things today. Try Googling "I hate HSBC" and see what people are saying about the bank on the Internet. The impact of Web 2.0 is real," he said.

Asked about another Sun favourite, cloud computing, and how the financial services industry was adopting it, Chan admitted that many national regulations prevented data from travelling out of a country. However, the main sticking point was not regulation but trust. Today you bank with the bank because you trust them with your data. Would I be comfortable if my data was protected not by Citi but by a large IT corporation? Maybe not, Chan said, and delivered a similar argument when asked about the future of mobile banking. The technology is not an issue, but trust is. Rather than replacing banks, telcos are now being used as part of two-factor authentication. Some banks today send a code via SMS to a registered mobile phone which has to be entered when logging into e-banking, similar to a one-time password device.

Later, Price Waterhouse Coopers used the event to announce its return to the IT industry now that the non-competition clause with IBM had expired. PWC was talking about identity and role management solutions for organisations.

One important point was that role management was very hard, if not impossible, to retroactively enforce on organisations with lots of legacy IT systems that have evolved over the years, sometimes with key people having too much power in certain areas. PWC advocated that role management should still be implemented, but that rather than forcing these managers to change workflow and disrupt work, a proper role management and ID management regime will help identify potential areas of conflict which should be passed to management and auditors so that they can keep an eye on these individuals.

Thailand's TMB has posted B55 billion baht of bad loans over past 2 years has to wonder how these smiling faces below will affect people on the 'street'. From my vantage point here in Bangkok, it is already obvious with the cranes of new construction going silent every day. All one has to do is ride the Skytrain around town to see the impact, and these are not the same cranes still swaying in the wind from the 1997 financial tsunami. These are new ones from new projects. I will post photos in coming days of huge projects which have gone silent. - Saigon Charlie

Largest sale ever for a Thai bank


Discussing the bank's outlook yesterday, from left: Ramky Subramanian, chief of retail banking; new TMB chief executive Boontuck Wungcharoen; and Bart Hellemans, chief risk officer.

TMB Bank plans to sell off 30 billion baht worth of distressed loans and assets this year as part of a sweeping overhaul of the bank's portfolio. Boontuck Wungcharoen, the bank's new chief executive officer, said TMB would sell 20 billion baht worth of non-performing loans and 10 billion in non-performing assets by the end of the year.

The sale is part of a seven-point, three- to five-year strategic plan aimed at positioning the country's sixth-largest bank in asset size to become a leading bank in Thailand.

Mr Boontuck, a veteran of Kasikornbank, takes up the helm of TMB as the bank continues to evolve following last December's entry of the Netherlands-based ING Group as a 30% strategic partner.

TMB has posted losses of more than 55 billion baht over the past two years because of the need to raise provisions to cover possible loan losses as well as charges against goodwill from the 2004 merger of the bank with DBS Thai Danu Bank and the Industrial Finance Corporation of Thailand.

For the first half of the year, the bank posted consolidated net profits of 2.74 billion baht, a sharp turnaround from losses of 18.147 billion in the same period last year. First-half results included new loan-loss provisions of 1.63 billion baht.

Net interest income, however, rose only a modest 2.5% year-on-year in the first half, with non-interest income up 3.2% thanks to gains in fee and service income from subsidiaries and gains on foreclosed properties. Net interest margins rose to 2.6% in the first half from 2.3% in the same period last year.

The bank's loan book contracted by 6.2% from the end of last year to 436.17 billion baht at the end of June as it moved to clean up low-yielding loans.

Mr Boontuck said the bank expected new lending of 20 billion baht in the second half of the year after a decline of 27 billion in the first half.

With the non-performing loan and asset sale _ the largest ever for a Thai bank _ TMB was expected to see a decline in lending for the full year, he said.

Gross non-performing loans are projected to fall to below 10% of total loans by the end of the year from 16% now with the asset sale.

Mr Boontuck said the bank had already fully provisioned against the 30 billion baht in bad assets for sale, adding that its capital adequacy ratio of 16.5% was sufficient to cover future growth.

TMB, which had deposits of 434.8 billion baht at the end of June, aimed to expand its deposit base by 25 billion in the second half after a 6.6% decline in the first half.

The bank plans to open 40 new branches in the second half from 473 now, and renovate another 20 branches.

Mr Boontuck said TMB was also planning to expand into wealth management as part of a strategy to offer a full-range of financial services for clients, with an aim to attract customers with minimum deposits of three million baht.

The bank's two asset management firms, TMB Asset Management and ING Asset Management, could also be integrated in order to present a clearer picture of the full group, he said.

Shares of TMB closed yesterday on the Stock Exchange of Thailand at 1.12 baht, up one satang, in trade worth 41.68 million.

Thailand to sell rice to African, Asian nations

BANGKOK, July 31 (TNA) -- The Thai government has agreed to sell 2.1 million tonnes of rice in its stocks on a government-to-government basis, according to Finance and Deputy Prime Minister Surapong Suebwonglee.

Mr. Surapong said several African and Asian countries had expressed interest in buying Thai rice in quantity, with prices yet to be negotiated.

According to the foreign ministry, the governments of Djibouti and Nigeria had approached the government stating their interest in purchasing Thai rice.

Senior Djibouti officials are expected to arrive in Thailand mid-August and the purchase, if agreed, will be conducted on a government-to-government basis.

In 2007, Thailand exported rice worth about US$1.2 billion to African countries. Its major competitors in the African market are India, Pakistan and Vietnam. (TNA)

Burma on Bush Agenda while in Thailand

By LALIT K JHA Thursday, July 31, 2008

WASHINGTON — US President George W Bush will travel to South Korea, Thailand and China next week before taking part in the opening ceremony for the Beijing Olympics.

While in Thailand, Bush, accompanied by his wife, Laura, will make a major policy statement on Burma while also meeting Burmese opposition group members.

On his second day in Thailand, Bush will attend a briefing by nongovernmental organizations and US agencies on the Cyclone Nargis relief effort.

"He will have a lunch in Bangkok with Burmese activists and hear their stories. And then he will be interviewed by the press in Thailand that broadcasts into Burma, so he can give a message directly to the Burmese people," said Dennis Wilder, the senior director for Asian affairs at the National Security Council.

"During the time that he is doing these events, Mrs. Bush will travel to Mae Sot, Thailand," Wilder said. The first lady has shown an exceptional interest in the affairs of Burma and the Bush's administration policy with regard to this country to some extent is driven by her strong support to the pro-democracy movement people.

Laura Bush will meet with refugees of the Mae La Refugee Camp, one of the largest refugee camps on the Thai-Burmese border.

"Following her visit to Mae La, she will travel to the Mae Tao Clinic," Wilder said. The clinic was founded by Dr. Cynthia Maung.

"You may remember that Mrs. Bush had a television event with Dr Cynthia Maung not long ago, and she is very much looking forward to getting on the ground and seeing the clinic in operation," Wilder said.

Dr Cynthia Maung said, “I don’t know anything about the agenda of the visit but my main presentation will be the difficulties of the situation that the Burmese people face here on the border and our need for humanitarian assistance.”

The clinic provides free health care for refugees, migrant workers and others who cross the border from Burma into Thailand.

Violet Cho contributed to this story.

Wednesday, July 30, 2008

Free rides in 3rd class, but not all trains

The government's free train travel programme launches tomorrow _ but only on third-class services over a limited distance. The State Railway of Thailand (SRT) will offer the free rides as part of the government's six-month economic assistance package for the poor.

But the service will be available only on non-airconditioned, third-class, non-express trains.

SRT spokesman Pairat Rojcharoen-ngarm said free rides would be available on 380 carriages of 164 third-class trains and on ''combi'' trains, which have both freight and third-class passenger compartments.

The third-class compartments of combi trains which also have second-class or first-class carriages would not be part of the scheme, nor would the third-class carriages of express services.

Fare-free trains will run on most of the four SRT lines, Mr Pairat said. However, free northbound services would end their runs at the Den Chai station in Phrae province, despite the northernmost destination being Chiang Mai.

Heading south, the free rides would go only as far as Chumphon. Normal fares will apply if passengers from Bangkok wish to go beyond these destinations.

However, there will be 10 free services from Hat Yai to the three southernmost provinces of Pattani, Narathiwat and Yala.

Northeastern journeys will end in Nakhon Ratchasima and Khon Kaen provinces, and the eastern trains will travel to Aranyaprathet in Sa Kaeo province.

Trains and platforms offering free rides will be marked with green signs.

Passengers will not need to obtain any tickets or passes before boarding the free trains, said Mr Pairat.

The SRT has already cut the fares of express trains on the three suburban routes, from 110 baht to between 20 and 50 baht depending on the distance.

Court finds Thaksin wife guilty of tax evasion

In a politically-loaded ruling, Criminal Court on Thursday found Pojaman Shinawatra - wife of coup-ousted premier Thaksin - guilty of tax evasion in a 1997 share transaction, court official said.

The heavily-guarded court, surrounded by some 2,000 Thaksin-supporters holding red roses, sentenced Pojaman to three years in jail for avoiding a tax bite amounting to 546 million baht (16.3 million dollars) on a share transfer to her step-brother Bannapot Damapong and her secretary Karnchanapa Honghern in 1997.

Bannapot was also sentenced to three years in jail and Karnchanapa to two years.

Thaksin and the couple's three children sat stony-faced throughout the ruling at the Bangkok court which was guarded by some 500 police. Pojaman had pleaded not guilty to the charge of tax evasion, claiming that the 738 million baht (22 million dollars) share transfer of Shinawatra Computer and Communications stock was a gift, not a business transaction.

The court said it had decided on a heavy sentence because both Pojaman and Bannapot were well-known public figures with responsibility to society.

Pojaman, who managed Thaksin's billion-dollar fortune and ran his business empire when he was prime minister between 2001 to 2006, is expected to appeal the ruling.

The court's verdict could pave the way for similar guilty rulings against Thaksin who faces at least three cases of malfeasance and abuse of power at the Supreme Court for Political Office Holders in the coming months. Thaksin, a former billionaire telecommunication tycoon who was prime minister between 2001 to 2006, was ousted by a military coup on September 19, 2006, on charges of corruption, dividing the nation and undermining democracy and the monarchy.

Thaksin remains one of Thailand's most controversial political figures.

Using populist policies Thaksin won the devotion of masses of rural and urban poor, but amid growing evidence of corruption and self-serving policies during his increasingly monopolistic rule, the Bangkok-based middle class and political elite turned against him in early 2006, ushering in his downfall.

( - Potjaman Shinawatra, wife of ex-premier Thaksin, arrived at the Criminal Court on Thursday morning to hear tax evasion case verdict against her and two other defendants.

Accompanied her were Mr Thaksin and their children.

About 1,000 supporters arrived at the court around 6pm to show their support.

The courtroom has the capacity to hold only 120 people, so closed circuit television is installed outside the room to allow others to follow the case.

Security at the court is stepped up around the area.

The tax evasion case came before the Criminal Court on March 26 last year when the Office of the Attorney-General (OAG) decided to indict Khunying Potjaman, her step-brother Bannapot Damapong and her secretary Karnchanapa Honghern for colluding in an effort to evade tax worth 546 million baht on the transfer of shares worth 738 million baht in Shinawatra Computer and Communication.

The indictment followed an investigation by the Assets Scrutiny Committee (ASC), now defunct.

More than 50 witnesses testified during the trial including Khunying Potjaman and Mr Bannapot who insisted the shares were meant as a gift, not a business transaction.

New case against Thaksin

The Supreme Court's section for political office holders on Wednesday agreed to open a new case against ousted premier Thaksin Shinawatra on charges of abuse of power in pushing a state loan to Burma to help his family's telecoms empire.

The court set September 16 as the first day of the trial which will examine whether Thaksin abused his position as prime minister when he ordered the state-owned EXIM Bank to extend a loan of 1 billion baht (30 million dollars) to Burma's military regime in 2004 to develop its telecommunications infrastructure to the benefit of Shin Corp, then owned by the Shinawatra family.

Thaksin and his wife Pojaman are already on trial at the same court on charges of abusing power in the purchase of a plot of land on Ratchadaphisek road in Bangkok at a government auction in 2003.

On Monday, the Supreme Court also named Thaksin and one of 47 defendants in a malfeasance case involving the government lottery.

The Assets Examination Committee, established by the military junta that toppled Thaksin on September 19, 2006, pressed several charges against the former premier, before it was retired on June 30.

Thaksin, a billionaire telecommunication tycoon who was prime minister between 2001 to 2006, was ousted by military on charges of corruption, dividing the nation and undermining democracy and the monarchy.

To date Thaksin has yet to be proven guilty of wrong-doing, although three of his lawyers defending him and his wife in the Ratchadaphisek case were found guilty for contempt of court in what appeared to be a bungled bribery attempt of court officials earlier this year.

Thaksin remains one of Thailand's most controversial figures. Using populist policies Thaksin won the devotion of rural and urban poor, but amid growing evidence of corruption and self-serving policies as his monopoly on power increased, the Bangkok-based middle class and political elite turned against him.

Thailand projects US$2bil revenue from MICE market


BANGKOK: Thailand expects its meeting, incentives, convention and exhibition (MICE) market to generate about US$2bil in revenue this year, representing a 20% growth over 2007, despite a sluggish economic climate.

Thailand Convention and Exhibition Bureau (TCEB) president Natwut Amornvivat told a press briefing the present global economic environment had yet to negatively impact the MICE market.

The anticipated number of trade shows, conventions and exhibitions were still coming to Bangkok this year, he said.

“We are expecting to host at least 112 events in 2008, compared with 100 in 2007.

“This year we expect to welcome about 970,000 exhibitors, organisers, and business visitors.

“Next year, we expect the revenue from the MICE market to grow to US$2.5bil,” he said.

He added that TCEB and the Bangkok Metropolitan Administration had recently launched the “Bangkok: The Exhibition City of Asean” campaign to promote the capital city as a MICE destination.

Amornvivat said due to the expected growth, two more convention centres were being planned - one each in Chiangmai and near the Suvarnabhumi Airport in Bangkok.

Presently, Bangkok has 250,000 sq m of exhibition and convention space and is ranked top among the Asean countries for having sold the most rental space by The Global Association of the Exhibition Industry, an organisation based in France.

“This ranking should help us remain attractive to organisers of MICE events,” Amornvivat said.

Major international events to be hosted in Bangkok soon include ITU Telecom Asia 2008, Asean Energy Business Forum, and Metalex, the largest industrial machinery trade show in Asia.

“For 2009, we have won the bid to host the 24th Pacific Insurance Conference and the International Harm Reduction Association.

In 2010, we will host the Energex 2010 and the Round-Table World Council Meeting,” Amornvivat said.

Set up in 2004, TCEB is a government arm tasked with developing and promoting the country as the premier MICE destination in Asia.

Trade tangle for Bush in Thailand

By Marwaan Macan-Markar

BANGKOK - Pirated DVDs, fake Swiss watches and imitation designer garments are fast disappearing from Patpong, a red-light strip in the Thai capital popular with tourists, bargain-hunters and others. The clean-up comes ahead of US President George W Bush's two-day visit next week to Thailand as part of his final Asian tour as chief executive.

On July 25, Thai police launched a crackdown to rid Patpong of the vendors who line the streets in the evening with their fake goods, shouting out bargains for pirated versions of Hollywood films such as Sex and the City and The Devil Wears Prada. Another part of this sprawling city, the backpacker areas around Khao San Road, saw similar raids.

The police effort highlights simmering US-Thai trade tensions, which have recently come to a head over Bangkok's moves to produce generic versions of US patent-protected pharmaceutical drugs. Washington recently downgraded Thailand onto its "priority watch list" of countries it estimates habitually violate intellectual property rights (IPR). In a seeming retort, pirated Hollywood DVDs have recently mushroomed across the capital city.

In mid-June, a senior Thai Commerce Ministry official visited the US capital in a bid to get the Bush administration to change its mind, though to no avail. "The country's IPR violation statistics have decreased significantly during the past few years and hence Thailand should be upgraded from the watch list," Siripol Yodmuangcharoen, commerce ministry permanent secretary, was quoted saying in the local press in mid-June.

Bush's visit gives Thai authorities another chance to make their pitch, although government officials said that trade issues are not expected to feature prominently on the visit's agenda. "There may be some informal discussion on trade-related issues," said one official.

That likely won't stop civil society groups and activists opposed to a free trade agreement (FTA) under negotiation between the two countries from using Bush's visit as an opportunity to air their complaints and grievances. They contend that Thai farmers, small business ventures and the chronically ill who depend on cheap generic drugs for diseases such as HIV/AIDS and cancer will suffer if a bilateral trade deal is implemented.

The US has pushed for stronger IPR protection in the proposed FTA than is currently mandated by member states to the World Trade Organization, which allows for generic drug production under certain circumstances through a compulsory licensing arrangement. US officials have taken issue with that clause and were behind the 2006 removal of a World Health Organization country representative to Thailand who argued against the FTA.

The sidelined WHO official argued in a op-ed column in the local Bangkok Post that hundreds of thousands of Thais who depend on access to locally produced cheap medicines to survive would be at risk from the FTA's tougher IPR requirements. He also noted that the Thai government's production of generic treatments had allowed the country to reduce AIDS-related deaths by a remarkable 79%.

Negotiations towards a Thai-US trade deal have been suspended since Bush lost his "fast track" negotiating authority and a 2006 military coup that ousted prime minister Thaksin Shinawatra, who was a strong advocate of the pact, and installed a more nationalistic interim administration.

The last round of talks was held in Thailand's northern city of Chiang Mai back in January 2006 and no new rounds are scheduled. Nor are they expected to be if the apparently more protectionist Obama Barack is elected US president in November.

Local activist concerns have nonetheless been resurrected by Prime Minister Samak Sundaravej's on-and-off drives to amend the Thai constitution, which was drafted by a military-appointed drafting committee and approved last August in a referendum while Thailand was ruled by a military regime. The Samak government apparently wants to amend certain clauses in the charter, including Article 190, which requires the Thai government to place any international treaty it plans to sign before parliament for scrutiny.

"This government has announced that Article 190 in the constitution is a problem and it needs to be changed. We are worried since this change may be used when the next talks for the Thai-US FTA begin," says Witoon Lianchamroon, director of Bio-Thai, a non-governmental organization championing the concerns of grassroots communities. "Bilateral deals have become important and this government is very interested in this area. We need that article to monitor and manage the situation."

"We have already learnt our lessons from the past," he added, referring to the FTAs Thailand has already signed with China, Australia, New Zealand and Japan. "They were not placed before parliament for scrutiny. There were no public hearings for us to express our worries." Farmers in northern Thailand were hit badly after implementation of the Thai-China FTA, which caused local garlic growers to lose out to cheaper imports from nearby China. Local flower growers also suffered, with lower-cost roses from China now dominating the markets in Bangkok.

Civil society groups prefer a "new beginning altogether for these trade talks", says Jacques-chai Chomthongdi, research associate at Focus on the Global South, a left-leaning Bangkok-based think-tank. "We were not happy with the process of the previous negotiations. It was not transparent. We are concerned that the US will put Thailand under tremendous pressure to strike deals in its favor."

A study of the FTA's likely impact conducted by Thailand's Development and Research Institute, an independent think-tank, showed that it would increase trade substantially between the two sides and that Thailand would actually accrue more economic benefits. The trade-geared country already relies heavily on US markets for its exports, which in total contribute around 65% of gross domestic product. In recent years, the volume of trade between the two countries has averaged around US$28 billion.

Local interest groups, particularly the farmers who have suffered from previous free trade deals, doubt those scientific assessments. They demonstrated their displeasure with US trade policies the last time Bush visited Thailand in 2003, placing a curse on him by dropping his photograph inside a pot and tossing it into the northern Ping River amid chants and black magic mantras. Bush can likely expect more of the same during his visit next week.

(Inter Press Service with editing and additions by Asia Times Online)

Thais have a taste for Swiss watches


Thais rank among the world's top buyers of Swiss watches and demand is growing despite political and economic uncertainties.

Narun Thamavaranukup, managing director of PMT The Hour Glass, a luxury watch importer and distributor, said Thais who visit Switzerland are among the top-five buyers of luxury watches there.

''This has gone on for over 10 years and the trend will continue,'' Mr Narun said.

Thais also spend a lot on luxury watches at home. The Federation of the Swiss Watch Industry said exports of Swiss watches to Thailand in the first half of this year were worth 138 million Swiss francs (4.41 billion baht), up 22% year-on-year.

Thailand now ranks 14th among major countries that import watches from Switzerland.

Yuwadee Chirathivat, president of Central Department Stores Ltd (CDS), Thailand's largest retail chain, agreed with Mr Narun.

''Though the Thai economy is not good, demand for luxury watches, particularly Swiss-made ones, continues to grow every year at a double-digit rate,'' she said.

''This is because people buy watches not only for functional use but also as an investment to pass on to their children.''

Thailand's Megaprojects roadshow focus


Surapong: Growth of 6% still within reach

Thailand's 1.6-trillion-baht megaproject programme will be the highlight of the country's roadshow presentations to investors next month, Finance Minister Surapong Suebwonglee said yesterday.

The infrastructure projects involve new investments in mass transit, water, education, health care and airport facilities and systems over the next several years.

The Finance Ministry plans to invite local ambassadors to also attend the briefing on the investment plans in a bid to attract investors and contractors to participate.

Dr Surapong said economic growth of 6% for the full year was still in reach, assuming that global oil prices remained at moderate levels.

Oil prices currently hover at $125 per barrel, down 15% from earlier highs this month but still up over 65% from the year before.

Oil prices and political uncertainties have been the main factors undermining business and consumer confidence over the past several months, helping push the Stock Exchange of Thailand down more than 20% for the year to date.

But Dr Surapong said he was hopeful that the government's six-point programme announced earlier this month would help rebuild confidence.''The government has taken measures to both stimulate the economy and ease the impact [of inflation and oil prices] on the public. We are hopeful that we can regain investor confidence,'' Dr Surapong said.

The six measures, which are effective until January 2009, are largely aimed at reducing the burden of high inflation on consumers, and include free bus and train rides for commuters, free water and electricity for small households and excise tax cuts for diesel and gasohol fuel.

Pannee Sathavarodom, the director-general for the Fiscal Policy Office, said the measures should help cut inflation this year to between 6% and 7% from earlier projections of 7% to 8%.

The FPO now projects economic growth of 5.6% for the full year, based on preliminary estimates of 5.9% growth in the first half and 5% to 5.5% growth in the second half.

The estimates are based on Dubai oil prices averaging $130 per barrel this year, up slightly from $121 now.

Exports will be the main driver for the economy in the second half of the year, with June exports up 27.4% in dollar terms from the same period last year, said Mrs Pannee. Exports increased 14.3% in price terms from last year and 11.5% in volume.

Tough times ahead for Thailand

There is little good economic news on the horizon. Thailand's political quagmire seems intractable, opening up downside risks that are difficult to quantify.

By Supavud Saicheua,
head of research, Phatra Securities Public Co, Ltd.

There is much confusion about how things might develop in Thailand in the coming months.

At the risk of being wrong, I have identified three factors that I consider most important. These are, firstly, problems of US financial institutions which are again in the forefront. Inflation remains a worry for Asia and Thailand. Finally, the unpredictability of Thai politics has made the predictions of fortune-tellers as sought-after as the writings of political commentators.

How the US financial sector fares in the coming months will have an important bearing on the global economy. In the summer of 2007, the bursting of the US housing bubble caused financial damage to US banks because of high risk or "subprime" lending. Some thought that the damage would soon be contained, especially after various financial institutions made bold write-offs and aggressively sought new capital.

The generous participation of Sovereign Wealth Funds added to this confidence.

However, the emergency rescue of Bear Stearns in March this year made it clear that the problem has spread into various fixed income and derivative instruments.

The novel ways in which the US Federal Reserve made liquidity widely available to US financial institutions on top of the aggressive cuts in its policy rate from 5.25% to 2.0% meant that the situation was grim.

The latest financial emergency prompted the US Treasury to spearhead the rescue of Fannie Mae and Freddie Mac, two government-sponsored corporations (GSCs) that are too important to fail. The two GSCs guarantee or directly provide mortgage loans worth $5.2 trillion, nearly half the system-wide mortgages worth $12 trillion. They are highly leveraged with capital - only 1-2% of total assets. Such leverage is not a problem under normal circumstances given the perception (though not written in law) that GSCs are backed by the US government.

But with US home prices falling 15% and the prospect of more to come, the US Congress has no choice but to approve legislation that authorises the US Treasury to provide any amount of credit and equity that Fannie and Freddie may need, along with help from the Federal Reserve.

Approving a law authorising a "blank cheque" to rescue Fannie and Freddie has led to optimism that the worst may be over. Such a belief could prove premature.

Merrill Lynch now sees US GDP contracting by 2.5% in the 4Q08 and 2.3% in 1Q09. For all of 2009, Merrill Lynch sees a 0.5% contraction in US GDP, whereas others expect US GDP to expand.

The IMF's latest forecast sees the US economy growing 0.8% in 2009. The IMF considers its forecast "gloomy" because it sees global growth falling from 5.0% in 2007 to 4.1% in 2008 and weaker still to 3.9% in 2009.

Why will things not get better?

Merrill Lynch points out that US financial institutions have tightened credit significantly not just for home mortgages but for commercial mortgages, car loans, credit cards, etc.

Recently, Fannie and Freddie were the main source of additional lending for the system. The rescue of Fannie and Freddie, though dramatic, may not restore its ability to expand credit. Indeed, lending more when home prices continue to fall could prove difficult when it is clear that the bill for damages will have to be paid by US taxpayers.

Moreover, some analysts noted that the severe compression of US asset prices is likely to claim many more casualties, if past financial crises are a guide.

The Savings and Loans crisis of the late 1980s caused 1,500 US financial institutions to go under. The situation stabilised only after the establishment of the Resolution Trust Corporation to buy out and manage down bad assets.

So far, only six US financial institutions have failed, so it is feared that many more could follow suit in the coming months as the US economy heads towards recession.

Accordingly, futures markets now see inflation as less of a problem in developed economies. No US interest rate hike is expected until the yearend, while hopes of rate cuts in Europe are being revived.

The sharp fall in oil prices from $147 to $125 during the past two weeks likely reflects this increased pessimism as much as initiatives by US authorities to investigate speculation.

Meanwhile, foreign investors remain concerned about Asian inflation and the inability of our central banks to tighten monetary policy in a timely manner.

In sharp contrast to this, Asian governments and businessmen are more concerned about economic slowdown and therefore central bank tightening has been gradual and reluctantly accepted.

Asia's implicit peg to the US dollar increases the risk that Asians will find runaway inflation the unwelcome surprise for 2009.

US monetary easing risks increasing the dollar price of crude oil and other commodities, setting the global economy up for prolonged inflation, as was the case in the 1970s.

The correlation between the dollar price of crude oil and the dollar-euro exchange rate was 95% from January 2007 to July 2008. If the dollar depreciates to two US dollars to one euro, and if past correlation between oil and dollar/euro holds, the price of oil would be $219-233 per barrel.

Asia has been struggling to control inflation since 2007 and the pegging of its currencies to the US dollar increases the risk of inflation getting out of hand in 2009.

On the other hand, a US recession is necessarily deflationary. If it is severe and spreads, Asian inflation could be a minor concern in 2009.

But only one of these two scenarios is the correct one. It seems that the majority view favours the first scenario, but a slight shift is now taking place towards the second.

Further sharp reductions in oil prices could forewarn that the second scenario is becoming more likely.

Thailand's political instability means that the country's future growth is being diluted in two main ways.

First is the inability to undertake long-term economic reform and liberalisation. The Constitution Court's decision on Preah Vihear has impaired the country's ability to engage itself in the ongoing globalisation of the world economy.

In general, the government finds it difficult to push forward long-term investment projects because of general distrust and detailed oversight.

Second, any future returns expected from an investment project must be subject to a larger discount rate to reflect the increased risk that elected governments will come and go quickly in Thailand.

It is clear that the 2007 Constitution has many pitfalls and those wanting to amend it are being actively opposed.

Current political difficulties faced by this government means that its remaining lifespan could be measured in a matter of months.

The instinct that new elections may not resolve the underlying conflict is the right one.

The bottom line is that despite its lacklustre performance, the People Power party - or a reincarnation of it - may not see its seats in parliament dwindle. This is because the Democrats are likely to face difficulties in trying to win more seats in the populous North and Northeast.

Smaller parties such as Puea Pandin, Chart Thai and Matchimathipataya are at risk of being dissolved. If not, their lack of success in the last election could make it difficult for them to carry on.

But the return of PPP appears unacceptable to powerful groups in Bangkok. And the mechanics of what Thai academics call "judicial activism" and politics on the streets is likely to shorten the life of any elected government headed by populist leaders.

In conclusion, there is little good news on the horizon. Ironically, the sharper than expected slowdown in the global economy could help bring Asian inflation under control, allowing domestic expansion to offset the shortfall in global demand.

However, Thailand's political quagmire seems far more intractable, opening up downside risks for the Thai economy in a way that is difficult to quantify.

Tuesday, July 29, 2008

Thailand: Gem and Jewelry Hub

-- JCK-Jewelers Circular Keystone, 7/29/2008 8:05:00 AM

The Thai Gem & Jewelry Traders Association is using the 42nd Bangkok Gems & Jewelry Fair, to be held Sept. 11-15, to promote Thailand as the world’s gems and jewelry hub.

Government figures reveal that the exports of gemstones from Thailand rose 38.5 percent in 2007 to $371.3 million, and jumped 70.8 percent in the first five months of 2008 to $238.8 million.

In addition, the country's imports of gemstones in 2007 were $90.1 million, up nearly 36 percent year-over-year, while the January-May 2008 records showed a 48.6 percent increase to nearly $134 million.

TGJTA says this rapid growth of gems and jewelry industry in Thailand was a group effort that included the support of the Department of Export Promotion, which provided much-needed expertise, and the Thai government, which provided guidance for research, training programs, and educational seminars.

TGJTA says that the 42nd Bangkok Gems & Jewelry Fair, to be held Sept. 11-15, will showcase the country’s work toward building a thriving gem and jewelry business. For more information or to register, visit or e-mail:

Thailand high court takes corruption case against ex-PM Thaksin, cabinet ministers

Mike Rosen-Molina at 7:26 AM ET

Photo source or description
[JURIST] The Supreme Court of Thailand Monday agreed to hear [AP report] a new corruption case against ousted Prime Minister Thaksin Shinawatra [BBC backgrounder; JURIST news archive] and 47 others, including three current cabinet members. The case involves allegations of misconduct related to the national lottery system, and names Finance Minister Surapong Suebwonglee, Labor Minister Uraiwan Thienthong and Deputy Transport Minister Anurak Jureemas as defendants. The status of the serving ministers under Thai law is in dispute; at a meeting [Reuters report] Tuesday, the Cabinet asked the government's legal experts to look into the issue and make recommendations rather than suspend the ministers outright, as some experts say is required under the constitution. AFP has more.

Earlier this month, the Thai Attorney General's Office filed other corruption charges [JURIST report] against Thaksin relating to a 2003 resolution that reduced fees paid by mobile phone companies to state telecommunications agencies. A company then owned by Thaksin's family saw the greatest benefit from the new payment scheme, leading to claims that Thaksin misused his authority for personal gain. Thaksin, who was ousted in a military coup [JURIST report] in 2006, is currently the subject of 24 legal actions.

Thailand's auto exports up 26 per cent

Jul 29, 2008, 9:33 GMT

Bangkok - Thailand's automobile exports during the first half of 2008 increased 26 per cent, earning the kingdom 174.8 billion baht (5.2 billion dollars), industry sources disclosed on Tuesday.

During the January to June period, Thailand exported 385,870 pickup trucks and passenger cars, a 26 per cent increase over the same period last year, said Surapong Paisithpatanapong, spokesman for the Auto Club of the Thai Federation of Industries.

Thailand's main export markets for vehicles include Australia, New Zealand, Japan, the Middle East and Europe.

Although Thailand has no car brands of its own, over the past two decades it has induced most of the world's automotive giants to set up assembly and manufacturing plants in the kingdom to take advantage of its large domestic market, especially for one-ton pickup trucks, and use it as an export base for the region.

Pickup trucks, multi-purpose vehicles well suited to Thailand's agro-based economy, have traditionally accounted for more than 60 per cent of all sales on the domestic market and the lion's share of exports.

During the first half of this year, some 207,424 pickup trucks were sold on the domestic market, up only 4 per cent, and there were signs of a sales slowdown in May and June when diesel prices soared.

Meanwhile, during the same period, some 110,000 passenger cars were sold, up 42 per cent, with models capable of using mixed ethanol fuels accounting for 34 per cent of the cars sold, said Surapong.

Is this scrap of land worth fighting for???

The implications of the Thai-Cambodian border dispute reach far beyond the 4.6 sq km of scrub around Preah Vihear, writes Piyaporn Wongruang

The disputed area adjacent to Preah Vihear covers only 4.6 square kilometres _ a very small area when compared to the total size of the countries of Thailand and Cambodia. But neither of the countries can afford to lose any of this land.

This is not only because the area carries with it the issue of territorial sovereignty, which no modern state can bear to lose, but also because the final fate of the area could signify the future of other overlapping areas still to be demarcated, particularly those in the sea, military analysts say.

While a lot of people are concerned about the possible loss of territorial sovereignty over the disputed land to Cambodia, Vice-Admiral Pratheep Chuen-arom (retired) has been pondering what will happen to the disputed areas in the Gulf of Thailand, which cover about 20,000 square kilometres.

For months, the vice-admiral has reviewed the information to hand and applied the lessons he learned when commander of a patrol fleet in the Gulf. He has decided to make public his concerns.

''When we lost Preah Vihear temple, we lost spiritually,'' said Vice-Admiral Pratheep.

''But if we lose the claimed land again, there is very much more at stake to be lost.''

Over a hundred years ago, Thailand was forced to demarcate its borders with two imperial powers, Britain (which ruled Burma and Malaya) and France, which had colonised Indo-China, including Cambodia.

Some maps helping define the borders between Thailand and states under protection of those imperial countries were drawn up. However, these were not officially accepted by Bangkok, especially those covering the border between Thailand and Cambodia.

While Cambodia continues to use the French maps, Thailand has its own versions and has used them as its border references. And because they use different maps, the two countries claim different borderlines.

Along the 800km territorial border between Thailand and Cambodia, there are at least 15 areas awaiting agreement from both sides.

But the issue does not stop there.

According to Vice-Admiral Pratheep, the border line was drawn down to the sea. From the 73rd kilometre territorial border peg in the district of Khlong Yai, in Trat province, France had drawn the boundary line cutting through part of Thailand's Kud island, while Thailand drew a different line close to Cambodia's Kong island.

This resulted in the different marine maps showing different sea boundaries. Typically, a marine border extends out 12 nautical miles, or about 22km, from a country's coastline.

The sea territorial boundaries play a crucial role in determining exclusive economic zones, where countries can claim natural resources, including those under the seabed.

Exclusive economic zones usually extend out to 200 nautical miles, Vice-Admiral Pratheep said. Because the two countries claim conflicting territorial boundaries, their claimed economic zones in the Gulf overlap by about 20,000 sq km.

Besides marine resources, those problematic zones also house huge petroleum deposits, which both countries thirst for, he said.

So, if the French-drawn maps were accepted, much of the area containing oil and gas deposits would go to Cambodia, Vice-Admiral Pratheep said.

''What is foreseeable is that the disputed territorial areas on land can be a model for the overlapping sea boundaries, because they are based on the same French mapping principle.

''The problem comes from the same root, which is mapping based on unequal treatment by powerful countries in the past,'' he said.

Over the past few weeks, Vice-Admiral Pratheep has teamed up with other senior officers, including Gen Pathompong Kesornsuk, to awaken the public to the implications that the loss of the 4.6 sq km of overlapping land near Preah Vihear would have on the overlapping sea territory.

Gen Pathompong, who is a chief adviser to the Supreme Command, previously raised his concerns about the ramifications of the French maps, writing letters to high-ranking military officials, as well as Privy Council president Gen Prem Tinsulanonda.

The general cited the lack of continuity and integration of work by Thai officials, from policymakers to officials at implementation levels.

Thailand and Cambodia formed the Joint Technical Committee in 2001 to work on the matter, but little information has been released, triggering suspicions of conflicts of interest by the politicians involved.

According to Vice-Admiral Pratheep and reports from Cambodia, the Cambodian government has already granted permission to some US oil companies to explore petroleum resources in the disputed waters.

In November 8 last year, Cambodia's Deputy Prime Minister Sok An, who is chairman of the Cambodian National Petroleum Authority (CNPA), declared a ''breakthrough'' regarding the petroleum exploration by Chevron Overseas Petroleum (Cambodia) Ltd, which obtained permission from Cambodia to explore petroleum resources in 2002.

The speech delivered by Mr Sok An that day noted that Chevron had drilled up to 15 wells in Block A, which covers about 6,200 sq km and is around 200km off the coast of Cambodia.

The company has found some evidence of oil deposits.

The CNPA now has other petroleum agreements signed with various companies for six offshore blocks.

Mr Sok An's speech further noted, ''We remain committed to resolving the matter of the Overlapping Claims Area in the Gulf of Thailand with the Royal Government of Thailand.

'The overlapping area covers around 27,000 sq km that is thought to be highly prospective for petroleum accumulations.''

Monday, July 28, 2008

Australia's PanAust eyes new Thai copper mine

Pan Australian Resources Ltd (PNA.AX: Quote, Profile, Research) said on Monday exploration work underway in Thailand could lead to development of a new mine yielding a half million tonnes of copper over 10 years.

An updated estimate of the mineral resource at the Puthep deposit in northern Thailand supported plans for a 10-year-plus mine project processing 10 to 12 million tonnes of ore a year to produce around 50,000 tonnes of copper annually, the company said.

Pan Australian's direct equity share would be at least 30,000 tonnes a year, it said.

The deposit is located within a three hour drive of the Australia-based company's regional head office in neighbouring Laos, where Pan Australian started mining copper and gold last April from its Phu Kham mine.

A feasibility study into mining the Puthep deposit was due to be completed in the first half of 2009, according to the company.

Pan Australian said will spend $30 million exploring for copper and gold in Laos and Thailand this year.

Shares in Pan Australian closed up 7.9 percent in an Australian market down 1 percent. (Reporting by James Regan; Editing by Lincoln Feast)

Karen Villagers Flee Burmese Forces

By VIOLET CHO Monday, July 28, 2008

About 300 Karen villagers in Burma have fled to Thailand after the Democratic Karen Buddhist Army (DKBA) and Burmese army units took over their villages, according to sources in the area.

Robert Soe, an officer in the Karen National Liberation Army (KNLA) Battalion 201, said refugees from four villages began arriving in Thailand last weekend. They are temporarily living in Valeki in Pob Phra District in Tak Province.

The refugees are receiving food and other necessities from local Thai people and international nongovernment organizations.

According to local people in Valeki, the Karen villagers said soldiers with the DKBA, a Karen splinter army, and the Burmese army took over their villages and forced them to work as porters during a military operation along the border.

Several hundred more villagers are reportedly displaced persons now inside Burma, said local sources.

“They are planning to go back after the DKBA and Burmese soldiers leave their villages because they have everything there, houses and farms,” said Ba Wah, a resident in Valeki.

It’s unknown how long the Burmese military operation will go on along the border area, said Ba Wah.

The exodus started early this month following skirmishes between the KNLA and the DKBA near Valeki village, across the border from Phadee. DKBA troops backed by Burmese army units took over a military base belonging to the military wing of the Karen National Union (KNU), KNLA Battalion 201.

Beside Burmese army operations in Karen State, there are also Burmese army operations going on in Shan State. According a recent report by the Free Burma Rangers, the Burmese army uses tactics of forced relocation, often along ethnic lines, as a way to smother potential opposition to its rule.

The Burmese army and United Wa State army both continue to use forced labor to transport supplies and expand military infrastructure, said the report.

People must pay a fine of 5,000 kyats (US $5) if they are unable to serve as labor.

Villagers are generally forced to provide labor four times a month, according to the report.

The report also said the Burmese army has ordered people in Shan State to grow castor oil and rubber plants, in a junta-imposed project to produce biofuel. Villagers have no choice whether or not to participate in the program, the report said.

Investing in Thailand

Thailand is classified as a newly industrialized country (NIC), an economic category that more or less means it has cleared the hurdle of being a developing economy, but doesn't meet the requirements for "first world" status quite yet. The NICs, which also include Mexico, China, India, and Turkey, are generally going through rapid economic growth driven by exports. Thailand's economy has been growing at roughly 5% per year, and it's ranked by the World Bank as the 19th-largest (based on real gross domestic product), just behind Argentina and Turkey, but ahead of the Netherlands and Iran.

As Bill Mann has been showing Global Gains subscribers, there are some great investment opportunities to be found outside the U.S., so here are a few words about a few Thai companies.

Fueling up
While you can do many things on the cheap in Thailand -- it can be less than $10 for dinners for two -- one thing you can't do cheaply is fuel up your car or motorbike. Thais in Bangkok pay roughly the same for a gallon of gas that we do in Las Vegas. And just like in the U.S., it's the energy companies that are profiting from those high prices.

While ExxonMobil (NYSE: XOM) and PetroChina (NYSE: PTR) may be the big names globally, in Thailand, it's PTT that's cashing in on high energy prices. Worth nearly $31 billion, PTT is Thailand's largest publicly traded company and is the country's only fully integrated oil and gas company.

Where would a rapidly growing country be in this day and age without cell phones? In China, China Mobile (NYSE: CHL) has been a driving force in wireless, and Global Gains recommendation Turkcell is doing the same in Turkey. In Thailand, Advanced Info Service is leading the way.

The wireless coverage in Thailand is impressive, as use of cell phones is important to high school kids in Bangkok, as well as the farmers and fishermen working in the far southern part of the country. Thais don't want for advanced phones, either; during a kayak trip, a guide played some selections of Thai music from the music collection he had stored in his phone.

Watching your cash
With a market cap of just $6.3 billion, Bangkok Bank is certainly no Citigroup (NYSE: C), but it's a gorilla in Thailand. It's the largest publicly traded bank in the country, as well as the largest Thai commercial bank and one of the largest regional banks in Southeast Asia. Bangkok Bank has been around since 1944 and currently has $43 billion in total assets. And it gives you exposure to more than just the Thai economy, because it also has branches in China, Hong Kong, Japan, Malaysia, and the Philippines, among others.

Kicking back
One can find darn good Chang beer anywhere in the country. Chang is the leading beer brand in Thailand and a product of Thai Beverage -- a company that produces beer, spirits, industrial alcohol, and bottled water.

As great as the Chang beer brand is, ThaiBev's other products are also noteworthy. Ethanol is gaining in Thailand because the government is promoting gasohol -- which is made with ethanol -- as an alternative fuel that could help lessen the country's reliance on crude-oil imports. Additionally, the Chang water brand is everywhere and anywhere in Thailand; tap water in the country is not drinkable.

Getting there
Maybe you like what you hear, but want to do some firsthand research (which, by the way, is done best on Thailand's beautiful beaches). Unless you're in Laos or Cambodia, the likelihood is that you'll be flying there. And it's equally likely that you'll be headed to one of Thailand's more popular airports, like Suvarnabhumi (in Bangkok) or Phuket airport. Both are operated by Airports of Thailand. As Global Gains pick Grupo Aeroportuario del Centro Norte has shown, operating airports in the right place can be quite a profitable niche.

Mind your comfort zone
The five companies mentioned above are some ideas to kick off further research into Thai businesses. However, at least in the U.S., these stocks are only listed on the Pink Sheets and often go months without a single trade. That fact, combined with having to climb a bit more into the weeds to do research on them, may discourage many investors.

But fear not. As with many other countries around the globe, you can find a host of major global companies taking part in the Thai economy. For instance, even though there's Thai coffee, one can also grab a Starbucks (Nasdaq: SBUX) latte in Bangkok. Coca-Cola (NYSE: KO), not surprisingly, is all over the country. And if you've got the urge for a little luxury, you can find labels like Coach (NYSE: COH), Hermes, and Prada in Thailand as well.

Sunday, July 27, 2008

Jelly Belly candy to open Rayong Thailand plant

Jelly Belly prepares to open first overseas plant as demand sweetens

East Bay Business Times - by Jessica Saunders

Opening day can't come soon enough for Jelly Belly Candy Co.'s new plant in Rayong, Thailand, which will supply customers in 43 countries outside the United States.

Officials from the Fairfield company say they can use the extra production to meet growing international demand. But delays related to overseas contractor issues have put the opening off - probably till later this year, they said.

The 50,000-square-foot manufacturing facility will place international production within closer reach of emerging markets in China, India and the Middle East, and in the same country where Jelly Belly buys tapioca syrup for sweetening some of its product lines.

The number of countries where Jelly Belly is distributed has risen 75 percent since 2006, and overall sales have grown 25 percent in the same period, to $160 million. Eighty-five percent of the family-owned company's sales are its signature small, naturally flavored jelly beans, with the rest coming from chocolate-covered candies, gummies, jells, candy corn and other sweets.

The new plant, located on 6.4 acres in a free-trade zone at Rayong on the Gulf of Thailand coast, is designed to provide extra capacity at a lower cost to serve the growing international market, said Herman "Herm" Rowland, Jelly Belly board chairman. That leaves Jelly Belly's domestic plants in Fairfield and Chicago free to supply the United States, still by far the company's largest market.

The extra production capacity, with room for expansion to 200,000 square feet, is coming online as Jelly Belly has targeted $200 million in sales by 2010.

It makes sense for Jelly Belly to choose Thailand for its first overseas location if it is already importing a key ingredient from that country, said Cynthia Kroll, senior regional economist with the Fisher Center for Real Estate and Urban Economics at UC-Berkeley's Haas School of Business. The plant is also closer to China's 1.3 billion potential customers and other growth markets like India, so it will lower transportation costs, and the country has cheaper labor, she said.

But operating overseas also comes with the challenges of unfamiliar government regulations, and language and distance barriers, Kroll said. "That is one reason a number of companies in their early stages don't go overseas."

Companies might be motivated to look to international markets if domestic competition increases and sales begin to level off, Kroll said.

That doesn't appear to be the case for Jelly Belly. Last year was the first since "the Reagan phenomenon" that the company fell behind in production and had to short-ship orders for seven to eight months, said Rowland, referring to the demand boom in the 1980s after word got out that President Reagan was a fan.

To cope, Jelly Belly ran both U.S. plants as many hours a week as it could, even going seven days a week in Chicago for some items, Rowland said. "If we had had the plant running in Thailand like the contractor said it would, we would be OK."

When the new plant will actually begin production is an open question. Asked to explain, Rowland said, "Contractor, contractor, contractor."

Construction was originally scheduled to begin in 2006, according to a press release from that year. But Rowland said it began around March after the typhoon season ended. The plant now is expected to make test production runs in August and open later this year.

"We're 98 percent complete on building facilities and equipment installation, and we are now fixing all the things that didn't get done right," said Rowland, a member of the fourth generation of the Goelitz family to run the company.

The company won't disclose what it spent to build the Thai plant, but Sharon Duncan, vice president for international business, called it a "substantial" amount.

Demand grew in all sales divisions last year, said Duncan, who has overseen expanding distribution, from 24 countries in 2006 to 43 this year. International sales revenue has grown by double digits for the past four years, she said, declining to provide exact figures.

The growth has resulted from greater consumer recognition, deeper penetration of existing markets and expanded channels of distribution, as well as favorable exchange rates, Duncan said.

The No. 1 growth market for Jelly Belly is China, followed by India, the Middle East and Eastern Europe, said Duncan, who was hired 3½ years ago to oversee a then-new international sales division.

"China has a huge population base, it's growing economically, and they have disposable income and a great appetite for Western brands," she said. "That's a perfect market for us."

To address concerns about genetically modified organisms, or GMOs, in the food chain, fears that are stronger internationally than in the United States, all overseas products will be sweetened using tapioca syrup instead of corn syrup. Corn is one of the most genetically altered crops. While all Jelly Belly products test GMO-free, Duncan said, some markets have such strict requirements to prove no GMOs touched a food product, it is easier to substitute another product for corn syrup. There is no such thing as a genetically modified tapioca root, she said.

"The Thai plant is an additional safety net for us to work GMO-free," Duncan said.

The global market also creates new product opportunities, such as jelly beans flavored with exotic fruits like passion fruit, star fruit and lychee nut. Jelly Belly has already taste-tested green tea, a popular flavor in Asia, and it went over "very well," Duncan said.

Overseas customers have a surprisingly strong recognition of the Jelly Belly brand, possibly due to the 4 million tourists who have visited the Fairfield plant, as well as its popularity among American and British expatriates, she said. Then there was that jelly bean-loving U.S. president, of course.

"The reaction Jelly Belly gets internationally is really fun. You get a big smile on people's faces," she said.

The company's chairman will probably start grinning too once he sees his plant start up. Cultural differences and language barriers have contributed to the delays, Rowland said, despite all the key plant employees attending a two-day cross-cultural school in Bangkok. In addition, all the Thai plant managers spent two to three months working in Fairfield to learn the business.

"The Thai people are tremendous people. They have tremendous ways of being, but they are hard for us to understand," said Rowland, whose son Herman Rowland Jr. will be managing director of the Rayong facility.

Jelly Belly Candy Co.

Business: Candy manufacturer
Headquarters: Fairfield
Founded: 1869
Board chairman: Herm Rowland
Employees: 675
Sales revenue: $160 million
Income: Not disclosed
Address: 1 Jelly Belly Lane, Fairfield 94533
Phone: 800-522-3267
Web: | 925-598-1427

Time to go bargain-hunting Merrill Lynch strategist sees opportunities in market selloffs

writes Umesh Pandey

As global markets continue to remain in the doldrums, economists and strategists are recommending that investors watch out for signs of possible turnaround in order to be able to start scooping bargain buys before it is too late.

''What I would recommend investors to watch out for is to start to put a small part of their earnings into an investment portfolio and hope that the markets will bottom out over the next couple of months,'' said Stephen Curry, director and head of investment strategy for managed products at Merrill Lynch's Hong Kong branch.

''There may be very limited downside risk remaining in the market at the moment as the United States is already in a recessionary phase and our house view is that things in the US would start to pick up after the first quarter of next year.''

Although there is no guarantee that a turnaround will come, he says that fishing around for some bargains is not a bad option. He recommends investors spread their planned investments over a period of time in order for them not to be caught in a downward spiral such as investors are now witnessing.

Most Asian markets have taken a plunge over the past couple of weeks amid fears soaring oil prices would derail economic growth that has already been shaken by a slowdown in the major developing countries as most Asian countries have been relying on exports to spur their economic growth.

With Asian markets being hurt the most from soaring oil prices and uncertainties in the global market, most investors in this part of the world are becoming risk-averse after enjoying years of robust consumption-driven economic growth in the United States.

The US, according to Mr Curry, has managed to create around $600 billion annually from growth that was consumption-driven, but the fallout in global markets has so far wiped out close to $5 trillion in valuations, and more can be expected.

''If we think that the pain in the US is nearly over, then our view is that it is still there at least until early part of next year, although there are some encouraging signs that things are looking brighter,'' he said, adding that one of the brightest aspects is the gradual decline in oil prices.

Merrill Lynch's view is for oil to peak at $150 a barrel this summer after already reaching $147.27 three weeks ago. Mr Curry thinks that in time the price will settle around $107. Once it reaches this level, the next step is for inflation to be tamed and this could be done though various means as oil prices slip back.

Then he sees an aggressive easing of monetary policy to kick-start global economic growth.

''What we would need to see is an easing of interest rates especially by Asian central banks,'' he said.

Mr Curry acknowledged most Merrill Lynch clients are holding on to cash but opportunities arise once the market bottoms, and being overweight in cash should not be that bad an option.

According to him, a so-called Swedish method to handle the financial crisis in the US would likely result in a faster-than-expected recovery, as is evident from the actions of the Federal Reserve in the United States.

The Swedish method consists of carving out banks' good and bad assets and then managing the good assets with the bad assets managed by a separate entity that acts similar to an asset management company.

The other method is the Japanese way, in which the state bails out every bank and does not let anyone go under, no matter how bad their assets are.

The Swedish method could result in the banking system returning to health in a few years and that would be good for the market, Mr Curry adds.

What is a good investment?

According to him, good investments are those that anticipate inflation, meaning commodities and gold, which are good hedges when there are economic uncertainties.

Where does one invest?

One of the best markets that offers good returns in the region is Thailand as the country is trading at low price-to-earnings multiples, and has an earnings growth story, he said.

Others are the Philippines and China, both or which have been hammered over the past few months.

There are markets where he recommends not investing, namely Australia, India and South Korea: Australia because it is much in the same state as the United States and United Kingdom, with a saving grace of higher prices for commodities, its key exports. India, on the other hand, has oil subsidies and high valuations and continues to remain very dependent on oil. South Korea is very much linked with the US economy.

When does one invest? Once one sees that rates have peaked and there could be a possible cut coming, then that is the time to accumulate, Mr Curry. And he says that it is not far away, at least not in the western hemisphere where the European Central Bank is set to raise rates by at most another 25 basis points, and the Bank of England has already started to hold back its rates.

Cross-border Trade in Mae Sot

The Thai-Burma Friendship Bridge, linking the border towns of Mae Sot and Myawaddy (Photo: Moe Kyaw / The Irrawaddy)

By HTET AUNG Friday, July 25, 2008

AE SOT, Thailand — Sitting in a small truck crammed with passengers and packages, I waited for the short but exciting ride from Mae Sot Market to a small pier on the bank of the Moei River, known in Burma as the Thaungyin River, which serves as a natural border between Thailand and Burma.

The other passengers are neither foreigners nor Thai tourists, keen to explore the beauty of the Burma’s natural environment in the southeastern frontier.

They are all small and medium-size Burmese retailers returning to Myawaddy with goods bought from the Mae Sot Market.

Everyday, traders cross the Thai-Burma Friendship Bridge with one-day border passes and return to Myawaddy that evening loaded down with packages of goods to sell in the market.

“We have to rely on the Mae Sot Market for almost all the basic commodities, including cooking oil, vegetables, flowers and fruit. Myawaddy can produce nothing” said a middle-aged woman sitting next to me, who bought several boxes of chickens and duck eggs for her retail shop in the Myawaddy Market.

Although Myawaddy exports some goods to Mae Sot, such as onions, potatoes, dried chilly, sea food, crafts, Burmese traditional medicines, textiles and other items, the town has become mainly a transit stop for goods coming from other parts of Burma. Some Burmese goods in Mae Sot are even cheaper than in Myawaddy, because the Burmese traders sold them in the Mae Sot market for a good price.

In the middle of our trip, the Thai border patrol police stopped the truck and checked each person’s border pass. Nobody was required to bribe the police to transport their goods.

According to other passengers in the truck, there are three kinds of Burmese piers along the Moei River, each controlled by different Burmese authorities. They are Na Sa Ka (Department of Border Trade), Democratic Karen Buddhist Army (DKBA) and Ward Peace and Development Council (WPDC).

The Na Sa Ka authorities are the most corrupt, according to my companions, and retail vendors try to avoid them.

“When we went to the Na Sa Ka officials, we lost almost all of our profits because we had to bribe them with lots of money,” said a tradesman in the truck. “Although we are only small retailers, they asked for at least 2,000 kyat (US $1.80) for our goods.”

“I get a small profit of about 5,000 kyat ($4.50) after selling 400 duck eggs for several days. How can I pay what they ask for?” said an egg retailer. “Because of that, we usually use the gate controlled by the WPDC. They ask for 500 kyat ($ .45 cents) per retailer.”

Our truck arrived on the bank of the Moei River at No. 2 Gate, located about 2 kilometers from the friendship bridge.

After watching my companions load up a small boat and push off to the Burmese side of the river, I returned to the Mae Sot border gate, where I met a Burmese shop owner who operates a textile shop near the bridge. He spoke to me openly, but asked that his name not be used.

“I have lived here and had this shop for 20 years,” he said. “Doing business in Myawaddy is more difficult these days mainly because of the various rules of the authorities. Whenever a new township authority is appointed they declare new rules, and we have to follow them.

“Mae Sot has become a town where not only many Burmese migrants work, but also Burmese are setting up businesses,” he said. “The advantage of having a shop in Mae Sot is that if you can officially open a shop and pay tax to the Thai authorities, they never disturb your business.”

An older Burmese shop owner at the Mae Sot Market said he had no complaints about doing business in Thailand.

“I have lived here since I was 18 years old,” said Daw Aye Aye Khine, the owner of the Moe Kote Drug Store. “My business is now doing well. During 30 years, I have never feared the Thai authorities because I pay tax regularly and follow their rules.”

Interestingly, the two Burmese businessmen in Mae Sot didn’t mention democracy or military rule when they talked about their frustration with the Burmese economy. They only mentioned the rule of law and good governance, which can create an environment that promotes economic and social life.

Corruption clearly exists in Burma and elsewhere, the businessmen said. Several mentioned big Burmese traders who benefit from the border trade because of their closeness to local authorities.

The egg retailer said “Some big traders in Myawaddy got rich by importing zinc roofs after Cyclone Nargis.”

Although the two counties opened official border trade after the Thai-Burma Friendship Bridge opened in 1997, most of the trade still takes place like in the old days before the bridge with smaller and middle-size business people trading goods through more than a dozen piers along Moei River.