Friday, October 31, 2008

Thailand's Kiatnakin Bank eyes distressed assets


Kiatnakin Bank foresees growth opportunities in managing distressed assets as the global economy enters recession in 2009.

President Tawatchai Sudtikitpisan said debt management would be a core business for 2009 together with auto hire-purchase and commercial loans.

"We believe financial institutions will look to sell off low-quality loans to reduce their risks under the current global market turmoil and economic slowdown," he said. "We see a good opportunity to get back into the debt-management business next year."

Kiatnakin has considerable experience in debt management, having been a major bidder for distressed assets sold during the 1997 economic crisis by the Financial Sector Restructuring Agency.

Mr Tawatchai said the bank would consider bidding on loan assets from both local and foreign institutions. He declined to put a figure on the bank's potential investment, saying this would depend on opportunities available in the market.

Auto hire-purchase loans now represent the bulk of Kiatnakin's operations and comprise 70% of its total loan portfolio.

The bank reported a nine-month net profit of 1.53 billion baht, up from 1.48 billion the year before. Third-quarter net profit rose 20% year-on-year to 674 million baht, with interest and dividend income up 31.6% year-on-year thanks to loan growth of 19.8% over the first nine months.

Kiatnakin had 106.56 billion baht in assets at the end of September, up 22.2% from the end of 2007. Gross non-performing loans were 8.56% of total loans, down from 12.45% at the end of 2007.

Hire-purchase assets totalled 55.7 billion baht at the end of September, up 30.3% from the end of January, while residential project loans fell 10.6% over the first nine months to 13.57 billion.

Mr Tawatchai said the poor economy has caused bad loans to be slightly higher than the bank's gross non-performing loan target of 8% of total loans.

The bank has tightened its loan approval procedures and its monitoring of existing clients. Down payment conditions for car buyers have also been raised from between 5% and 10% to between 15% and 20% of the purchase price. The bank also now requires buyers to have a monthly income at least double their debt payments.

"We still aim to bring down our bad loans to match the industry average of 6% of total loans by the end of the year," said Mr Tawatchai.

For 2009, Kiatnakin now expects loan growth of just 10% from this year due to the economic uncertainties.

KK shares closed yesterday on the Stock Exchange of Thailand at 13.40 baht, down 30 satang, in trade worth 9.5 million baht.

They're building, but who's buying?

Indian real estate developers slash prices to boost falling sales.

Sudipt Arora in New Delhi

It could be the best of times for those wanting to buy a home in Indian cities as developers have started slashing prices to shore up sagging sales.

The building continues in the bustling Guragon area near Delhi but the properties on offer are starting to get cheaper.

Considered as the barometer of economic growth, the real estate sector has grown 30 to 35% during the past five years, reflecting the rapidly increasing demand for office, commercial and industrial space. Even the demand for bigger homes, now considered within the range of prospering working classes, galloped phenomenally.

But the economic juggernaut began slowing earlier this year because of double-digit inflation and a severe liquidity crunch, fallout from the US sub-prime crisis. Now economic activity may shrink as part of a global slowdown.

India's growth estimates of 9% at the beginning of 2008 have been revised to well below 7%, and the effect is directly visible in the realty sector.

According to the industry lobby Associated Chambers of Commerce and Industry (Assocham), the real estate sector is estimated to be worth at least $15 billion in which foreign direct investment is $4 billion. The sector is bound to grow larger eventually as the IT sector alone is expected to require about 200 million square feet space across the major and large townships.

It is also estimated that in the residential sector, the housing shortage is around 20 million units of which nearly 7 million are estimated for urban India.

In June this year, wholesale price-indexed inflation passed into double digits, raising prices of construction material. Realtors over-ran their budgets and projects stalled, leaving skeletal structures dotting the landscape in big and small cities all across the country.

Then came the liquidity squeeze, as the government sponged away cash from the system to control inflation. Home-loan rates shot up, people who bought struggled to pay, and potential buyers kept away. Almost 90% of home buyers take the home loan route.

"No one's buying anymore," says Ashwani Shukla of the real estate agent Triveni Associates. "Two years ago, 25- year-olds earning fat pay packets from [multinational corporations] were buying high-end apartments. Now there are no takers for flats selling at 20% markdowns. We are finding it difficult to even meet daily overheads."

Mr Shukla says that if the situation does not improve, there could be distress sales within six months. The sector was heading for a cyclical slowdown even before the current economic slump. Over the past few years, increasing demand had pushed up prices with speculators jumping in to inflate the market. Eventually, inventory piled up when buyers refused to pay unrealistically high prices.

"So many transactions were taking place between speculators and investors that no one bothered to find out what the end user, the family who would eventually live in the house, would be willing and able to pay," Mr Shukla says.

Those prospective home-owners are the developers' biggest target as almost 80% of real estate developed in the country is residential space.

Some developers of high-end apartments are now even offering a free Mercedes C200K, Toyota Land Cruiser and BMW 320i, or at least a few gold coins. In some cases, even a small flat is being thrown into the deal for those eying premium segment bungalows. As a slowdown in the realty sector stares developers in the face, these are some of the innovations they are coming up with to keep buyers interested.

Other builders have started shifting from the premium housing sector and are launching projects in the more affordable range for middle-class buyers. Are these signs that realty prices will drop in the near future? Assotech CMD Sanjiv Srivastava said: "I wouldn't advise people to wait for prices to drop. If you are getting a property at a good location, bargain hard and close the deal."

But Anshul Jain, CEO of the India arm of the global property consultancy firm DTZ, has a different take. "Yes, a correction in property prices is on its way," he said.

Many builders said they were now concentrating on the middle segment. Manoj Gaur, promoter of Gaur Sons, said the group has launched projects in Indirapuram on the outskirts of Delhi in the range of 2,500 rupees per square foot (19,000 baht per square metre) to suit middle-class buyers. Not only this, many developers are reducing the floor size of the flats from 2,000 square feet to around 1,200 square feet (112 square metres). This translates to a 50% fall in the price of a three-bedroom apartment to around three million rupees.

Gaur said though sales of premium segment apartments have been hit, demand for mid-segment housing is okay. A number of projects in mid-market segment are being launched in Gurgaon near Delhi too in the price range of 3.5 million to 4.5 million rupees.

Anil Chawla, private equity head for of D.E. Shaw & Company, one of the biggest private equity investors in real estate in the country, says he also expects the prices to fall. Similarly, Santhosh Kumar, deputy CEO of Jones Lang LaSalle Meghraj, one of India's leading real estate consultants and brokers, says that there are definite prices discounts available for people who are willing to pay upfront even now. "They may get 30-50% discounts even now," he says.

There are several factors going against the realty sector. The main one is the lack of demand from home buyers and the slow offtake and oversupply of commercial real estate. In the case of residential property, the rate of interest on home loans has gone up from around 7.75% in 2004 to around 12.75% now.

For a person taking a home loan, interest has increased 5% in the last four years. Also, the slowing economy and global financial crisis have squeezed liquidity. So even if someone is willing to take a home loan at a higher rate, the banks may not have the money to lend.

All these developments seem to point to one thing - that the market seems set for a price cut going forward.

Bangkok and Chiang Mai lead Conde Nast Asian travel survey

Bangkok and Chiang Mai have been voted by readers of Conde 'Nast Traveler Magazine as the top two cities to visit in Asia.

A total of 32,633 readers participated in the 2008 Reader's Choice Survey announced last week. The findings will appear in the magazine's November issue. Bangkok has won this category every time since the magazine created the "Best Asian" cities category in 2001, said its editor Klara Glowczewska.

Cities making the top-10 list are Bangkok, Chiang Mai and Hong Kong are joint second, followed by Singapore Kyoto, Shanghai, Jaipur in India, Tokyo, Hanoi and Beijing.

Thai hotels also figured prominently in the survey, with Four Seasons' Tented Camp Golden Triangle in Chiang Rai topping the category, while the Peninsula placed 16th, the Mandarin Oriental Hotel (23rd), Shangri-La Hotel (38th) and the Four Seasons in Chiang Mai (63rd).

Heading the top-10 list of islands in the Indian and Pacific ocean regions was the Maldives, followed by Bali, Phuket, Mauritius, Seychelles, Samui, Cebu, Langkawi, Borneo and Lombok in Indonesia.

The airline category was headed by Singapore Airlines, followed by Emirates, Virgin Atlantic, Cathay Pacific, Japan Airlines, Air New Zealand, Thai Airways, All Nippon Airways, Qantas Airways and Korean Air.

For more, visit

Bangkok's mass transit system to start 3 new lines

Construction next year for three projects


Construction of three mass rapid transit projects worth a total of 211.99 billion baht needs to be accelerated and construction contracts should be signed this year, officials say.

Construction of the lines should start next year, said Prime Minister Somchai Wongsawat, who chaired a meeting of economic ministers yesterday.

The three mass rapid transit projects are the 23-kilometre Purple Line from Bang Sue to Bang Yai; the 27-kilometre Blue Line from Bang Sue to Tha Phra and from Hua Lamphong to Bang Khae; and the 70-kilometre Red Line from Bang Sue to Taling Chan and from Bang Sue to Rangsit. The projects are expected to be completed in 2013.

The 59.93-billion-baht Purple Line won cabinet approval in October 2007 and the project owner, the Mass Rapid Transit Authority (MRTA), signed an agreement on March 3 to borrow from the Japan Bank for International Cooperation (JBIC) to finance civil works.

The construction agreement with prospective contractors was originally expected to be signed by January next year but the current political drift has put the schedule in jeopardy.

The 79.03-billion-baht Blue Line won cabinet approval on Oct 2. The project is at the stage of environment impact analysis and of seeking JBIC financial support.

The 13.13-billion-baht Red Line from Bang Sue to Taling Chan is now at the second round of bidding, while the 59.88-billion-baht Red Line route from Bang Sue to Rangsit is at the stage of requesting approval for environmental impact analysis.

Ms Suparat said that Deputy Finance Minister Pradit Phataraprasit would visit China from Nov 4-7 to negotiate for loan support of US$400 million for the three mass-transit projects. Officials hope a lending agreement can be signed at the summit meeting of Asean leaders on Dec 15.

Ministers directed state agencies yesterday to clarify which agency would be responsible for the Green Line, the 37.52-billion-baht extension from Mor Chit to Saphan Mai and from Soi Baring to Samut Prakan.

Earlier, the Bangkok Metropolitan Administration had informed the National Economic and Social Development Board that it would invest in the Green Line, while Transport Minister Santi Promphat said the cabinet had approved the MRTA as the agency that would implement the extension of the Green Line on March 19.

Currently, the Green Line project is in the process of environmental impact analysis.

In a related development, Ms Suparat said 7,200 kilometres of rural highway projects worth 1.8 trillion baht planned for construction between 2009 and 2012 were also tabled for the cabinet's consideration yesterday.

A total of 340 billion baht would be set aside from the 2009 fiscal budget to fund the projects' construction, with 280 billion baht already allocated.

The Transport Ministry yesterday asked for additional funding of 46 billion baht from the 2009 fiscal budget, while it plans to secure loans for remaining funding.

According to Ms Suparat, the economic ministers' committee also approved investment budgets for education and public health for 2009-11 worth 22 billion baht and 78 billion baht respectively.

Ms Suparat said the government planned to raise investments in megaprojects in 2009 from 250 billion to 350 billion baht. The investment expansion is a part of several stimulus measures the government hopes will help raise economic growth to 4% next year.

Thailand signals strong slowdown in September


The Thai economy showed signs of a clear slowdown in September, with exports and manufacturing production both down from the previous month, according to data released by the Bank of Thailand yesterday.

Amara Sriphayak, a senior director for the central bank's domestic economy department, said the US and global economic slowdown had a clear impact on Thailand, with third-quarter export figures clearly down from the first half.

Manufacturing production slowed as a result, while tourism revenues sunk due to domestic political instability.

But farm prices remained relatively strong, helping support rural incomes and economic activity.

Mrs Amara said the economy slowed in September from August, adding that the central bank now projected third-quarter growth to drop to 4% and fall even further in the fourth quarter.

The National Economic and Social Development Board is scheduled to release third-quarter growth figures on Nov 24. The economy slowed to 5.3% year-on-year growth in the second quarter from 6.1% in the first.

September economic figures showed declines across a number of areas, with the manufacturing production index slowing to 4.6% growth from 7.6% the previous month. Industrial capacity utilisation also dropped to 68.2% in September from 70% the previous month.

Export-oriented industries posted a sharp slowdown in activity, with growth of 8.8% year-on-year in September compared with 16.4% the previous month.

The decline was in line with the overall slowdown in exports, which totalled $15.6 billion for the month, up 19.5% year-on-year but down from $15.78 billion the previous month.

Imports also fell to $15.5 billion in September, up 38.6% year-on-year, from $16.46 billion the previous month. The trade account returned to a surplus of $142 million in September compared with deficits the two previous months, although the current account remained in deficit overall at $703 million.

"The greatest concern for the economy right now is the fact that export shipments in the third quarter fell to 9.1% growth compared with 12.1% in the previous quarter," Mrs Amara said.

"The slowdown should be even faster in the fourth quarter, and this is a clear sign that the global crisis is having an impact on overseas orders."

Inbound tourists totalled just 900,000 in September, a 16.5% decline from the year before, as foreigners cancelled trips as headlines centred on the seizure of Government House by the People's Alliance for Democracy and the temporary closure of provincial airports.

Farm income also dropped to 45.5% growth year-on-year in September from 57.5% the previous month. Mrs Amara said high farm incomes supported rural consumption as motorcycle sales grew.

But private investment remained weak, with growth of just 0.5% in September from the previous month.

Fiscal spending had less of an impact on growth than earlier forecast, with disbursements for the fiscal year ending September reaching just 92.3% of the budget compared with a target of 94%.

Danish royal couple to visit Thailand

Their Royal Highnesses Crown Prince Frederik and Crown Princess Mary of Denmark will be in Thailand for a four-day state visit from Nov 24-28 to commemorate the 150th anniversary of Thai-Danish diplomatic relations.

A trade mission comprising over 30 Danish companies will accompany the royal couple to strengthen commercial and industrial ties between the two countries.

"This will be the largest and most comprehensive promotion of Danish business and industry in Thailand," Crown Prince Frederik said at the Amalienborg Palace in Copenhagen recently.

"Today, Thailand is a modern country that offers vast opportunities for foreign investments," he added.

The accompanying trade mission represents key sector of mutual interests between Thailand and Denmark such as energy and environment technology, food and food processing, airport equipment and lifestyle products, Crown Prince Frederik said.

Their two toddlers, three-year-old Prince Christian and one-and-a-half year-old Princess Isabella, will not be travelling with the royal couple to Thailand, though.

"The programme is a busy programme, so they'll be better off staying home. We'll take them another time and enjoy the beaches," said Australian-born Crown Princess Mary.

Thai-Danish official diplomatic relations date back to the reign of of King Mongkut. When King Chulalongkorn ushered Siam into modernisation, he got help from several Danish diplomats to develop the navy, expand sea trades, and build up rail infrastructure.

In the modern era, Thai-Danish cooperation led to the setting up of the country's national airline as well as dairy farming.

"The Crown Princess and I hope that the visit will strengthen the existing relationship and also strengthen the trade and commercial cooperation," said Crown Prince Frederik."

Scientists Find Evidence of Massive Indian Ocean Tsunami Hundreds of Years Ago

29 October 2008

Baan Nam Khem, Khao Lak Phang Nga Province, Southern Thailand - hardest hit from Dec 26 tsunami
Baan Nam Khem, Khao Lak Phang Nga Province, Southern Thailand - hardest hit during Dec. 26, 2004 tsunami
Scientists say they have discovered evidence of a giant tsunami in the Indian Ocean some 600 years ago that is comparable in size to the one that killed an estimated 230,000 people in the same area in 2004.

Studies published this week in the journal Nature document evidence in sand deposits in Indonesia and Thailand that indicate a massive tsunami took place on those coastlines sometime between 1290 and 1450. The researchers carbon-dated soil samples using organic material found under the sand deposits.

The experts said the findings indicate that tsunamis of such magnitude occur in the Indian Ocean only every 600 to 700 years. But they say people still need to be educated about tsunami warning signs to guard against smaller such events. 

The scientists noted that one Indonesian island, Simeulue Island, had very few tsunami deaths in 2004 because islanders still tell the story of a 1907 tsunami that killed many people

Thursday, October 30, 2008

Outsourcing popular trend in Thailand

Survey finds use of temps increasing

With an increasingly competitive global market, employers in Thailand are determined to keep both headcount and overheads below current levels by relying more on external resources to relieve skills shortages, according to the consulting firm Prasena.

The company recently conducted an in-depth survey of 49 leading companies that employ 35,000 staff in 11 major sectors in Thailand.

The results show that employers are using more temporary and/or seasonal staff - including freelance consultants and experts - paid daily or even hourly rates. These outsourced resources may not always be cheaper but can be replaced or eliminated at will.

Overall, 88% of participating companies have resorted to external resources over the last 12 months, in numbers that increased their workforces by an average of 36%. However, beyond these short-term measures, employers continue to entrust long-term solutions to their internal experts or HR functions.

About 92% of companies, even small ones, now have a full-fledged HR function, usually reporting directly to the head of the organisation. HR heads are entrusted with a strategic level of responsibility and 71% are members of the executive committee.

Over the last few years, along with the widening of HR roles, companies have invested, sometimes significantly, in HR management methods, techniques and tools. But Prasena's survey showed that the evolution has mainly been neither smooth nor complete.

The survey found that in many firms, changes have been too fast for the HR team to upgrade its skills in time to adapt its functions. In some companies, the obligation to wait and then to implement plans from headquarters has also been a restrictive factor.

Prasena analysts said the most urgent needs were to upgrade HR teams through clarifying the way HR responsibilities are allocated, to professionally test each HR person's technical HR management skills, and to conduct professional training to bridge the gaps.

They suggested that external help should be secured to provide temporary support whenever required. HR budgets should also be reallocated, rather than increased, to focus on productivity and efficiency while reducing red tape and low added-value activities.

The survey also found that two Thai companies were among the top five of all participants, which demonstrated that HR excellence depends more on corporate culture and local leadership than on an organisation's size, country of origin, sector of activity or any other traditional indicator.

Bangkok International Trade and Exhibition Centre (Bitec), with 480 employees, was ranked the best equipped in performance management and had the highest overall ranking. The construction company Tipco Asphalt, with 550 employees, was among the top five for organisation and skills management.

Also on the top five list were DHL, a German courier company with 863 employees; SCG Dow, a chemical company with 500 employees; and BASF, a German chemical company employing 224.

Thailand cuts growth projections down to 3.8-5.0% in 2009

FPO charts growth plan

Fiscal spending and jobs to be the focus


Additional fiscal spending and jobs programmes are needed to help cushion the Thai economy from the impact of a global recession in 2009, according to economists at the Fiscal Policy Office. ''Inflation isn't a concern, not with the sharp declines in oil prices. The main risk is economic growth,'' said Somchai Sujjapong, the director-general of the Fiscal Policy Office.

The Bank of Thailand cut its growth projections earlier this month for the Thai economy to a range of 4.3% to 5% this year and between 3.8% and 5% in 2009, down from earlier forecasts of 4.3% to 5.8%.

Policymakers will meet tomorrow to discuss new stimulus measures to help the capital market, create jobs and spur investment and consumption.

Dr Somchai said increased fiscal spending was critical to help buffer the impact of a slowing global economy.

''Next year we will certainly feel the impact of the slowing global economy. We need to enact measures that will have an impact,'' he said.

He declined to offer details, but said the FPO was preparing a stimulus programme that focused on four areas: reviving confidence, boosting investment, supporting the country's competitiveness and alleviating poverty.

Thailand's relatively strong fiscal position gives policymakers ample scope to boost spending or cut taxes. Public debt is now at a relatively low 35% of gross domestic product, well under the legal ceiling of 50%.

Dr Somchai said that while consumer and business confidence had been relatively weak this year due to domestic political uncertainties, the overall economy remained relatively strong.

He said third-quarter economic growth was projected at 4.5%, while growth for the fourth quarter was likely to slip under 4%, putting growth for the full year at around 5.1%. For 2009, the FPO maintains a growth forecast of 4-5%.

Teerana Bhongmakapat, dean of economics at Chulalongkorn University, said growth of 4-5% was under the overall capacity of the economy.

''The turmoil in the global economy and the instability in domestic politics is only adding to the weakness in the Thai economy,'' he said.

While added that fiscal spending may be needed to help support growth, deficit spending had its limits and it remained uncertain how long the current crisis would last.

''The signs are that recovery will take time. The latest figures for the US economy could show a contraction for the third quarter, and the United Kingdom is already in recession,'' Dr Teerana said.

He said Thai growth could slow to less than 3% in 2009 as a result of the global slowdown.

More worrisome was the agricultural sector, which will surely suffer from falling commodities prices, depressing rural growth and potentially leading to rising non-performing loans for financial institutions.

Dr Teerana said any jobs programme needed to be carefully structured to maximise benefits while minimising the burden on the state.

''We don't need additional welfare programmes. It's uncertain how long this crisis will last and the government can't simply transfer funds from one group to another for a long period of time,'' he said.

Aat Pisanwanich, director of the Centre for International Trade Studies of the University of the Thai Chamber of Commerce, said global economic growth could be depressed for two years, with the US potentially facing a four- to five-year period of weakness.

''We definitely need proactive measures, particularly for smaller companies that could be forced to close due to the recession,'' he said.

Tax incentives and measures to ensure sufficient access to liquidity for companies were also needed to help the private sector and consumers reduce expenses.

Dr Aat said public investment also needed to increase, not only for Bangkok megaprojects but also investment in rural provinces such as new roads and irrigation systems.

''Frankly, I don't think this crisis will be as bad as 1997-98, when unemployment jumped to two million people, four times current levels,'' he said.

''The economy during that crisis contracted heavily. I think for Thailand, we will still see positive growth this year and in 2009.''

Wednesday, October 29, 2008

Thailand Can Be A Retirees Paradise

If you are starting to wonder about where you could retire to, the chances are that Thailand has not been one of your first choices. However, the people who have retired to Thailand really do love the way of life there and it may well be worth thinking about it once you have done a little research.

What to Expect From Retiring in Thailand

Thailand is well known for its fantastic weather and it is certainly somewhere that you should consider if you want to experience a warm winter. Also, one of the main reasons why people do choose to retire to Thailand is the fact that there is not as much crime there as there is in some Western countries. In fact Thailand is known to be one of the safest countries in the world and attacks on strangers is extremely low and that allows you to feel safer than you would in a country such as the UK or in America.

If you are on a slight budget then there will always be something to suit your needs in Thailand. All you have to do is look away from the tourist driven places and you will find that the prices of accommodation and living is a lot lower than it is in built up areas.

Another good factor about the cost of living in Thailand is the medical care. The treatments and the facilities are extremely modern, yet they are also really inexpensive too. This means that you will easily be able to afford any health care which you may need and it is just as good as it would be back home.

If you are thinking of retiring to Thailand then one thing you will need to think about is what you would like to spend your time doing. There are a number of activities available to you and it basically depends upon how active you want to be. For example you can take part in scuba diving or if you would still like to feel like you are working then you can apply to become a volunteer teacher. You can also just relax and enjoy cultural activities if you would prefer.

Overall retiring in Thailand is definitely something you should consider. The cost of living there is extremely low and it is one of the safest places in the world. With no cold weather to worry even in winter, about what more could you possibly ask for?

Visit for the latest on retirement including saving for retirement and choosing a place to retire.

Tuesday, October 28, 2008

Surviving global supply chain blues


The global financial crisis is taking its toll across almost every international business sector. Asian economies face a new challenge, a downward spiral in the global economy with which they have become interdependently linked. Less than a month ago, there was still hope that America's financial crisis might be contained. China's economy was strong and other industrial countries such as Germany and Japan hadn't experienced the real-estate bubble that blew up the financial system of the United States.

Supply chains in crisis: The mayhem now taking place across the international financial sector is hurting activity in most developed economies. This is in turn bringing the crisis closer to developing economies. As the external sector weakens and costs of raising debt or equity rise, businesses will reduce investment, hiring and expansion plans. Fulfilling existing contracts now places many unforseen exchange-rate burdens. Domestic demand will therefore lose momentum, large firms will begin to go bankrupt, they will lay off employees, or indicate that they are stressed. Foreign-based firms will slow down their trade activity or even withdraw completely from certain markets.

Impact on Asia: There are many signs of trouble ahead, chief among them weakening export growth. Tens of thousands of export-oriented companies in southern China have gone out of business as a result of falling demand, rising costs and tougher enforcement of environmental and labour laws. Southeast Asia can expect an accelerating downturn in exports and then softening industrial production. There is little doubt that a synchronous slowdown is under way in the United States, Europe and Japan. Such a slowdown will also damage prospects for the large emerging economies such as Russia, India, Brazil and Turkey. Trade with the Middle East should remain stable, with increasing demand for fresh food from exporting countries with devalued currencies.

Local impact: As manufacturers cut back production, jobs will be lost while those remaining employed will see lower overtime and less income. Rural households that enjoyed record incomes due to high prices for higher value-added products such as rubber, palm oil, coffee, cocoa and other agricultural produce will cut spending as well.

Maintaining relationships: Farmers and retailers will need to work together to ensure the long-term future of their respective supply chains to make sure they are well placed to handle the global crisis. Farmers need a firm commitment from their retailers if they are to remain competitive. Those who have established dedicated supply contracts as a function of good practice will be better placed to meet volatile market pricing and logistics costs.

Ocean shipping: Some reports say that the cost to ship a container from Asia to Europe has recently plunged from $2,800 just a few months ago to just $700 today. The once-booming ocean shipping industry, benefiting from several years of high volumes and building ever-larger ships to meet seemingly never-ending demand for international container movements, is suddenly hurting as bad as any industry as demand softens substantially.

Outsourcing risk: For the past 20 years, international brands and manufacturers have been outsourcing production to China to take advantage of low labour costs. They have implemented and redesigned systems to be the most effective and cost-efficient, which has led to increased dependence on cost-sensitive, interconnected supply chains that are vulnerable to associated risks. The current financial crisis has shaken many of the basic precepts required for outsourcing. Many companies must now quickly mitigate these risks as the impact of global trade disruption becomes greater. Once foreign firms begin reducing their orders across the board, Chinese manufacturers will begin laying off employees to save money and this is where the trouble for China's domestic market will begin.

Summary: Economic conditions in coming months will be among the toughest Asia has had to manage since the crisis a decade ago. But Asia today is far more robust than in the 1990s, helped by strong external balances, massive foreign-exchange reserves, more diversified export bases and reformed banking sectors. Although one or two countries with financial vulnerabilities or political problems could suffer more than others, most large Asian economies will continue growing and rebound strongly once the global crisis ends.

However, the key to success will be how well organisations can adapt their international and local supply chains to control their internal logistics in order to minimise exposure (or potentially fatal damage) to their trading capabilities and relationships.

Weekly Link is co-ordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals; we welcome all input, questions, feedback and news at:

Thailand's carmakers say market still healthy


The local automotive industry believes it can remain relatively unaffected by the global financial meltdown as Thai economic fundamentals remain sound while the domestic and export markets are still healthy, said Toyota Motor Thailand president Mitsuhiro Sonoda. He noted that local automobile sales began shrinking from mid-year but exports climbed steadily. Total vehicle production for both domestic and export markets this year is expected to surpass that of the previous year.

Local buying power has declined slightly as consumers still worried about the future economy, causing them to delay buying the vehicles.

Passenger car sales increased significantly during recent months but trend of the market is switching to smaller cars for the sake of fuel saving. Sales of pickup trucks, however, dropped slightly because of high diesel costs.

''We worry about the crisis that may intensify and closely watch until next year how it will be developed, especially the export markets for Thai-built vehicles,'' Mr Sonoda said at the launch of a new Lexus model yesterday.

However, he noted that most Thai-made vehicles were not destined to the US market and very few to Europe.

Thailand's electrical exports may be static in 2009


Thailand's exports of electronics and electrical products next year may not pass this year's 1.6-trillion-baht projection as the European market nears a slowdown after the US market's collapse. Europe is now the leading destination of electronic goods and electrical appliances shipped from Thailand, consuming up to 17% of total exports.

The Association of Southeast Asian Nations (Asean) has become the second largest market (16% of exports), while the US has dropped from being the largest overseas market to ranking third (14-15% of exports), said Katiya Greigarn, chairman of the Electrical, Electronics and Allied Industry Club.

''Exports to Europe, especially air conditioners, have been doing well so far this year, prompting us to believe that overall shipments for the whole year have remained on track to grow by roughly 8-9%,'' said Mr Katiya.

''However, the market next year has remained uncertain, with financial turmoil taking its toll on Europe. If European demand falls, it is possible our exports will be flat next year.''

Last year, when electronics exports started to feel the impact of the US market's slowdown, the sector posted a growth of nearly 11% to 1.5 trillion baht.

In the third quarter of this year, the sector's export value rose 9% year-on-year, due to more orders placed for the high season of Christmas and the New Year, he said.

Hard disk-drives (HDD) _ the top electronic export item _ have posted a 10% increase in exports so far this year, compared with an average annual growth of 20% over recent years.

But shipments of integrated circuits (IC) have fallen by 10%, mainly due to the US slowdown. Sales in the US constituted as much as 20% of Thai electronics exports two years ago.

About 85% of Thailand's output of electronic and electrical goods is exported, said Mr Katiya. He added that the industry employed 500,000 people and its workforce has been rising by an average of 30,000 to 40,000 annually.

He forecast that the gloomy outlook could now lead manufacturers to trim costs by cutting overtime. But he discounted the possibility of massive layoffs.

''As of today, if we are forced to cut production, I think the number of staff likely to lose their jobs is only marginal,'' he said.

Monday, October 27, 2008

Thailand's Board of Investment has new plans

BoI plans new incentives


The Board of Investment is preparing a new incentive package and revamping its organisation to stimulate more investments as it foresees a tough year ahead, said secretary-general Atchaka Sribunruang Brimble.

"The BoI's privileges are still inferior when compared to neighbouring countries' investment attraction efforts. Therefore, we plan to improve incentives for research and development and tourism industries, which should help their growth," she said.

Some legal regulations will be altered to improve the agency's effectiveness in serving investors. It also plans to improve communications with potential investors, maximising their access to information.

The expansion of offices overseas is part of improving information accessibility, with Taipei and Sydney units to open by year-end and Beijing, Seoul and Stockholm units to open next year.

Mrs Atchaka also vows to better serve small and medium enterprises (SMEs). The BoI has set up an SME working committee to create links between small parts suppliers and large manufacturers. Also, 47 million baht has been allocated to facilitate SME growth.

"Next year should be a tough year. We have to position Thailand as a better investment destination than our competitors," Mrs Atchaka said.

While new investors will be targeted, the BoI is hopeful that expansion by existing investors will help it endure the global investment slump next year.

The BoI aims for 650 billion baht in projects seeking privileges next year. It plans to approve all 383 remaining proposals this year worth 270 billion baht.

How much lower can the Thai baht go?



The baht is likely to continue to weaken for the near future as foreign investors continue to dump emerging market assets and export growth slows due to the global economic downturn.

The baht closed yesterday at 34.79/89 to the dollar, compared with 34.7 on Friday and 33.85 at the end of September.

Analysts said the US dollar was likely to extend gains against other currencies as US financial institutions continue to reduce their leveraging in the wake of the global crisis.

Institutional investors such as hedge funds and pension funds have also been heavy sellers of emerging market assets as investors cut losses and retreat to cash or risk-free US treasury bonds.

The one exception has been the Japanese yen, which climbed to 92 to the US dollar yesterday as investors continued to reverse "carry-trades", where traders borrow in low-interest yen to finance investments in higher-yielding assets in other currencies.

Dealers said statements by the Group of Seven industrialised countries that the yen's movements were "excessive" were all but ignored by the market. The currency rose to a 13-year high of 92.65/7 yen to the dollar compared with 94.24 last week, while the euro fell to 1.243 against the greenback as the financial crisis continues to affect the Eurozone.

For the baht, analysts said further declines were likely against the dollar in line with other Asian currencies. Falling export revenues, foreign investment inflows and tourism receipts would further add pressure to depreciate.

Nicholas Bibby, senior regional economist at Barclays Capital, predicted that the baht was likely to break 38 to a dollar in the first quarter of 2009 and stabilise in the remainder of next year.

"We expect the dollar to strengthen against Asian emerging markets' currencies. The main factor is risk aversion. Also inflows to capital accounts will subdued," he said.

Other Asian currencies, including the Korean won, Singapore dollar and Philippine peso are also trading at multi-year lows against the dollar due to capital outflows.

Another dealer noted that the baht had actually been less volatile in recent months when compared with other currencies, thanks in part to the fact that capital outflows had been ongoing since the beginning of the year.

Foreign equity investors have been net sellers of over 140 billion baht worth of stock this year, due in part to the political instability that has dominated the headlines since mid-year.

According to the Kasikorn Research Center, the baht was now down 3.2% against the dollar since January. In the first quarter, the baht appreciated 7.2% against the dollar, but has since given up all its gains over the past six months.

"Actually, the depreciation of the baht should help improve export competitiveness as the Chinese yuan and the yen have both strengthened against the dollar," said one Kasikorn Research executive.

Thai Chamber of Commerce.warns exporters

Chamber warns exporters


The global financial crisis will dent Thailand's export economy in both traditional key markets and new destinations such as the Middle East, warns the Thai Chamber of Commerce.

"The coming crisis is really the big problem (for the Thai economy)," said Dusit Nontanakorn, the chamber's vice-chairman. "The government's current economic stimulus measures are not potent enough to address and curb the possible impact. They sound like using aspirin to treat cancer.

"The impact on the country's tourism has already been felt. We expect exports will start falling from next month onward for the United States, Europe and Japan. New markets will follow course, especially the Middle East as the oil price falls. The real impact on the Thai economy will become visible after November."

Businesses are urged to prepare for the coming crisis by shifting their production strategy, he said.

"As consumption freezes, those engaged in producing high-end products need to shift to medium-end to stay afloat," said Mr Dusit. "Those producing low-end products could get into big trouble, as they will directly compete with low-cost products from China."

Pramon Sutivong, the chamber's chairman, said the impact would likely be more severe than expected, but the effect on industries would vary by sector.

"Unlike Thailand's financial crisis in 1997, this new crisis will affect all the real sectors," he said.

To help industries through the crisis, the chamber is preparing to appraise the impact on all business sectors, both in the short term of three to six months and the long term of up to two years.

The results will be released Nov 13.

Thailand: Stock Exchange Temporarily Halts Trade

BANGKOK, THAILAND: A Thai official says trading on the Stock Exchange of Thailand has been temporarily halted after a 10% slide in its index.

The market fell 43.29 points _ or 10% _ from the market's previous closing level, triggering a so-called "circuit breaker."

SET President Pattariya Benjaphonchai said trading was automatically suspended for 30 minutes.

The SET Index was at 389.58 points when trading was suspended.

It was only the third time in the market's 30-year history that the circuit breaker was triggered. The first was in December 2006, when an interim government announced controversial controls on capital flows and the second was on 10 Oct in line with regional markets. (AP)

Thailand's government forced to host ASEAN summit in Chiang Mai


Saritdet Marukatat

Good news: Thailand will host the summit of the Association of Southeast Asian Nations in December.

Bad news: The event is coming to Thailand at the wrong time.

Hosting an Asean summit is a matter of prestige. It normally is an opportunity for the host country to show its colleagues what it can do.

The country stands to get huge media exposure and publicity for free. This is supposed to help promote the country's image and boost related industries such as the hotel and shopping businesses.

Instead of being excited about the forthcoming opportunity, which comes around alphabetically, the government now looks worried instead.

Prime Minister Somchai Wongsawat, Foreign Minister Sompong Amornvivat and other cabinet members are wondering how to host the most important regional meeting in such a way that will not embarrass themselves.

A government without Government House is bad enough already. Bringing the guests to meet the prime minister at his makeshift office at Don Mueang international airport would be totally unacceptable.

And it appears that this could very well happen as the People's Alliance for Democracy shows no sign of evacuating the place which is supposed to be occupied by Mr Somchai and his deputy prime ministers, instead of Sondhi Limthongkul, Chamlong Srimuang, Phibhop Dhongchai and other PAD members and supporters. A firm position by the prime minister that the PAD must hand over Government House back to the proper occupants has gone unheeded thus far.

As the summit on Dec 15-18 draws nearer, the organisers are getting more concerned. So now they're going for Plan B.

Instead of holding the event in Bangkok, they will be moving it to Chiang Mai. The second option has nothing to do with the fact that it is the home province of Thaksin Shinawatra, the former government leader sentenced to two years' jail in absentia by the Supreme Court for abuse of authority. And it also has nothing to do with the fact that the weather in that northern city is better than Bangkok, as the foreign minister claims.

The reason is that the government wants to stay away from possible trouble which the PAD protesters might create. Chiang Mai is not known as a PAD stronghold; many there still support the convicted former prime minister - this was clearly illustrated in the last election, when the party he supports, the People Power party, won the contest.

No matter where the summit takes place, the shame for Thailand is already palpable. Mr Somchai and his government will not have the chance to demonstrate their leadership among other Asean members. Leadership cannot be built overnight; it comes with political stability and a stable government.

As the summit draws nearer, the premier and cabinet members will promote initiatives to be tabled for discussion at the top level talks. But whether they will be approved is another thing. Hosting the event is not an automatic guarantee of success. Past accomplishments of the grouping did not spring from the formal negotiation tables at which leaders and their teams of negotiators sat. They were a result of the informal gatherings, including those at golf courses. Informal talks have played a key role in driving Asean forward for a long time. Unfortunately, that is what this government will not be able to offer.

The current political crisis is hampering the bargaining power of Thailand in its talks with other countries, including Asean. Other countries will be willing to listen to any Thai proposals and initiatives. But they will definitely not go beyond that because they are not sure how long Mr Somchai will stay in power, given the standoff with the PAD.

The government also faces another uncertainty, as Mr Somchai's party is awaiting a verdict on whether it will be disbanded due to election fraud by the party's then deputy leader Yongyuth Tiyapairat.

Mr Somchai himself had not expected to become prime minister. Given all the problems surrounding him, he should not expect anything concrete from the Asean summit, either.

Saritdet Marukatat is News Editor, Bangkok Post.

Thailand to cut rubber output by 700,000 tonnes

BANGKOK: Thailand, the world’s biggest rubber producer, plans to cut production by 700,000 tonnes in the six months starting from October to shore up prices, the Agriculture Ministry said yesterday.

“We will encourage farmers to tap less latex as we aim to cut rubber supply by 50% between October to March,” said Deputy Agriculture Minister Theerachai Saenkaew, who oversees rubber matters.

He told Reuters that the cut in output was based on the 1.4 million tonnes Thailand produced from October 2007 to March 2008.

It would be equivalent to around 23% of Thailand’s likely production this year of around 3.1 million tonnes.

The country produced 3 million tonnes in 2007. Theerachai said the government would accelerate its replanting programme by urging farmers to cut down more ageing rubber trees.

It aims to cut the area covered by rubber trees that are more than 25 years old by 64,000 hectares (158,100 acres) a year, up from the current 32,000 hectares per year.

The price of Thai RSS3, a benchmark for physical prices, was quoted at US$1.85 per kg on Monday, just a few months after it struck a 56year high of US$3.25 in July.

Tokyo rubber futures reflect the bearish outlook, falling more than 5% on Monday, with weaker oil prices and a stronger yen adding to the pressure on prices.

Car sales are slumping as consumers turn cautious in the face of a global financial crisis, and with more than 70% of rubber sales going to the car tyre industry, top producers Thailand, Indonesia and Malaysia are feeling the pinch.

As part of the plan to reduce rubber supply, Thailand will also reduce physical rubber trading days in local trading centres across the country from October to March, when supply was expected to fall, Theerachai said.

“Trading days would be cut by two or three days per week to meet falling supply,” he said. - Reuters

Thailand could lose 1 million jobs to recession

Bangkok - Thailand could lose up to 1 million industrial jobs over the next several quarters as a global recession cuts in to the kingdom's exports, industry sources warned Tuesday. As the world enters recession, export orders are expected to fall 30 per cent next year, adversely affecting Thailand's key export sectors such as garments, electric and electrical appliances, ceramics and furniture, according to Thaveekij Jaturajarernkul, chairman of the labour committee and the Federation of Thai Industries.

"Consequently, 15 to 20 per cent of the workforce is expected to be laid off at the start of 2009," he told The Nation newspaper.

Industry currently employs about 6 million people in Thailand.

Many Thai factories are already operating five days a week instead of the previous six as a result of declining export orders this year, said Thaveekij.

Be careful of what colour you wear in Thailand

Foreign visitors, locals and football fans are thinking twice about whether to don yellow and red colours in Thailand, for fear of getting into political trouble. -Daily Xpress, ANN 

Tue, Oct 28, 2008
Daily Xpress, ANN

by Wannapa Phetdee

Everything is political in these divided times - even the colours you wear can get you in trouble

The effects of the political conflict are spreading, and this time around it is even creeping into people's wardrobes.

It didn't matter much which colour you wore in the past, but nowadays everyone is thinking hard before grabbing yellow or red clothes from the closet.

Staying neutral

"I have to think twice before choosing my necktie and shirt colours as I don't want people to get the idea that I support any political groups, especially when I act as moderator for political forums," said Suan Dusit Rajabhat University Vice Rector Sukhum Chaloeysap.

With red being used by the pro-government groups and yellow by the anti-government protestors, many ordinary folk are feeling uneasy when it comes to choosing what colours to wear.

Foreigners' fear

Sukhum, also director of Suan Dusit Poll, said that he once thought about conducting a survey on the red and yellow colours but he changed his mind as he was afraid of deepening the political rift.

"On the October 7, I was concerned about students' safety as the clash happening near our university. I went and warned student to stay away from the scene and some protesters shouted at me, saying that the shirt cares nothing and doesn't devote to the nation!"

Fear about sending the wrong signal has also spread to foreigners. The host of TV's "Jor Jai" programme Natwut Amornvivat said that many western and Japanese business travellers have asked him about what colours were safe to wear in Thailand.

"I told them that the colours shouldn't apply to them and that they would be okay if they stayed away from key protest areas," Natwut said.

Natwut said he wears both red and yellow sportswear on his free days. "My friends sometimes tease me about which group I belong to."

Democrat Party MP Rachada Dhanadirek said she tries not to dress in red or yellow, especially when she's around political demonstrations.

"I've started wearing red since my group campaigned against the 2007 Constitution drafting, even though red doesn't suit me," said People Power Party MP Chatuporn Promphan, a member of the Democratic Alliance Against Dictatorship and host of "The Truth of Today" TV show.

Chatuporn wants the People's Alliance for Democracy to stop wearing yellow, as he said it should be used to honour HM the King.

Chatuporn has red polo shirts, jackets and neckties. He tries to wear something red every day.

Football fans' dilemma

Thai football fans who follow English premiership teams like Arsenal, Liverpool and Manchester United are facing a dilemma over their red replica shirts.

Famous sport columnist Buranij "Bor Boo" Rattanavichien said in his column for Star Soccer that he's getting funny looks for wearing his Man United shirt. "I just want to wear my team shirt, and it happens to be red. I'm not siding with either the pro-government group or the PAD."


Thailand's PAD-Good people?

Good people?

By Amy Kazmin

Published: October 28 2008 02:00 | Last updated: October 28 2008 02:00

Once the main gateway to Thailand, Bangkok's old Don Mueang airport has been little used since the city's new international hub opened in 2006. But Don Mueang's VIP terminal is these days the unlikely refuge of an elected government struggling to retain control in the face of an extraordinary challenge to its rule.

In hastily refurbished offices previously occupied by airline executives, Somchai Wongsawat, Thailand's new prime minister and brother-in-law of the exiled Thaksin Shinawatra, his predecessor but two, is trying to keep the wheels of state turning - and steer the economy through the current global financial turmoil - even as the coalition led by his People's Power party fights to survive.

The coalition, dominated by Thaksin loyalists, took power in February after winning a general election with strong support from rural voters still devoted to the former telecommunications mogul. But in a stand-off that this week entered its third month, ministers and officials have been shut out of the sprawling Government House compound - the jewel of which is an Italianate palace - by thousands of protesters who reject the legitimacy of the Thai electoral system and the PPP-led administration it has produced.

Calling themselves the People's Alliance for Democracy, the protesters, drawn mainly from Bangkok's middle class, are demanding a new political order to replace the one-person, one-vote parliamentary democracy that they say permits poorly educated rural voters repeatedly to deliver power to corrupt politicians unworthy of leading the Buddhist kingdom. This month, protesters trying to prevent Mr Somchai's government from unveiling its programme in parliament clashed with police in some of the worst political violence Bangkok has seen since 1992.

The PAD, whose followers mainly wear royalist yellow, insists its proposed "new politics" will improve Thailand's democracy. But critics say the PAD - and its powerful behind-the-scenes military, bureaucratic and palace backers - are seeking nothing less than a rollback of hard-won democratic gains so as to restore the political influence of traditional Bangkok elites.

"It's just a power grab," says Thitinan Pongsudhirak, a political scientist at Bangkok's Chulalongkorn University. "The PAD is the vanguard of the establishment. This is a counterrevolution to the right. It's a disguised manipulation of democratic rules to preserve and retake the prerogatives of the establishment."

The struggle, which along with the global financial crisis is taking its toll on the export-oriented Thai economy (see below), will reverberate well beyond a country long seen as a model for developing economies gradually transitioning towards democracy. Any rollback - or even the widespread embrace of the idea that democracy has failed - could embolden traditional elites elsewhere to resist or even reverse democratisation. "If the old guard can roll back the clock and reclaim lost prerogatives, it will set a bad example for other transition countries," says Mr Thitinan.

Aloose grouping, the PAD has yet to define fully how it would achieve its aim of reducing political corruption. It has backed away from its first idea of a parliament in which 70 per cent of members would be appointed. Instead it is proposing a voting system with indirect elections based on occupational groups. PAD leaders "want to destroy party politics in Thailand and reduce the power of the population to vote", says Giles Ungpakorn, author of a book critical of the 2006 military coup that removed Mr Thaksin.

The tycoon, who had served more than five years as prime minister and now lives in the UK, was last week sentenced in absentia by Thailand's supreme court to two years in jail on a charge of corruption in a land deal.

Chaturon Chaisang, a former deputy prime minister in Mr Thaksin's government, says the Bangkok showdown reflects the "fundamental political conflict" that has haunted Thailand since the abolition of its absolute monarchy in 1932 (see right). "It's a question of whether a tiny group of 'good people' should run the country or do people have the legitimacy to choose their own leaders."

Yet the battle is unlikely to end quickly. Supavud Saicheua, a Phatra Securities economist, predicts that the conflict could take three to four years to play out - with the economy suffering plenty of collateral damage. "The crux of the issue is the ability for political power to be shared amicably between the elites and Bangkokians on the one hand, and the more united rural based voters on the other," he wrote in a recent report.

"If one-man, one-vote cannot produce an acceptably trusted government, then many in Bangkok would support judicial activism to check and balance the government, or resort to appointed leaders."

During 18 months of militaryinstalled government, Thailand adopted a new constitution that replaced the elected senate with a half-appointed upper chamber and strengthened judicial and bureaucratic power while diluting elected officials' authority. The strong mandate the primarily rural electorate gave to Mr Thaksin's loyalists last December prompted PAD leaders' agitation for further such curbs. "Thaksin excited such animosity that their hatred of him has evolved into hatred of the system that brought him to power," says Chris Baker, a Bangkok-based historian and analyst.

The number of PAD protesters besieging Government House is far smaller than those who joined the 2006 marches against Mr Thaksin. But they have shown a willingness to adopt confrontational tactics, such as forcing the closure of airports including Phuket for several days in September.

The PAD also appears to have strong financial support - and protection - from elite forces. Not only has the military refused to remove the protesters from Government House by force, or even to put pressure on them by restricting the flow of food and people into the compound, but serving officers have been training PAD guards on how to resist any eviction effort.

Queen Sirikit, wife of the revered King Bhumibol Adulyadej, attended the funeral of an antigovernment protester killed in this month's violence, a gesture Thais interpret as a display of support for the PAD cause. The continuing political role of the military was meanwhile in evidence when Gen Anupong Paochinda, the army chief - flanked by the heads of the navy and air force - in a televised interview called on Mr Somchai to resign to show responsibility for the violence. Surayud Chulanont, the privy councillor who served as prime minister after the 2006 coup, has urged the PPP to negotiate with the PAD on its demands.

"The distinguishing features of the movement are its wealth, its explicit and its implicit use of violence, and its magical protection against threats, including police action, court orders, and legal process," Chang Noi, the pseudonym for two acute observers of the Thai political scene, wrote recently in The Nation newspaper. "These are the politics of class and privilege."

Mr Somchai, who became prime minister last month after his predecessor was removed by a court for hosting a cookery show while in office, is trying to reduce tensions, avoiding any provocation that might trigger further disruption or violence that could be used to justify a new military coup. He has suggested that he is open to negotiating with the PAD.

Yet even as Mr Somchai tries to defuse the PAD challenge, his administration faces another threat to its survival: charges of electoral fraud brought against his party at the constitutional court. The court has the power to dissolve the PPP and ban its leaders from political life, by invoking draconian laws imposed after the 2006 coup that provide for the punishment of an entire political party, and its leadership, for the misdeeds of a few.

That such laws exist at all - and are so readily invoked - highlight what a long way Thailand still has to go in building sustainable democratic institutions, even if the PAD elite fails to win further legal changes. Says Mr Ungpakorn: "Whatever the outcome, it doesn't look very good for democracy."

Coup history

Seven decades of squabbles

Ever since a 1932 revolt by top bureaucrats and military officers ended absolute monarchy, Thais have been fighting over the allocation of political power.

For decades, Thailand was under the thumb of repressive military dictatorships, which ruled with the backing of the US - then battling communism in Asia - and allies in the palace.

In the 1980s, urban middle-class demands for greater political participation and social justice were accommodated with a "managed democracy" in which General Prem Tinsulanonda, the army chief who is now the top adviser to King Bhumibol Adulyadej, served as prime minister for 11 years. An appointed senate packed with military officers and bureaucrats also wielded great clout.

The clamour for more participatory politics peaked in the 1990s, when Thailand adopted a reformist constitution intended to boost both government stability and accountability. In its effort to lay solid democratic foundations, the 1997 charter required the prime minister to be an elected MP and it created a wholly elected senate.

In 2001, Thaksin Shinawatra, a billionaire telecommunications mogul, swept to power with broad-based urban and rural support, after promising that his wealth would make him immune to corruption. Mr Thaksin fulfilled populist promises to pump money into the neglected countryside and make state social services more accessible. But urban elites grew disillusioned with his authoritarian tendencies, vigorous taxation to fund his populist programmes, policies benefiting his family's business interests, and his suspected republican leanings.

Tapping into a sense of betrayal among those who had previously looked to Mr Thaksin as a national saviour, the People's Alliance for Democracy mobilised the Bangkok middle classes to join protests against him. In September 2006, a military coup drove him from power, just months before elections that, due to his enduring popularity among rural voters, Mr Thaksin was widely expected to win.

Economic impact

'Revival requires a political equilibrium that is years away'

With its pliant workforce, well developed infrastructure and easy living, Thailand nearly always makes the short list for foreign companies searching for a suitable south-east Asian investment location. But as Thais have grown increasingly consumed with their political battles in the past few years, investors have opted to go elsewhere and foreign direct investment inflows have dropped off sharply.

From a peak of $9.2bn in 2006, foreign direct investment dropped to $6.1bn in 2007, reflecting the turmoil that accompanied massive anti-government protests and a September 2006 military coup. In the first six months of 2008, Thailand, south-east Asia's second largest economy and a hub of foreign manufacturing, received just $1.69bn in foreign investment inflows.

"People are just sitting on their hands waiting to see what happens politically," says Sriyan Pietersz, head of research at JPMorgan in Bangkok.

Thailand, like other Asian nations, is holding its breath to see how the crises in the US and European financial systems will hit its economy. The finance ministry has cut its gross domestic product growth forecast for the year to 5.1 per cent, down from a previous 5.6 per cent, and projected an even worse performance for the coming year.

But Thailand, which grew far more slowly than its regional peers last year, will face an even tougher time if its government is so hamstrung by legal and political challenges that it cannot adopt aggressive pro-growth policies. Investor and consumer confidence would both be further undermined.

"Restoring Thailand's medium-term growth prospects requires a sustained revival of public and private investment," Supavud Saicheau, an economist at Phatra Securities, wrote in a recent report. "We doubt that such a revival is possible until a new political equilibrium is re-established, which we believe will be about three to four years from now."

The impact of recent strife on Thailand's tourist trade - which employs about 1.8m people and accounts for around 6 per cent of GDP - is another worry.

Tourism had been strikingly resilient to the recent years of political instability, with foreign visitors to Thailand increasing steadily since 2005. Yet all that changed this month, when a state of emergency was temporarily declared in Bangkok after a deadly clash between government supporters and opponents. The People's Alliance for Democracy, which has been leading the protests, also closed three regional airports, including that of the tourist island of Phuket, for several days.

With countries warning citizens against travel to Thailand, arrivals in Bangkok's international airport plummeted. The finance ministry has estimated that the industry lost anything between $880m and $2bn in September as a result of the trouble.

Tourism professionals are still hopeful of a rebound in the coming high season, as the state of emergency has been lifted and the PAD has backed away from such tactics as closing airports. Apichart Sankary, president of the Association of Thai Travel Agents, says: "In Thai, we call this damaging your own rice cooking pot."

Aviation passenger figures 'worst since SARS'

The international aviation industry is staring at its worst slump since SARS as the global financial crisis shows no sign of easing.

Fresh figures from the International Air Transport Association show the number of people flying has declined for the first time since 2003 when Sudden Acute Respiratory Syndrome (SARS) threatened to become a pandemic.

"For September, all major regions reported that passenger traffic shrank, with the exception of Latin American carriers which saw an increase of 1.7 per cent," the association said.

"Even this is shockingly down from the 11.9 per cent growth of the previous month."

The Asia-Pacific region arguably has been the hardest hit as airlines struggle to cope with shrinking access to credit.

"Up to August, the drop in international passenger traffic was isolated to Asia-Pacific carriers," the association said.

"The sharp downturn in world trade disproportionately impacted Asia-Pacific carriers with a 6.8 per cent drop in traffic in September."

Giovanni Bisignani, the chief executive officer of IATA, called on governments to act to save struggling airlines, not with bailouts but with a renewed attempt at market liberalisation.

"We are not asking for bailouts or more government involvement in our business," he said in a statement.

"What we were asking for this weekend was simply the ability to act like any other global business."

Investment is the best reason to smile in Phuket


Thailand is at the very heart of Southeast Asia, occupying an area of nearly 200,000 square miles.  Thailand is a diverse and beautiful country where the terrain ranges from forested mountains in the north, to rice fields of the central plains and the tropical coastline and sandy beaches of the south.

Thailand is affectionately known as the land of a thousand smiles, its tropical climate and welcoming people have been a beacon to holidaymakers and travellers alike.  In recent years overseas property purchasers have been looking to buy a piece of this tropical paradise, here are ten reasons to smile when considering investing in Thailand:

Year Round Tropical Climate
Thailand is blessed with a magnificent tropical climate, with high temperatures and humidity; April and May are the hottest months of the year. Thailand is an ideal winter sun destination with November to February probably being the most pleasant time of the year when the cool breezes from the north east offer some welcome relief from the humidity of earlier months.  The Thai climate is good news for investors, meaning that they have a year round holiday destination for their own use or a rental property that has potential to deliver a good rental return.

Strong Tourism Industry
With visitors from Europe, USA, Australia and Asia, Thailand remains one of the world’s most popular tourist destinations, with over 14 million visitors arriving in 2007 (Thailand Tourism Authority). Such a strong tourist market means that quality accommodation is always in demand, which is great news for investors looking to rent out their property.  Owners in the Oxygen Bay, Bangtao, resort in Phuket,will certainly not have any trouble renting out their property if they wish. Only a short distance to the beach front, 15 minutes to Phuket town and 25 minutes to Phuket Airport these properties stand in a fantastic location. Prices start from £178,500 / THB 11,887,771.

Money goes a little Baht Further
Thai property benefits from being located outside of the euro zone, offering investors a way to stretch their hard earned cash that little bit further. The Thai property market is still relatively undiscovered with property often cheaper than more established European markets. Some property investors have witnessed impressive returns over the past few years particularly in areas in the south such as the island of Phuket. In fact experts estimates that currently capital appreciation is around 10 to 15 per cent per annum. Thailand also has no capital gains tax for private investors and taxes in general remain low adding another incentive to purchasing.

Low Cost of Living
The cost of living in Thailand is relative, you can live on a shoestring budget or go for luxury as you desire. Generally though Thailand offers some amazing bargains and low living costs.  Across the country you can find many local markets which are generally the cheapest places to food shop. Bangkok and Phuket offer excellent value for the local facilities, restaurants and amenities. Property is still available for much lower prices than other Asian Cities, such as Hong Kong and Singapore.

Resilient Economy
Thailand is the second largest economy in Southeast Asia and has seen estimated growth of 5.1% this year (Fiscal Policy Office Thailand). Blessed with an abundance of natural resources, strong manufacturing sector and excellent export growth Thailand’s economy is looking in a strong position for the future.  The Thai Baht has been steadily rising against the US Dollar and the economy has shown little sign of being affected by the global credit crunch.  Even Donald Trump is taking advantage of the great real estate opportunities in Thailand by investing in Bangkok.

New Double Taxation Treaty
A recently agreed deal betweenHM Revenue & Customs (HMRC) and the Thai authorities has eliminated the need for British investors to incur the double taxation of income and capital gains arising in one country and paid to residents of another.With investment in Thailand getting more popular this should come as great news for those looking to purchase one of the spectacular properties available in this stunning country.

Island Paradise Properties
Thailand offers beautiful mountains, dense forests and stunning beaches, a tropical climate and cosmopolitan cities.   Property can be located in the most astonishing of settings, take for example the Kokyang Estate II, situated close to the dazzling Nai Harn beach, one of the most beautiful in Phuket, with its clear waters and nearby jungle-covered mountains, the resort really is out of this world. Phuket really is a tropical island paradise for escaping the day to day existence of home.  Whether you are looking for a first class adventure holiday or simply a place to unwind in sheer luxury, this awe inspiring island is the place for you. has many superb properties for rent and sale.

No longer a world away
Thailand was once viewed as an exotic long-haul destination however with developments in aviation the country is now a sophisticated fully fledged tourist destination with direct flights to Bangkok and Phuket running from the UK daily.  A 12 hour flight can see you arriving in Bangkok or Phuket, and once you have arrived Thailand is now even easier to explore thanks to its excellent bus and rail networks, which are cheap, easy and reliable.

There’s no place like home?
English investors looking to live in Thailand may be pleasantly surprised by how well accommodated they are.  English is widely spoken and Westerners are welcomed by the friendly local people.  Can’t live without those home comforts?  Then you’ll be pleased to know that Phuket even has a branch of Tesco for those essentials. Sportsmen and women too will be delighted by the facilities available for football, badminton, tennis as well as the magnificent golf courses and world class dive centres.

Ideal retirement destination
Thailand is a popular destination for those considering relocating overseas in their retirement. Retirees are attracted by Thailand’s relaxed pace of life, low cost of living, excellent health care system, rich culture and low taxes. Thailand makes an effort to simplify the emigration process for retirees by offering retirement visas for foreigners over 50 years of age.

So with all the benefits of recent tax regulations and the relatively low price of property in Thailand, is now the time to invest?  Steve Worboys, MD of Experience International seems to think so: “With Thailand still emerging as a property investment destination prices remain low.  There are undoubtedly some very attractive real estate opportunities to be found in certain locations within Thailand, like Phuket for example.”

5 Responses to “Investment is the best reason to smile in Phuket”

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