Tuesday, June 30, 2009


The Bangkok Post reports that the Thai government plans to promote theThai gem and jewelry sector by abolishing the value-added tax charged on imported raw materials for the production of jewelry.

Prime Minister Abhisit Vejjajiva announced at a gem and jewelry seminar that the government is aware that the taxation has impaired the gem and jewelry sector’s competitiveness in the global market.

He added that with the aim of lowering costs, the tax for imported materials will be reduced to a 1% withholding tax.

Prime Minister Vejjajiva announced: "The Revenue Department will ask the Finance Ministry to propose the new tariff incentive to the cabinet for consideration." He added that the
gem and jewelry industry is among the country’s top four largest export sectors, with a value of 280 billion baht (2% of the global market).

Last year Thailand ranked fourteenth in exporting gem and jewelry products. Some 1.1 million Thais are employed in the industry.

Finance Minister Korn Chatikavanij stated: "This step will lead to higher government revenue in the long run and it will benefit business operators and more than one million workers in this industry.”

In the first five months of 2009, Thailand exported gems and jewelry valued at 165 billion baht. The gem and jewelry sector’s export value for the entire year is expected to reach 300 billion baht.

Thai Government: Foreigners can't drink here (on religious holidays)

Alcohol ban on religious holidays

Published on July 1, 2009

The government was dealing another severe blow to the already-battered tourism and entertainment industry by suddenly banning booze during Buddhist holidays next week, business leaders complained yesterday.

"This is the same old issue - the government rising up to destroy tourism. This does not parallel its tourism policy of increasing the number of visitors coming into the country," said Thai Hotels Association (THA) president Prakit Chinamourphong.

Enforcement of the decree would hurt tourism venues, especially clubs and restaurants located in hotels, as well as general tourist attractions.

"How can tourists can enjoy their holiday in Thailand without drinking? Like Phuket or Pattaya, they're coming for beaches and fun. They like to have beers and some drinks on the beach. If we ask them not to do so, they won't be happy," Prakit said.

The government should have communicated the order well in advance to foreign tourists, so they could plan their activities and celebrations better while staying in the country.

"I think it's good for locals to stop drinking during that time, but tourists will be upset," Prakit said.

Visitors understand the prohibition on election days but cannot accept it for occasions like this, he said.

Hotel operators are expected to suffer even more from the latest move after getting hit by the global economic crisis and type-A (H1N1) influenza, he said.

The industry is expected to be hurt even more by the suspension of alcohol sales.

A source from the Federation on Alcohol Control of Thailand said the order for alcohol-free religious holidays would be a great setback for local tourism and related businesses, such as hotels, pubs and restaurants.

"With the ban, all tourist destinations, including Koh Samui, Phuket and Pattaya, will be hurt. All pubs and beer bars will have to close, because they cannot sell any alcohol on those days," the source said.

"It will disappoint foreign tourists visiting Thailand, as drinking alcohol, such as wine and beer, is part of their everyday routine. They may switch to other countries next time. The government should take this sensitive issue seriously if they want to promote tourism as one of the key sectors bringing revenue into the country to stimulate the economy."

Chatchai Wiratyosin, marketing manager of Singha Corp, brewer and distributor of Singha and Leo beers, said his company could live with the government's decision to suspend alcohol sales on special religious holidays.

"We don't think the measure will make a significant impact on the sale of alcoholic beverages, because people normally drink less on religious holidays anyway," he said.

But he still wonders why the government must always issue immediate measures to ban the sale and drinking of alcohol instead of trying other means, such as educational campaigns to promote higher morals among local youths regarding responsible drinking.

Saturday, June 27, 2009

Thai Government: Foreigners can't farm here

The Ministry of Commerce says the law is quite clear -- foreign developers cannot invest in the country's agricultural sector, especially the farm sector.

Department of Business Development director-general Kanissorn Navanugraha was respondng on Monday to reports the Gulf Cooperation Council (GCC) had expressed an interest in raising livestock and growing rice in Thailand,

He said the Alien Business Act B.E. 2542 (1999) forbids foreigners from owning businesses relating to farming and raising livestock.

The GCC consists of Oman, Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates.

The Ministry of Foreign Affairs should understand the law, Mr Kanissorn said.

The Department of Business Development was not aware of any foreigners trying to invest in the farming sector, he said.

Foreigners could also hold no more than 49 per cent of the shares in agricultural firms.

He said there were more than 60,000 joint ventures in the country and 1,500 of them were associated with land dealings. None of them were related to agriculture.

Thai government's great gambit

By Shawn W Crispin

BANGKOK - Thai Finance Minister Korn Chatikavanij says he was raised as a mandarin but that his economic policies are all for the people. The former JP Morgan investment banker designed and this week partially passed through the senate what promises to be the largest fiscal push in Thailand's modern history.

Oxford-educated Korn, 44, says in an interview with Asia Times Online that the total 1.5 trillion baht [US $44 billion] program, including 800 billion baht worth of borrowing outside of the normal budget, is designed to lead the Thai economy over the next three years and will be "historic" in its scope and proportion. His ruling Democrat Party is touting the fiscal program's over 6,000 different projects as Thai Khem Kaeng, or Thai Strength.

The unprecedented spending comes notably at a time of exceptional Thai weakness, with the export-geared economy contracting 7.1% year-on-year in the first quarter and full year gross domestic product (GDP) projected by some private investment banks to contract by around 5%. Private consumption and investment are stuck in the doldrums, with average factory usage rates of under 60%.

Critics of the government's great gambit say many of the policies smack of influence-peddling and veiled vote-buying at a time the government's coalition partners gear up for new elections, most likely to be held in mid to late 2010. Others see repackaged versions of former exiled prime minister Thaksin Shinawatra's populist policies, which while in the opposition the Democrats sharply criticized as fiscally reckless and morally corrupt.

Thailand's economic woes have been compounded by years of political instability, which reached chaotic new proportions in April when anti-government protesters blocked roads and rioted violently in the streets of Bangkok. When the military restored order, some viewed it as further evidence that the Democrats were in league with conservative pro-establishment forces that allegedly had a hand in forming its coalition government.

In a June 25 interview with ATol's Southeast Asia Editor Shawn W Crispin, Korn countered such characterizations and outlined how the government and his ministry are willing to risk "political suicide" to close Thailand's yawning gap between rich and poor.

ATol: Your fiscal stimulus program ambitiously aims for the government to lead the Thai economy over the next three years. With the collapse of global trade and your country's heavy reliance on exports for growth, does Thailand need a new economic model and one that is more state-led?

KC: God, I hope the second part is never true. I'm not a believer of a state-led economy in the long term. In every parliamentary speech I give about the need for government action today, I always pre-empt that by saying I see this very much as a short- to medium-term state of affairs.

The mark of success of government participation in the economy is how fast it can pull back to allow for a strengthened private sector to take charge. My perspective is, and I know from experience of being in both the private and government sectors, that the public sector just doesn't spend the money as efficiently as the private sector, both in terms of knowing where the money should go and also in terms of efficiency in disbursement and usage.

I don't do so with reluctance, because I know as of today there is no other option. The Bank of Thailand tells us we have 1.7 trillion baht [roughly US$50 billion] of excess liquidity, money that is just not being used, partly because the private sector isn't investing and doesn't need the funds beyond working capital, partly because banks aren't approving loans because of heightened concerns about credit risks.

For whatever reason, the money is just sitting there and unless the government acts as the agent to put that money to good use, the economy will stall. So I have no hesitation in doing what I believe the government needs to do today, but I certainly don't see this as an ongoing operating philosophy.

ATol: Bureaucratic foot-dragging has stalled the implementation of previous government's ambitious fiscal programs. How quickly and efficiently do you think the projects can be implemented?

KC: First of all, nothing has ever been attempted of this scale or in this manner I guess by any government since the last Democrat-led government. We always seem to be on board when there is a crisis and a need for extraordinary measures.

But this time we are moving with much greater transparency, much greater speed and on a bigger scale, a historic scale: 1.5 trillion baht is about 16% of GDP, to be spent over three years. That's on top of the annual budget deficit that we will need to maintain for the next few years as well.

We specifically selected projects - some are large projects, including one or two mass transit lines and an airport expansion, for example - but also small water and road projects spread all over the country designed to create local and regional jobs. These are not transformative projects, but they are long in the waiting and designed to create jobs, inject demand into the local economy and fill that gap of efficiency at the grass-roots level.

In about 10 days, we are launching the first financial aspect of the Thai Khem Kaeng (TKK) program which is the launch of a TKK bond, a high-interest savings bond. There will be a national campaign designed on the one hand to provide a lift of the very low interest level of deposits, and also to link the general population to the government investment program, so that there is a psychological and mental linkage between the population providing the funds and for the government to make these historic investments.

ATol: Some analysts and opposition members say that certain mega-projects have been broken into smaller quanta and that smaller line items avoid the extra scrutiny required by law for projects of over 1 billion baht. How do you respond that your ministry cut down the size of projects to avoid greater scrutiny?

KC: We didn't cut up anything actually. These were projects that were already in the system waiting for funds, waiting for execution. So nothing was actually cut up. Like I said, it is a mix of large projects - the new airport wing, the double track rail linking the northeast to the southern seaboard, mass transit lines, and some large water projects, such as linking the water reservoirs in the eastern seaboard to each other - as well as small localized work projects designed to help people in rural areas. So it's a combination of all, but none of these projects were actually cut up as such.

ATol: So how much leakage do you expect?

KC: That's always a challenge. You will have seen over the past several weeks and months the government and prime minister [Abhisit Vejjajiva] in particular has shown every indication of taking this issue very seriously, within the coalition and otherwise. So the Ministry of Finance helps by providing maximum transparency to these projects. We will be up-linking all the projects on the web, including information regarding specifications and tender price, and then updating progress made. We hope that through this transparency there will be less leakage.

ATol: Some analysts have speculated that both the Democrats and your main coalition partner Bhum Jai Thai (BJT) party will deploy budgets and have designed projects in ways to bolster party popularity before new elections. How do you respond?

KC: They weren't designed that way. The projects are first of all spread to all 76 provinces, though not necessarily equally. We worked on it not from a provincial perspective, but from a project perspective, so we looked for projects that were viable and doable.

And then, almost as an afterthought, we asked so where are the projects going? And it turned out that [the northern province] Chiang Mai, which clearly isn't our political territory - we don't have any MPs there and its not seen as a stronghold - will receive the bulk of the initial money. The northeast is getting significant money, more than the [Democrat stronghold] south.

If you look at the numbers it is clear we're not favoring any particular provinces and that indicates we didn't have votes as a primary objective. However, we are hopeful that a successful implementation will make the government more popular, but that's fair enough - right?

ATol: There are competing academic notions about how effective loose coalition governments like yours are at implementing fiscal measures, particularly as ambitious as you've outlined. One argument is that they lead to fragmented policy responses because of a lack of cooperation between ministries controlled by different parties.

KC: That's fair. It's not as good as a single-party government. But then again it depends on who the single party is. Because there is a check and balance that is going on within our coalition government and the public has seen that through the press.

In many ways, this past month or two, the opposition has been invisible and policy debate has taken place within the government, with the senate's help. So, as I said it, depends on who that single party is - but nothing beats a quality single-party government.

But having said that, there is every incentive for every party involved in the coalition to go out there and spend this money according to plan. There is no good reason at all they should choose to sit on this money for the parts they are responsible. And I'm sure they won't.

ATol: How have you found, in your capacity as minister of finance, working with Bhum Jai Thai, which controls the Transport Ministry?

KC: The interesting thing is that the politics of the northeast, which is where they [BJT] are from, and the politics of Bangkok and the south, there are a lot similarities but just as many differences. We just need to understand that. Southern voters are more ideological, less concerned about projects and funds; northeastern voters are quite the opposite. No right or wrong, it just means people have different needs and expectations.

We manage the situation based upon common interests of an understanding of the fact that the country's best interests are served by ensuring we have a stable government and one that is in a position to implement the TKK strategy for at least another year. I say another year because even though it's a three-year project, the bulk of the projects will be initiated in the first year and completed within three. Once we've started these projects, even if there is a change in government, the projects are in place, the funds are in place, and the rest is just a matter of follow through.

ATol: There is a strong perception that the Democrats are more comfortable selling their economic vision to foreign audiences than to local constituencies. Former prime minister Thaksin Shinawatra's Thai Rak Thai party used slick political marketing and simple messages to sell his policies at the grassroots level. What is being done to communicate your economic message to rural constituencies, particularly in the northeast where elections are won and lost?

KC: What we all learned from Thai Rak Thai's mass communication strategies that were employed to popularize his policies is that communication is a necessary and important part of what governments have to do in this day and age.

We're working on a mass media program on Thai Khem Kaeng, everything we do in regards to the different projects, even the financial part with the savings bond, is partly designed to finance the program but also partly designed to get the general public involved.

Imagine there are over 6,000 projects of different nature - hospitals schools, roads, water - all over the country every project is going to be branded. Individual projects will be launched as part of the broad Thai Khem Kaeng policy. So people will know not that a road is being built, but that it's being built as part of the Thai Khem Kaeng program, by this particular government. We'll be going all out to do that.

ATol: So how much of that political marketing will mirror the marketing Thaksin did of his policies?

KC: Well, at least we'll be telling the truth.

ATol: The Democrats were highly critical of Thaksin's ramped up spending policies and populism while in the opposition. But many see vestiges of his economic legacy in several of your policies, including the sufficiency development funds and 2,000 baht handouts to low-income earners. What did Thaksin get right and how do your policies distinctly differ from his?

KC: He got the people involved, which I think is right. I'm the son of a civil servant, a Ministry of Finance civil servant, and then I was a career banker for almost 20 years, so I have the classic upbringing of the so-called mandarin class.

I've been in electoral politics for four years now, fought two elections, and I actually have an increasing not decreasing belief that the general population is more often than not right and that the elite minority, with all their rationality and reason, is often misguided in their self-beliefs.

The fact that Thaksin went out to the broad population I think will serve the country well in the long term. The problem is he did it, frankly, with false and misleading information, which is the dark side of his legacy and also turns something that could be positive for the country potentially into something that is very dangerous. Which is the kind of situation that we've had for the last year or so and this government is trying to amend.

So get the people involved, but make sure that they are properly informed, don't mislead them with false promises and distorted facts, and, above all, don't in the meantime engage in corruption. I guess what at the end of the day brought down Thaksin and people's faith in him wasn't the fact that some of his policies were flawed - and so many of them were flawed in execution, if not in conception - but the fact that at the end of the day people thought whatever good he did was all self-serving.

ATol: Do you think that foreign investors associate your government with the nationalistic policies put in place by the military appointed government installed after the 2006 coup that ousted Thaksin?

KC: No, I don't think so. I mean, for example, the military government imposed capital controls and you're never going to see an ex-JP Morgan banker do that.

ATol: But there are perceptions that conservative forces aligned behind the formation of your coalition government and that the same nationalistic elements are still lingering in the background. Are you having a difficult time putting these perceptions to rest?

KC: On Monday [in the senate] we were debating against that particular conservative force, some of whom were saying why don't we just sit back and go back to sufficiency economy rather than trying to invest our way out of this crisis. We're not polarized in that way - this government is a government for unity, really.

I don't think it will be very easy for anybody to pigeonhole this particular government as being a conservative force or pro-military force or whatever. Thailand has never been radicalized and in many ways I think this government better reflects true Thailand than any previous government over the last 10 years.

ATol: To what extent is the so-called establishment an impediment to reform in this country? Are the Democrats to your mind part and parcel of that establishment?

KC: I like to think not; let me give you a concrete example. We at the Ministry of Finance are now thinking about reforming property laws. I've been told that this is something we should stay away from, that it's political suicide ... But in terms of the need to reform the way tax is collected here in Thailand, I don't think there is any doubt and so therefore I fully intend to work towards achieving this.

The bulk of our tax income comes from revenues. And there's an inherent unfairness of that as compared to collecting taxes from people's wealth and assets. There needs to be a balance - I'm not saying it should be all one way or the other. But right now only 10% of government revenue is from assets. That's far too low compared to other economies.

I took the issue and gave a presentation to party members yesterday [June 24], very interesting, lots of debate saying "don't do it because it will bring the government down"; "do it because it is fair and it will be this government's legacy"; "do it but pretend not to be doing it", all kinds of opinions. The prime minister is behind this, the timing is always critical, and proper communication is important.

I've reserved some funds in the current budget precisely because I feel there will be a need to communicate with the public on several key laws and issues. Our intention is to affect the right kind of change. I'm not here just to be here. If I can't do things that I feel need to be done I might as well be lying on a beach.

ATol: There is a perception that your government is pro-establishment, so by putting this land tax policy on the agenda you are clearly going after certain establishment interests. Is this being done purposefully to change perceptions of your government's image?

KC: Let me tell you, let me tell you. We discussed a waiver [for the land tax], to draw a line who should be netted and who should be waived. And this tells a story. If you look at agricultural land across the nation, and if we were to say that those who own land valued at less than one million baht are exempted from this property tax that would equate to an exemption of 90% of all agricultural land holdings - yet we would lose only 10% of the expected tax revenue. That tells the whole story.

If I am able to communicate, I can tell the majority of the public, "Don't worry, you're not going to be taxed." At the same time I can tell my tax authorities, "Don't worry, you'll still get 90% of your expected revenues." And I think that speaks for the unequal distribution of wealth and assets here in Thailand. That's a problem that any self-respecting government must address regardless of potential political pitfalls.

ATol: You earlier broached tax reforms that would have equally gone after establishment interests through the proposal of an inheritance tax. Why has that since fallen off the table?

KC: I'm less keen on that, I must say. First of all, I can't do two at the same time. But philosophically I feel, number one, in practice it's hard to go after the inheritance tax and the truly rich can get away with it and it will be those somewhere in the middle that will end up paying.

Secondly, if I can successfully put in place a fair asset and property tax then there is less need to tax the transfer of that asset. It doesn't matter who owns it, father or son, you'll still be taxed in a fair way and long term. So I feel one negates the need for the other.

ATol: So again are the Democrats a part of the establishment or are they taking on the establishment?

KC: Neither. We don't feel we are doing either. We are working with the entire country. We are here to work for the people. If that sometimes means we have to step on a few toes, establishment or otherwise, then we'll do so with our customary politeness, making sure we apologize in the meantime.

ATol: Other countries in the region have leveraged the crisis as a political opportunity to push difficult economic reforms to spark more domestic demand-led growth. For instance, Malaysia has liberalized many service sub-sectors and allowed foreigners to take greater equity stakes in banks and insurance companies. Why haven't we seen similar competition-promoting measures in Thailand?

KC: Funny enough, I was able to go to a launch recently of a Malaysian bank, CIMB, taking a controlling stake in a bank [Bank Thai] previously owned by the Thai state. The law has been changed to allow the minister of finance to provide a waiver for 49% foreign ownership for banks.

I am in a position whereby I have been sending out signals saying that I'm willing to consider [using the waiver] whereby I think the system and overall economy will benefit. I've also at the same time made it clear that I see lack of competition in the financial services segment as a key impediment to development of capital markets and also the banking system.

So, it's easy enough to read between the lines. We're also working on a capital market development plan which will be concluded in the next couple of months. There will eventually be some very significant signals that will be sent from that plan.

ATol: Can you give me a hint as to what signals will be sent?

KC: Well, from the basic of stock exchange commercialization, liberalization of the brokerage industry, to considering how to move towards greater ability of foreign investors to participate directly in shares of companies on the stock exchange without being encumbered by the ownership laws [that limit foreign holdings].

ATol: So then your view is that by rolling back these various foreign ownership restrictions now in place it will give the domestic economy a needed jolt and spur the private investment that your fiscal measures are actually trying to set in motion?

KC: Absolutely, absolutely. I've always thought that if you can't think of anything else, then at least make sure there is free and fair competition. I do believe in markets.

ATol: And you agree that many markets in Thailand are captive to some very large conglomerate interests that perhaps it would be better for the country if they were broken up and exposed to more competition from the outside?

KC: I'm not against large companies as long as there is no abuse or monopolistic or oligopolistic power they might have over the market. I hesitate to answer your question as posed because I think that there are situations where having large strong champions can be positive for the economy.

The problem is that we've tried to rein them in through the use of regulations [1999 Trade Competition Act], but so far regulations have not proved to be as effective as one might hope in making sure there is free and fair competition. And that might be cultural or otherwise, but that is why we are moving towards greater liberalization.

ATol: All of this is no doubt positively received by capital markets, but there is still the black cloud on the horizon of potential for more political instability. I know some in the Democrats feel that the party benefited perceptually from the chaotic street protests in April and that they tarred Thaksin's and his supporters' image.

KC: It didn't tar him, it brought him to light - there's a difference. The risk is still there, definitely. I think I can safely say that the majority of the population wishes that it wasn't still there. But I don't think we can deny the fact that there is a remaining legacy.

I don't think we can deny and have to acknowledge the fact that Thaksin, with all the financial resources he has, still feels that the only way to regain what he feels is lost is through the creation of chaos, perhaps leading to some type of a vacuum into which he can be sucked. That's very unfortunate, but as I said it shines light on his true self.

I fully believe that the current trend of his declining popularity and credibility, both domestically and internationally, will continue. We, as the government, need to remain patient, resolute and continue to work for the people. I think there's no easy short cut out of this situation. It may mean Thailand underperforms its potential until we can be free of this particular dark legacy. Our job is to work towards that.

ATol: Do you think that political stability going forward is directly related to Thaksin's access to financial resources?

KC: His access to funds is definitely an issue. The reality is, rightly or wrongly, he still has a very strong base of very organized core supporters here in Thailand, especially in the northeast and the upper north. We must acknowledge that and must address that.

Even with all the money he has, if he didn't have genuine organizational and popular support he wouldn't be able to cause as much trouble as he has caused and appears to be intending to continue to cause. So it isn't one single factor: money is important, but to say it's all about money would be doing ourselves a disservice.

Shawn W Crispin is Asia Times Online's Southeast Asia Editor. He may be reached at swcrispin@atimes.com.

Thursday, June 25, 2009

Newly Leaked Pictures of Burma’s Secret Tunnels

In Burma, several senior military officials have been detained following the leakage of photos of secret tunnels being built on the Burmese/Thai Border. Investigations are now underway.

Several Burmese military officials have been detained following the leaking of photos about the existence of secret tunnels built by foreign workers.

The tunnels, which are codenamed Tortoise Shells by the Burmese military, are large enough for heavy vehicles to drive through and have an independent power supply.

According to the photographs obtained by the Norway-based TV station Democratic Voice of Burma, or DVB, it’s believed that North Korea is involved in the tunneling project which started 1996.

There will reportedly be more than 800 underground facilities when the project is completed. Nearly 40 of 53 underground stations located at the Thai-Burmese border area are believed to been built since 2004.

N. Korea digs tunnels in Myanmar to earn dollars
By Bertil Lintner

Missiles and missile and nuclear technology, counterfeiting money and cigarette smuggling, front companies and restaurants in foreign countries, labor export to the Middle East -- North Korea has been very innovative when it comes to raising badly needed foreign exchange for the regime in Pyongyang. But there is a less known trade in service that the North Koreans have offered to its foreign clients: expertise in tunneling. A fascinating new glimpse of this business has now been offered in secret photos from Burma obtained by this correspondent.

The photos, taken between 2003 and 2006, show that while the rest of the world is speculating about the outcome of long-awaited elections in Burma, the ruling military junta has been busy digging in for the long haul -- literally. North Korean technicians have helped them construct underground facilities where they can survive any threats from their own people as well as the outside world. It is not known if the tunnels are linked to Burma's reported efforts to develop nuclear technology -- in which the North Koreans allegedly are active as well. (See Burma's Nuclear Temptation by Bertil Lintner, YaleGlobal, Dec. 3, 2008)

The photographs published here show that an extensive network of underground installations was built near Burma's new, fortified capital Naypyidaw. In November 2005, the military moved its administration from the old capital Rangoon to an entirely new site that was carved out of the wilderness 460 kilometers north of Rangoon.

Meaning the "Abode of Kings," Naypyidaw is meant to symbolize the power of the military and its desire to build a new state based on the tradition of Burma's pre-colonial warrior kings. But underground facilities were apparently deemed necessary to secure the military's grip on power.

Additional tunnels and underground meeting halls have been built near Taunggyi, the capital of Burma's northeastern Shan State and the home of several of the country's decades-long insurgencies. Some of the pictures, taken in June 2006, show a group of technicians in civilian dress walking out of a government guesthouse in the Naypyidaw area. Asian diplomats have identified those technicians, with features distinct from the Burmese workers around them, as North Koreans.

This is quite a turn around as Burma severed relations with Pyongyang in 1983 after North Korean agents planted a bomb at Rangoon's Martyrs Mausoleum killing 18 visiting South Korean officials, including the then-deputy prime minister and three other government ministers.

Secret talks between Burmese and North Korean diplomats began in Bangkok in the early 1990s. The two sides had discovered that despite the hostile act in the previous decade they had a lot in common. Both had come under unprecedented international condemnation, especially by the US, because of their blatant disregard for the most basic human rights and Pyongyang for its nuclear weapons program. Burma also needed more military hardware to suppress an increasingly rebellious urban population as well as ethnic rebels in the frontier areas. North Korea needed food, rubber and other essentials -- and was willing to accept barter deals, which suited the cash-strapped Burmese generals. "They have both drawn their wagons in a circle ready to defend themselves," a Bangkok-based Western diplomat said. "Burma's generals admire the North Koreans for standing up to the United States and wish they could do the same."

After an exchange of secret visits, North Korean armaments began to arrive in Burma. The curious relationship between Burma and North Korea was first disclosed in the Hong Kong-based weekly Far Eastern Economic Review on July 10, 2003. A group of 15-20 North Korean technicians were then seen at a government guesthouse near the old capital Rangoon. The report was met with skepticism, especially because of the 1983 Rangoon bombings. But, when North Korean-made field artillery pieces were seen in Burma in the early 2000s, it became clear that North Korea had found a new ally -- several years before diplomatic relations between the two countries were restored in April 2007.

"While based on a 1950s Russian design, these weapons (the field guns) were battle-tested and reliable," Australian Burma scholar Andrew Selth stated in a 2004 working paper for the Australian National University. "They significantly increased Burma's long-range artillery capabilities, which were then very weak." Since then, Burma has also taken delivery of North Korean truck-mounted, multiple rocket launchers and possibly also surface-to-air missiles for its Chinese-supplied naval vessels.

Then came the tunneling experts. Most of Pyongyang's own defense industries, including its chemical and biological-weapons programs, and many other military as well as government installations are underground. This includes known factories at Ganggye and Sakchu, where thousands of technicians and workers labor in a maze of tunnels dug under mountains. The export of such know-how to Burma was first documented in June 2006, when intelligence agencies intercepted a message from Naypyidaw confirming the arrival of a group of North Korean tunneling experts at the site. Today, three years later, the dates on the photos published today confirm the accuracy of this report. By now, the tunnels and underground installations should be completed, as would those near Taunggyi. This well-hidden complex ensures there is no danger of irate civilians storming government buildings, as they did during the massive pro-democracy uprising in August-September 1988. Sources say that the internationally isolated military junta may also consider these deep bunkers as their last repair in case of air strikes of the kind that the Taliban in Afghanistan or Saddam Hussein regime in Iraq endured.

It is not clear how much, or what, Burma has paid for the assistance provided by the North Korean experts, but it could be food -- or gold, which is found in riverbeds in northern Burma. Or some other mineral. Burma, of course, is not the only foreign tunneling venture by North Korea.

In southern Lebanon following the 2006 war, Israel's Defense Forces and the United Nations found several of the underground complexes, which by then had been abandoned by Hezbollah militants. By coincidence or not, these tunnels and underground rooms -- some big enough for meetings to be held there -- are strikingly similar to those the South Koreans have unearthed under the Demilitarized Zone that separates South from North Korea. Under small, manhole cover-sized entrances hidden under grass and bushes were steel-lined shafts with ladders leading down to big rooms with electricity, ventilation, bathrooms with showers and drainage systems.

Some of the tunnels are 40 meters deep and located only 100 meters from the Israeli border. North Korea's possible involvement in digging these tunnels is however, difficult to ascertain. According to Israeli investigative journalist Ronen Bergman, a senior officer in the Iranian Revolutionary Guards, who had defected to the West, revealed that, "thanks to the presence of hundreds of Iranian engineers and technicians, and experts from North Korea who were brought in by Iranian diplomats ... Hezbollah succeeded in building a 25-kilometer subterranean strip in South Lebanon."

Beirut sources suggest that it is more likely that Hezbollah has used North Korean designs and blueprints given to them by their Syrian or Iranian allies -- both of whom are close to the North Koreans. (Both Iran and Syria have acquired missile technology from North Korea, and what was believed to be a secret nuclear reactor in Syria built with North Korean help was destroyed by the Israeli air force in September 2007.) Either way, North Korean expertise in tunneling has become a valuable commodity for export. And Pyongyang is flexible about the method of payment as long as it helps the international pariah regime.

Bertil Lintner is a Swedish journalist based in Thailand and the author of several works on Asia, including "Blood Brothers: The Criminal Underworld of Asia" and "Great Leader, Dear Leader: Demystifying North Korea under the Kim Clan." He can be reached at lintner[at]asiapacificms.com


Thailand fails to halt dramatic export fall

Govt efforts fail to halt dramatic export fall

The government's efforts to drive exports are not effective enough to avert the country's worst slump in overseas sales since 1992, the University of the Thai Chamber of Commerce said yesterday.

The UTCC predicted that exports would contract by 17.7 per cent this year to US$146.33 billion (Bt5 trillion), a dramatic turnaround from last year's growth of 16.9 per cent.

Exports in the third quarter will drop to the lowest level for six years, shrinking 22.3 per cent year on year, as economic conditions remain poor.

In the worst case, exports could contract 22.7 per cent this year to $137.47 billion, the UTCC added.

Plunging exports signal that gross domestic product could shrink by more than 3-3.5 per cent, as exports make up about 65-70 per cent of GDP.

The main factors leading to the sharp export contraction are the global economic slump, increasing oil prices, the strengthening of the baht and the inefficiency of official measures to boost export growth, said the university.

The predicted 17.7-per-cent export fall is based on global trade dropping by 11 per cent, an average oil price of $63 per barrel and the baht averaging 34.4 against the US dollar.

Aat Pisanwanich, director of the UTCC's Centre for International Trade Studies, said exports would drop more sharply than during other crises because of the extent of this year's global economic meltdown.

"Many negative factors have caused exports to drop. Despite the government's attempts to boost exports, its measures are not |efficient enough to cope with the global economic downturn," he said.

He said the government's many overseas roadshows to promote exports to target and potential markets still lacked coordination between government agencies and the private sector.

The government must therefore increase its cooperation with the manufacturing and export sectors when drawing up export-promotion plans.

An intelligence unit to provide in-depth information on target markets and potential new markets is also needed, so that exporters can for example be alerted of any barriers that might obstruct trade growth, said Aat.

In drawing up its export-promotion strategies, the government must set up an 'Export Warning System', giving companies advance overseas trading and customs information.

The UTCC's forecast of a 17.7-per-cent export contraction takes into account the government's plan to inject financial liquidity for exporters, as well as moves to cut some import tariffs, he said.

The university predicts that exports to the traditional markets of the United States, Japan and the European Union's first 15 member countries will drop by 21.7 per cent this year, while exports to new potential markets in Africa, the Middle East, Latin America and Eastern Europe will fall by 16 per cent.

Exports to markets such as South Korea, Australia, Canada and Taiwan will fall 15.3 per cent, it said.

Imports this year are expected to drop by 25.7 per cent to $132.69 billion, resulting in a trade surplus of $13.63 billion. Aat said a higher trade surplus could cause the baht to appreciate.

Chainant Ukosakul, vice chairman of the Thai Chamber of Commerce's committee on trade rules and international trade, said the government must concentrate on solving exporters' liquidity problems, as many of them lack the finance to run their businesses because of lower income.

Land purchase through Thai spouse forbidden: Land Dept

Land purchase through Thai spouse forbidden: Land Dept

The director general of the Land Department has reiterated that foreigners using Thai nominees to buy land anywhere in the country will have their land title deeds revoked if caught – even if the nominee in question is a lawfully wedded spouse.

Land Department Director Anuwat Meteewiboonwut made the comments during a recent stop in Phuket as part of a nationwide inspection tour of 30 provinces.

The tour is aimed at improving public services by land officials in three areas: dress, conduct when dealing with the public and working harder to eliminate a backlog of work.

Many members of the public have complained that it takes up to a year to complete a transaction that should only take one day, he said.

Mr Anuwat, a former governor of both Phang Nga and Samut Prakan provinces, said he was satisfied on the first two points, but rated the general level of success among land officials nationwide at speeding up their work rate at “only 30%”.

The next round of inspection tours will come in July, after which time personnel changes will be considered if service does not improve, he said.

“We have to keep pressure on them, otherwise the work will not get done,” he said.

As for foreigners seeking to buy homes in Phuket, they can do so through the Condominium Act, which allows foreign ownership of up to 49% of any project, he said.

Foreigners cannot use a Thai spouse as a nominee to buy property in Thailand, however.

“If the Thai spouse has enough money to buy the house that is fine, but if the Thai has no money and uses money given to him or her by a foreigner to acquire property, that is against the law. If we check and find out later that a Thai person has been using money from a foreigner to buy land anywhere in Thailand, we will revoke title deeds,” he said.

Mr Anuwat said the provisions of [Ministry of Interior] ministerial order 43 makes it difficult to issue land documents quickly, as it requires action from a number of different agencies. Desire for land on the island has also led to encroachment problems here, he said.

As a key market for property companies, Phuket is a constant source of problems and complaints to the director general’s office, he admitted.

“We will try to resolve these problems and develop our personnel continuously in order to provide high quality services. Fortunately the governor of Phuket used to work in the Land Department, so he understands the procedures and can help co-ordinate all the agencies involved,” he said.

Mr Anuwat was speaking of Phuket Governor Wichai Phraisa-ngop, who served as Land Office director in Nakhon Pathom in 1997 and as deputy director of the Land Department nationwide in 2003.

Wednesday, June 24, 2009

North Korean and Burmese delegations meet

North Korea Myanmar Koreas Nuclear

North Korea Myanmar Koreas Nuclear

In this 2008 photo provided by Thai Irrawaddy News Magazine Wednesday, June 24, 2009, North Korean delegation, left, and the Burmese delegation take seats for a meeting in Pyongyang, North Korea. A North Korean ship suspected of carrying illicit weapons was off the coast of China on Wednesday, June 24, 2009, believed en route to Myanmar as regional military officials and a U.S. destroyer kept a close eye on the vessel’s movements.

Thai PM visits China to boost trade, lure tourists

BANGKOK -- Thai Prime Minister Abhisit Vejjajiva arrived in China today to boost trade and lure back tourists warned against traveling to the Southeast Asian country after Premier Wen Jiabao was evacuated by helicopter.

China has advised citizens against visiting Thailand since Wen and other regional leaders were forced two months ago to flee a summit disrupted by protesters who opposed Abhisit. The two leaders are scheduled to meet tonight.

Tourism will be high on Abhisit's agenda during the four- day trip as he aims to strengthen ties with Thailand's largest trading partner after Japan. Visitors from China, Thailand's largest market by volume last year, fell the most of any group from a year earlier in May, according to government data.

"The crisis that happened here led to a significant decline in tourists from China," Abhisit told reporters today in Bangkok before his aircraft left. "We will boost confidence. China's government is interested in infrastructure and mass transit projects. China is an expert in this area."

Chinese investment in agriculture, agro-industry and infrastructure, as well as greater access for Thai fruits and vegetables will also be sought, Abhisit said earlier this week.

Thailand's government has prepared an investment plan worth about 1.4 trillion baht ($40.9 billion) through the end of 2012 to revive an economy facing its first annual contraction since 1998. Exports amount to about 60 percent of gross domestic product, with foreign tourists contributing about 6 percent.

Arrivals Tumble

Arrivals at Bangkok's main airport from China and Hong Kong in May fell as much as 56 percent from a year earlier, more than double the overall decline of 26 percent, according to the Office of Tourism Development. That came a month after Thai protesters who claim Abhisit doesn't have a mandate to govern stormed the summit of 16 Asian leaders, forcing its cancellation.

"We rarely have any tour groups from China as the ban is still on," said Sisdivachr Cheewarattanaporn, president of the Thai-Chinese Tourism Alliance Association, who joined Abhisit on the trip along with about 100 other business leaders. "We need to go there to convince them, to regain their confidence."

Thailand's trade with China fell 25 percent to $11.3 billion in the first five months of the year, compared with an overall drop of 30 percent, according to Commerce Ministry data. The Southeast Asian nation's trade deficit with China narrowed to $363 million from $1.18 billion a year earlier, according to the data. Thai exports to Asia's biggest economy after Japan include rubber, petrochemicals and electronics.

'Erase Bad Image'

"This trip should help erase the earlier bad image about political instability, which weighed down our trade," said Dusit Nontanakorn, chairman of Thailand's Chamber of Commerce, who is also on the trip. "Even if we can get a slice of the market share there, it will help boost our trade a lot."

Charoen Pokphand Group, owned by Thailand's third-richest family, said in February it planned to buy an 11 percent stake in Shanghai AJ Corp., a Chinese investment company, for 588 million yuan ($86 million). China's manufacturing supports demand for commodities and components from companies like Hana Microelectronics Pcl and Siam Cement Pcl

Burmese Gems for Sale

By ARKAR MOEWednesday, June 24, 2009

A special Burmese gems emporium organized by the state-run Myanmar Gems Enterprise (MGE) is taking place at the Myanmar Convention Center (MCC). The sale started on 22 June and ends on July 4.

Over 8000 jade lots as well as quality gems, pearls and jewelry are to be sold through competitive bidding by tender.

Rangoon-based gems traders said regular jade buyers from Taiwan, Hong Kong and Beijing would come in lower numbers than in former years because of global calls for a boycott on Burmese gems and tightening Western sanctions.

Former US President George Bush signed the Burma Jade Act into law on July 29, 2008, restricting the import of precious Burmese gems and stones and extending existing import sanctions on Burma.

Charles Perigh, a western gemstone dealer with many friends in Burma, told The Irrawaddy: “Most of the best pits in Mogok, which is also called Rubyland, are run by relatives of high ranking family members of the Burmese military. There is no stability in the gems business and nothing is definite these days.”

“Although the Union of Myanmar Economic Holdings company (UMEH) sells gemstones in Rangoon by auction twice per year, low and medium quality roughs are cut and sold directly in Mogok through brokers,” Perigh said.

“Moreover, the cut stones, whether loose or mounted in jewelry, go to Thailand from Rangoon in different ways.”

“Some unique and first-class gems, such as clean pigeon-blood rubies weighing several carats, have a different destiny. These rubies often go directly into the pockets of family members of the regime in Mogok, who secretly send them to Singapore for sale through brokers to get a better price,” said Perigh.

According to officials at the US Department of Treasury, the sanctions target two conglomerates: the Union of Myanmar Economic Holdings Limited (UMEH) and the Myanmar Economic Corporation. Both have extensive businesses in a variety of sectors critical to the Burmese government, including the gem, banking and construction industries.

Perigh said: “I do not think the embargo is effective. In fact the jade business is Chinese. Roughs including huge boulders weighing several quintals are mainly exported to Hong Kong. This trade can bring great profit to the Burmese generals.”

Awng Wa, a member of the board of advisers for the All Kachin Students and Youth Union (AKSYU), who regularly monitors the jade trade at the border, said to The Irrawaddy: “Trade is only possible for persons close to the Burmese generals. Only they can easily go and sell in China, Singapore and other Asean countries. Moreover, they can buy very precious high quality rubies, sapphires and other gems at bargain prices now.”

“Nowadays, Jade sales are very low. Demand from Chinese traders has dropped, and dealing at the jade market in Hpacan has fallen. Most joint-venture jade companies in Hpacan have suspended mining operations, though some joint-venture jade companies which are related to Burmese military leaders remain in operation,” Awng Wa said.

According to the Central Statistical Organization, Burma produced 30,896.44 tons of jade and 20.5 million carats of gems in 2008. The gems included ruby, sapphire, spinel and peridot, as well as 767 kilograms of pearl.

Burma usually holds gem auctions twice a year, but in recent years they have been held with increasing frequency in a bid to raise foreign currency amid tightening sanctions against the junta. Four such auctions were held in 2006.

Thai PM leaves for China on official visit to boost investment trade and tourism

BANGKOK, June 24 (Xinhua) -- Thai Prime Minister Abhisit Vejjajiva on Wednesday left here for Beijing on an official visit to China to boost Sino-Thai strategic cooperation as well as his ambition to meet or even surpass the 2010 Sino-Thai investment, tourism and trade targets in face of the ongoing global economic and financial crisis.

This is the first Abhisit's visit to China since taking office in December. And his entourage is the biggest delegation Thailand has organized since he assumed office, and includes more than 100 representatives from both government and the private sectors.

During the trip, he is scheduled to meet his Chinese counterpart Wen Jiabao and pay a courtesy call on Chinese President Hu Jintao.

"China is a very important strategic partner of Thailand and I'm going to enhance the partnership and relationship between the two countries in very challenging times, when the world is facing a financial and economic crisis... at the same time there are also significant opportunities for the expansion of the relationship between China and Thailand, China and the ASEAN," Abhisit said in an interview with Xinhua before his visit.

To boost trade and tourism are top agenda for Abhisit's visit.

"We set targets for 2010, in terms of volume of trade, in terms of the number of tourists, in terms of investment. And before the crisis, I think we were on track and can meet those targets quite comfortably," he said, "But the first half of this year has seen a very big drop in exports and has seen a very big drop in number of tourists. That's a concern and is something we should discuss to see how we can fix that."

"At the very least, I think we should still aim for the targets that have been set in the past, if not actually being more ambitious, say, maybe we can try to even up that, and hope that next year and the year after, we'll see more favorable circumstances. "

According to Thailand's Commerce Ministry in April, the Sino-Thai trade target for 2010 is 50 billion U.S. dollars.

Specifically addressing the issue of boosting Thai tourism and attracting more Chinese tourists, Abhisit introduced the measures taken by his government, including waiving visa fees, reducing landing fees, and trying to provide further incentives.

Tourism Authority of Thailand's data on June 4 said that for the first quarter of 2009, visitor arrivals to Thailand totaled some 3.2 million, down 19 percent compared to the same period last year.

The tourism sector, generating about 540 billion baht (about 15.4 million U.S. dollars) annually, makes up more than six percent of Thailand's gross domestic product (GDP) and seven percent of its work force.

Meanwhile, Abhisit said he will invite Chinese Premier Wen Jiabao to visit Thailand before or after the ASEAN Summit and Related Summits scheduled to be held in southern island of Phuket on October 23-25.

The summits scheduled for April 10-12 in Thailand's eastern beach resort city of Pattya, was forced to be canceled after thousands supporters of the anti-government United Front for Democracy against Dictatorship (UDD) or the so-called "red-shirts" rushed into the meeting revenue. Since then, the Thai government has set late October as the time for the next summits and consulted with related countries.

Thai mega-loan package sails through Senate

BANGKOK, June 23 (Xinhua) -- Thai Senate endorsed the executive decree authorising the Ministry of Finance to seek loans of 400 billion baht (11.72 billion U.S. dollars) for economic stimulus package, Thai media reported Tuesday.

According to Thai News Agency, Prime Minister Abhisit Vejjajivaon Monday night clarified to the Senate the necessity of the decree as the government needs the money for various projects to spur the economy and create jobs, before the Senate voted 69 to 48 to approve it, with 11 senators abstaining.

The controversial package, whose huge amount was seen unnecessary by some MPs, had sailed through the extraordinary session of Parliament on June 15.

Under the second stimulus plan by Abhisit administration, the loans of 400 billion baht to be borrowed under the executive decree, will be used to finance the government's budget deficit and to finance public infrastructure investments.

There is another 400 billion baht borrowing plan that has been passed by the Parliament on June 16. The second 400 billion baht will be used to pay government overhead such as salaries for civil servants, amid the government's dwindling tax collections.

The two borrowing plans, with a combined value of 800 billion baht (23.44 billion U.S. dollars), are part of the Thai government's second economic stimulus package worth totally 1.43-trillion baht (41.90 billion U.S. dollars), which will cover multi investment projects during 2009 to 2012.

Thai auto exports plunge 54.69 pct in May

BANGKOK (AFP) — Thai auto exports plunged more than 50 percent in May owing to a continued slump in demand as the global financial crisis spreads, an industry group has said.

The number of vehicle shipments tumbled 54.69 percent year-on-year to 31,913 units, which equated to a drop in value of 52.8 percent to 15.2 billion baht (447 million dollars), the Federation of Thai Industries (FTI) said.

"As the global financial crisis had spread... demand has dropped by 40 percent in the key Thai export markets such as Australia, Asia and Europe. It is only in the Middle East that demands are still growing," the FTI said in its monthly statement.

In the first five months of 2009, Thailand exported 199,381 vehicles -- a drop of 37.88 percent compared with last year -- while the value of the industry's exports fell 36.73 percent to 91.8 billion baht.

The ongoing slump in car exports, as well as domestic sales, prompted the FTI to revise down its production targets for 2009.

It lowered the total auto production target by 32.57 percent to 940,000 units, compared with 2008's figure of 1.4 million.

The production target for exports was revised down by 34.94 percent to 510,000 units, compared with 784,000 units last year.

Exports account for 54.26 percent of total car production in Thailand.

Tuesday, June 23, 2009

Profile: Thai PM Abhisit Vejjajiva

BEIJING, June 23 (Xinhua) -- Thai Prime Minister Abhisit Vejjajiva is scheduled to pay an official visit to China on June 24-27 at the invitation of Chinese Premier Wen Jiabao.

Abhisit was born in 1964 in Newcastle-upon-Tyne, England, to an elite family from Bangkok. His parents are both medical professors and his father once served as Deputy Minister of Public Health in Thailand.

He graduated with a Bachelor's Degree in Philosophy, Politics and Economics and later obtained a Master's Degree in Economics from Oxford University in Britain.

Abhisit began his political career in 1992 as a Democrat MP for Bangkok constituency. He was reelected to the same seat in 1995 and 1996.

In the elections of 2001 and 2005, he won his seat at the House of Representatives as a Party List MP for the Democrat Party.

He has served as Democrat Party spokesman, government spokesman, Deputy-Secretary to the Prime Minister for Political Affairs, Chairman of the House Education Affairs Committee, and Minister to the Prime Minister's Office.

In 2005, Abhisit was chosen as Democrat Party leader to replace Banyat Bantadtan who resigned following a flat defeat by Thaksin Shinawatra's Thai Rak Thai party in the 2005 general election.

Abhisit was elected as Thailand's 27th Prime Minister on Dec. 15 last year at a special House voting session.

He married Dr Pimpen Sakuntabhai, a former dentist and now a lecturer at the Department of Mathematics at Chulalongkorn University in Thailand. They have two children.

Editor: Wang Hongjiang

Demand continues to fall in Phuket

Hopes for a recovery around end of the year

More than 10 residential projects with a combined market value of nearly Bt10 billion remain "on hold" in Phuket, because demand from both domestic and foreign buyers - especially for luxury homes - has fallen to less than half of last year's level.

Wanwipa Horbut, deputy managing director of luxury property developer Surin Hill Development, said demand for luxury residences in Phuket had continued to fall since the onset of the global economic crisis last year. Both domestic and foreign buyers have fled the market, leaving the company unable to sell its most recent condominium project, Baan Thai Layan in Phuket. The condominium, which was launched last year, is worth Bt1 billion.

"We launched this project with a focus on buyers interested in investing in Phuket. When the global recession hit last year, most investors delayed or suspended their plans. As a result we cannot sell our project," she said.

Surin Hill Development is trying to find new distribution channels to sell the condominium units completed so far, and is revising plans for a third phase of the development to meet changes in demand from home-buyers.

Wanwipa said although the company had "missed its target", it was continuing with construction. Fourteen units have been completed in the first phase and construction is continuing on 16 units in the second phase.

Pisarn Tangkasombat, president of the Arayaburi Group, which owns hotels and resorts and develops residential projects on Koh Samui and in Phuket and Krabi, said domestic and foreign demand for residences in Phuket was continuing to fall against figures from last year.

"Some Thai investors are interested in buying our residential projects, but the banks reject their loan applications. This is the main problem for local investors," he said.

Pisarn said a friend of his who planned to launch a residential project in Phuket worth nearly Bt1 billion suspended his project when he saw diminishing demand for residences in the area.

"We cannot say how many property projects have been suspended in Phuket, but we know of more than 10 projects worth nearly Bt10 billion," he said.

Phanom Kanjanathiemthao, managing director of property agency Knight Frank Charter (Thailand), said foreign investors continued to delay their investments in property projects in Thailand, especially in Phuket, where mainly luxury residences carried high prices.

"We believe the Phuket property market may recover in the final quarter of this year or next year because most of the property projects in this area focus on the luxury market," he said.

A survey by the Real Estate Information Centre earlier this year found there were 139 residential projects in Phuket offering a total of 12,334 units. Half of these have now been sold.

Phuket's main residential market focuses on upper-income earners. Most home prices range from Bt5 million to Bt12 million.

Monday, June 22, 2009

Burma's Secret Exodus: The Illegal Road to Patong

By Alan Morison and Chutima Sidasathian
Monday, June 22, 2009
HUNDREDS of Burmese are crossing into Thailand in secret and heading south to Ranong, Phang Nga and Phuket to beat the July 1 deadline for a new ID card system aimed at clarifying the number of legal workers.

As longboats packed with scores of Burmese cross to Ranong each night in darkness, Immigrations officers, the Royal Navy, the Army and Marine Police are conducting a crackdown.

The mass exodus is driven by people desperate to start a new life in Thailand, where harsh conditions and less-than-fair wages seem a vast improvement on going hungry under Burma's junta generals.

The Chief Inspector of Ranong Immigration, Police Lieutenant Colonel Nattarit Pinpak, said today: ''We are out every night. (on the delta crossing between Victoria Point and Ranong.)

''Some nights, up to 100 longtail boatloads are coming across. There could be 10 or more people in each boatload.''

Further south, large numbers of Burmese workers provide the Phuket holiday resort town of Patong with much of its low-paid labor, a European researcher has found.

As part of a comprehensive study of the economics of the popular tourist centre, Bianca Gantner interviewed workers at 40 small shops.

''More than the half of the employees were from Burma,'' she told

''They work in small shops and sell copy T-shirts, watches, DVDs. Burmese also work as beach chair vendors.

''I would say one third to one half of the beach chair vendors on Patong beach come from Burma.''

Ms Gantner was surprised to find that the people who rent the small Patong shops mostly do not work in them.

Phuketwan has established that the large numbers of lowly-paid Burmese enable the Thai renters to meet rapidly rising costs in the highly-competitive holiday town.

Ms Gantner, who is using the research for her PhD thesis in Vienna, Austria, said: ''Most of the Burmese are illegal, at least 80 percent.''

''If they get caught by the police (which is not very hard work for the police because the police know where they work and they don't look like Thais) they pay a fine which is about one-third of their monthly salary.''

Thousands of Burmese have made their homes illicitly along the Andaman coastline, with questions now being asked about what will happen to children born and raised on Phuket or in Ranong and Phang Nga.

Phuketwan contact with years of experience dealing with Burmese migration estimates that the Burmese population of Ranong is already three times the official Thai population of 177,000.

At least 12 illegal schools for Burmese children flourish in the provincial capital. Burmese television is beaming in. And all the signage in the local supermarkets is in three languages: Thai, English and Burmese.

Phuket's illegal Burmese population underpins the local economy, especially in the construction business.

Burmese, often with better English and a greater desperation for income, are present on Phuket in increasing numbers.

One expat told
Phuketwan: ''If I want to clear the weeds from the klong beside my house, a difficult job, Thais will change me 10,000 baht.

''But the local Burmese are happy to do it for 2000 baht.''

From July 1, illegal Burmese will be able to register so authorities have an accurate record of numbers in Thailand.

Unless it is quickly corrected, the economic downturn is expected to bring calls for more jobs, even those involving menial and underpaid labor, to be the preserve of Thais.

Ms Gantner said of the Burmese she encountered in large numbers in Patong: ''They just think from month to month. I think they are still hoping that more tourists will come next season.''

She hesitated to hazard a guess at the economic future of Patong and its Burmese workers because there so many unpredictable factors involved.

But she did say that she thought Patong was a good destination for tourists who want value for money, like crowded beaches (''there are people who like crowded beaches''), enjoy the nightlife and prefer to go to a destination directly from their country.

Thai Bourse To Conduct Roadshow In U.S., London From Late June

BANGKOK -(Dow Jones)- The Stock Exchange of Thailand's U.S. and U.K. roadshow, designed to showcase major Thai companies to fund managers, will start at the end of this week, the bourse said Monday.

More than 50 fund managers from 40 asset management funds in each city visited are expected to attend, it added.

The bourse, accompanied by Thanachart Securities, BNP Paribas Securities ( Asia) and nine other listed companies, will visit Boston and New York during June 25-26 and London during June 29-30, it said in a statement.

Listed companies joining the roadshow with a combined market capitalization of THB1.7 trillion ($49.77 billion) include Thailand's largest mobile phone operator by subscribers Advanced Info Service PCL (ADVANC.TH), Thailand's largest lender by assets Bangkok Bank PCL (BBL.TH), energy conglomerate PTT PCL (PTT.TH), national carrier Thai Airways International PCL (THAI.TH) and the country's largest canned and frozen seafood processor, Thai Union Frozen Products PCL (TUF.TH).

The exchange will visit London again during July 6-9 along with Deutsche Bank, TISCO Securities and five other listed companies, including Thailand's largest agricultural conglomerate Charoen Pokphand Foods PCL (CPF.TH), refiner IRPC PCL (IRPC.TH) and PTT Chemical PCL (PTTCH.TH).

Sunday, June 21, 2009

Thailand's central bank - weak or strong baht?


Just as banks must gauge risk in lending, central bank must look at relative costs of a weak or strong baht.

By: Parista Yuthamanop
Published: 22/06/2009 at 12:00 AM
Newspaper section: Business

Governments across the globe, Thailand is no exception, have adopted similar strategies to survive the worst economic crisis in eight decades - cut interest rates and increase government spending.

‘‘There is cost incurred from taking care of the exchange rate, assuming that we are successful,’’ says Dr Tarisa. PATTARACHAI PREECHAPANICH

Thailand's first stimulus package, worth 117 billion baht, was mostly aimed at easing the pain of the crisis on lower- and middle-income residents through utilities subsidies for the poor, a 2,000-baht cash handout to workers earning less than 15,000 baht per month, and free education for students.

A more ambitious stimulus plan commits 1.4 trillion baht to infrastructure investments through 2012, including programmes improving rail, irrigation, agriculture and logistics systems.

But monetary policy was the first line of defence against the global storm. The Bank of Thailand's Monetary Policy Committee slashed its one-day policy rate by an unprecedented full percentage point in December. Rates have fallen by 2.5 percentage points since late 2008 to the 1.25% now.

But while liquidity remains plentiful in the market, loan portfolios continue to shrink, as financial institutions tighten screening in light of economic uncertainties. Small and medium-sized companies have been particularly affected, despite support from state-controlled financial institutions.

Tarisa Watanagase, the governor of the Bank of Thailand, expressed sympathy for those frustrated by the parsimonious attitude of local banks.

The central bank has sought to strike a balance between the need to ensure proper risk management in the banking system and the need to ensure that credit flows to the private sector.

"Can the central bank order banks to lend? I don't think so. What is happening is a typical reaction of banks to the downturn," Dr Tarisa told the Bangkok Post.

"It would be worse if banks reacted differently. Our job is to ask local banks to strike a suitable balance, where they do not overreact or ignore the risks."

Thai banks have emerged from the crisis in generally solid shape, with none of the toxic assets on their balance sheets that have brought larger US and European peers to the verge of bankruptcy.

Asset quality and profitability remain solid, and most bankers expect loan growth to pick up going into the second half of the year as the overall economy recovers.

Eased monetary policy has led to a two-percentage-point decline in deposit rates and a 1.4-point fall in lending rates, Dr Tarisa said.

She noted that while banks' caution reflected in part fears of future non-performing loans, the decline in lending also stemmed from a fall in demand for credit as well as declines in inflation.

"It will not be too long before the impact of monetary policy plays out. The central bank cut interest rates by a full percentage point in December. This sent a strong signal to banks. We expect them to adjust [rates] more quickly than in the past," Dr Tarisa said.

Concern over the direction of the baht has also been building, with businesses asking the central bank to push the currency weaker to help support exports.

Dr Tarisa, however, maintains the long-held stance that intervention is only to smooth out volatility, not change the direction of the currency.

Most analysts agree the baht is set to appreciate this year, thanks to hefty current account surpluses and growing concern about the value of the dollar.

Dr Tarisa said intervention was no cure and exacted its own cost on the economy.

The central bank intervenes in the currency markets by buying and selling dollars for baht. If it wishes to stall appreciation in the face of capital inflows, it can buy dollars for baht to affect market forces, pushing up foreign reserves. But such tactics must also be accompanied by bond issues in the local market to control the money supply. The bonds come at a cost in the form of interest payments.

The 1997 crisis, when the central bank was left all but bankrupt following a failed defence of the exchange rate, remains fresh in the memory of the bank.

"There is cost incurred from taking care of the exchange rate, assuming that we are successful. But the real question is can we really be successful? The real sector, capital flows and market expectations all will affect the trend of the baht," Dr Tarisa said.

The strength or weakness of the currency should also not be judged by looking at a single cross-rate, but instead consider Thailand's overall competitiveness in the world market.

Dr Tarisa said the central bank instead uses nominal effective exchange rates (NEER), a weighed average of a basket of currencies, in judging external competitiveness.

The baht, against currencies of 21 trading partners, had a NEER of 77.22 in May, only slightly changed from 77.23 in January, even as the baht appreciated by 1% against the dollar.

According to the central bank, a 1% decline in NEER will increase GDP growth by 0.1 to 0.2 percentage points, assuming the currency trend lasts two years. The net benefit to Thailand of a weak currency is relatively low, due to the high import content of exports and the country's low efficiency in the use of oil and energy.

Pushing the baht in any direction essentially represents a transfer of wealth, from one side of the economy to the other.

"Is this counter-intuitive? No. While exporters earn more [from a weaker baht], importers will pay more," Dr Tarisa said. "And I believe it is an open question of whether the central bank should make this decision, even if it could. It's siding with one part of the economy at the expense of another."

Ultimately, the central bank wants the public to recognise that exchange rates move in unpredictable ways, based not only on economic performance and capital flows, but market expectations and fickle investor sentiment.

"Exporters and importers must understand these risks. We would like to see them manage [currency risk] themselves, rather than hope that the central bank will do so."