Thoughts on Thailand (2)

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KanKan Yuenyong is co-founder and director of Thailand-based think tank Siam Intelligence Unit. He contributes regularly to Investvine on a question-and-answer basis. In the following session he shares his views on the current political and economic situation in Thailand.

1. The political tensions in Thailand seem to have eased – fears of major unrests were ungrounded and the attendance of latest anti-government protest in early August was low. Has Thailand come to terms?

I wish, but unfortunately, like people say, it will not end until it ends. The problem of the anti-government or anti-Thaksin movement is that they are too divided. There are now at least 3 groups of them, (1) The People’s Army which maintains its base at Lumpini Park in Bangkok, (2) The Democrat Party (DP)’s supporters and (3) The Yellow Shirts or People’s Alliance for Democracy (PAD)’s supporters. Now they just wait and see. The People’s Army is too weak, they can mobilise only 800 – 1,000 people. The DP and PAD have been fighting each other since the Abhisit government. But, recently, there were some reports that PAD and DP have been talking and are sending moral support to the People’s Army.

I think PAD and DP try to negotiate how to organise themselves to fight against the government. PAD’s Sondhi Limthongkul asked all DP’s MPs to resign from their position and initiate a mass protest on the street. With this strategy, they believe that both PAD and DP can draw more than 100,000 protesters to the streets. But so far, DP’s Suthep Thueksuban rejected this offer. DP has decided to “paralyse” the legislation problem, by making a protest, veto, long debate, etc. in the parliament for all bills that are being inquired at the moment. This includes (1) the constitution amendment bill (by canceling the appointed senator and approving only an elected senator), (2) the amnesty bill and (3) the 2-trillion-baht infrastructure reform project bill.

But, so far, I don’t think the opposition’s tactic can stop the legislation process, instead they can just “poison” it. At the end of the day, the government will pass it with a superior vote. We need to see further how the DP and PAD can organise a big movement to topple the government. But at present, it’s hard to draw 100,000 people to street protests. It may happen, but will it last for months? And according to the public opinion, people have become bored with the protests from all sides. The government has started a reconciliation process, including the “reform assembly.”

2. The government did, however, threaten to fine and/or punish some Facebook posters for “liking” anti-government paroles. This is certainly not the right way to deal with it?

Personally, I don’t agree with this approach. But from the government’s view, this is understandable. There is a information warfare on social media. For example, sometimes there are rumours that there will be a coup, or the arrest of a VIP, and people do believe it and spread it to their friends. The message hence is being spread further and further. By the way, this is not happening only with this government. The former government under Abhisit’s administration did the same during the Red Shirt protest.

3. Nevertheless, the Thai economy has hit a road bump, it seems. Exports and investments are slowing down. What is happening?

It’s a “technical recession.” It means that Thailand had two consecutive quarters of declining GDP, minus 1.7 per cent in the first quarter of 2013 and minus 0.3 per cent in the second quarter. But there was a growth of 5.4 per cent in the first quarter of 2013 year-on-year and 2.8 per cent in the second quarter year-on-year, so this is not a “real recession.”

The problem is Thailand had a very strong GDP growth in the fourth quarter of 2012 because of economic stimulation, especially through the first-car-buyer campaign. Personally, I don’t agree with this campaign. It has nothing to do with the traffic jam problem. But this campaign benefits middle-class people who have enough money to buy their first car even without a rebate campaign. But they can now save money through the tax rebate at around 100,000 baht. With this saved money they buy import products, for example iPhones, iPads, luxury goods, and the money will leak out of the Thai economy. The handout gift cheque campaign (around 2,000 baht) or something called “helicopter money” during Abhisit administration caused the same problem.

But stimulus campaigns that target the grassroot people should be different. Actually, programmes such as the rice-pledging scheme can be considered another kind of a stimulus campaign. When grassroot people get this money they will buy local products, and the money will circulate within the Thai economy. It helps generate other businesses and further money.

The first-car-buyer campaign locks the debtors from consuming other products too. They have to save money for repayment. Somebody said that this is another reason for the declining GDP in both the first and second quarter of 2013. But, another reason is shrinking exports to the US, Japan, EU and China, but except ASEAN. The pattern is very similar to the fourth quarter of 2008 and the first quarter of 2009. I guess this will impact not only Thailand.

But on the other hand, the weakening of the Thai baht helps the export sector. In contrast to the first and second quarter of 2013, I think the export sector in second half of 2013 will recover. And this will make the US reconsider the cancellation of their quantitative easing policy. They may launch a next round of quantitative easing and weaken their dollar to compete with their exports again. This is an unresolved trade issue. It’s already a currency war. But the point is that the quantitative easing policy will reach its limitations in the future, considering the response of the bond market.

This is another issue. And it will be, like I mentioned in my last article, a catastrophe. The advanced economies don’t know how to deal with this problem. They are trying to reduce public debt, which I think will be more of a problem. Just see Japans case.

4. Tourism numbers in Thailand are constantly hitting new highs. Is the country’s exposure to this sector becoming too strong – seen from a macro-economic angle?

I think this is because of the better touristic conditions in Thailand. The country has a lot of tourism attractions together with a unique culture within Asia. Thailand also has a sound transportation infrastructure and good accommodation, as well as excellent airport facilities at both Suvarnabhumi Airport (for normal flights) and Don Mueang Airport (for budget flights). It’s normal for Thailand to get more and more passengers each year.

Suvarnabhumi passenger numbers grew from 47,910,904 in 2011 to 53,002,328 in 2012, and Don Mueang’s from  8,467,860 in 2011 to 9,541,552 in 2012. Budget carriers will boost the passenger numbers further. In the first half of 2013, passenger volume at Don Mueang skyrocketed by 572 per cent to 7.95 million.

I also heard that the Chinese’ movie “Lost in Thailand” was very successful to attract a lot of Chinese tourists. And that’s true, Chinese are among the highest tourism numbers in Thailand.

5. The oil spill in Koh Samet was a major environmental disaster. Did authorities and the culprit, PTT  Global Chemical, deal with it the right way in your opinion?

I have no information on this issue, I just read it in the newspapers. I don’t want to express an opinion on the issue as I do not have enough information on it. But personally, I feel that the damage is under control. However, this is a symptom of the Thai energy governance problem.

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Reading Time: 5 minutes

Kan Yuenyong is co-founder and director of Thailand-based think tank Siam Intelligence Unit. He contributes regularly to Investvine on a question-and-answer basis. In the following session he shares his views on the current political and economic situation in Thailand.

Reading Time: 5 minutes

KanKan Yuenyong is co-founder and director of Thailand-based think tank Siam Intelligence Unit. He contributes regularly to Investvine on a question-and-answer basis. In the following session he shares his views on the current political and economic situation in Thailand.

1. The political tensions in Thailand seem to have eased – fears of major unrests were ungrounded and the attendance of latest anti-government protest in early August was low. Has Thailand come to terms?

I wish, but unfortunately, like people say, it will not end until it ends. The problem of the anti-government or anti-Thaksin movement is that they are too divided. There are now at least 3 groups of them, (1) The People’s Army which maintains its base at Lumpini Park in Bangkok, (2) The Democrat Party (DP)’s supporters and (3) The Yellow Shirts or People’s Alliance for Democracy (PAD)’s supporters. Now they just wait and see. The People’s Army is too weak, they can mobilise only 800 – 1,000 people. The DP and PAD have been fighting each other since the Abhisit government. But, recently, there were some reports that PAD and DP have been talking and are sending moral support to the People’s Army.

I think PAD and DP try to negotiate how to organise themselves to fight against the government. PAD’s Sondhi Limthongkul asked all DP’s MPs to resign from their position and initiate a mass protest on the street. With this strategy, they believe that both PAD and DP can draw more than 100,000 protesters to the streets. But so far, DP’s Suthep Thueksuban rejected this offer. DP has decided to “paralyse” the legislation problem, by making a protest, veto, long debate, etc. in the parliament for all bills that are being inquired at the moment. This includes (1) the constitution amendment bill (by canceling the appointed senator and approving only an elected senator), (2) the amnesty bill and (3) the 2-trillion-baht infrastructure reform project bill.

But, so far, I don’t think the opposition’s tactic can stop the legislation process, instead they can just “poison” it. At the end of the day, the government will pass it with a superior vote. We need to see further how the DP and PAD can organise a big movement to topple the government. But at present, it’s hard to draw 100,000 people to street protests. It may happen, but will it last for months? And according to the public opinion, people have become bored with the protests from all sides. The government has started a reconciliation process, including the “reform assembly.”

2. The government did, however, threaten to fine and/or punish some Facebook posters for “liking” anti-government paroles. This is certainly not the right way to deal with it?

Personally, I don’t agree with this approach. But from the government’s view, this is understandable. There is a information warfare on social media. For example, sometimes there are rumours that there will be a coup, or the arrest of a VIP, and people do believe it and spread it to their friends. The message hence is being spread further and further. By the way, this is not happening only with this government. The former government under Abhisit’s administration did the same during the Red Shirt protest.

3. Nevertheless, the Thai economy has hit a road bump, it seems. Exports and investments are slowing down. What is happening?

It’s a “technical recession.” It means that Thailand had two consecutive quarters of declining GDP, minus 1.7 per cent in the first quarter of 2013 and minus 0.3 per cent in the second quarter. But there was a growth of 5.4 per cent in the first quarter of 2013 year-on-year and 2.8 per cent in the second quarter year-on-year, so this is not a “real recession.”

The problem is Thailand had a very strong GDP growth in the fourth quarter of 2012 because of economic stimulation, especially through the first-car-buyer campaign. Personally, I don’t agree with this campaign. It has nothing to do with the traffic jam problem. But this campaign benefits middle-class people who have enough money to buy their first car even without a rebate campaign. But they can now save money through the tax rebate at around 100,000 baht. With this saved money they buy import products, for example iPhones, iPads, luxury goods, and the money will leak out of the Thai economy. The handout gift cheque campaign (around 2,000 baht) or something called “helicopter money” during Abhisit administration caused the same problem.

But stimulus campaigns that target the grassroot people should be different. Actually, programmes such as the rice-pledging scheme can be considered another kind of a stimulus campaign. When grassroot people get this money they will buy local products, and the money will circulate within the Thai economy. It helps generate other businesses and further money.

The first-car-buyer campaign locks the debtors from consuming other products too. They have to save money for repayment. Somebody said that this is another reason for the declining GDP in both the first and second quarter of 2013. But, another reason is shrinking exports to the US, Japan, EU and China, but except ASEAN. The pattern is very similar to the fourth quarter of 2008 and the first quarter of 2009. I guess this will impact not only Thailand.

But on the other hand, the weakening of the Thai baht helps the export sector. In contrast to the first and second quarter of 2013, I think the export sector in second half of 2013 will recover. And this will make the US reconsider the cancellation of their quantitative easing policy. They may launch a next round of quantitative easing and weaken their dollar to compete with their exports again. This is an unresolved trade issue. It’s already a currency war. But the point is that the quantitative easing policy will reach its limitations in the future, considering the response of the bond market.

This is another issue. And it will be, like I mentioned in my last article, a catastrophe. The advanced economies don’t know how to deal with this problem. They are trying to reduce public debt, which I think will be more of a problem. Just see Japans case.

4. Tourism numbers in Thailand are constantly hitting new highs. Is the country’s exposure to this sector becoming too strong – seen from a macro-economic angle?

I think this is because of the better touristic conditions in Thailand. The country has a lot of tourism attractions together with a unique culture within Asia. Thailand also has a sound transportation infrastructure and good accommodation, as well as excellent airport facilities at both Suvarnabhumi Airport (for normal flights) and Don Mueang Airport (for budget flights). It’s normal for Thailand to get more and more passengers each year.

Suvarnabhumi passenger numbers grew from 47,910,904 in 2011 to 53,002,328 in 2012, and Don Mueang’s from  8,467,860 in 2011 to 9,541,552 in 2012. Budget carriers will boost the passenger numbers further. In the first half of 2013, passenger volume at Don Mueang skyrocketed by 572 per cent to 7.95 million.

I also heard that the Chinese’ movie “Lost in Thailand” was very successful to attract a lot of Chinese tourists. And that’s true, Chinese are among the highest tourism numbers in Thailand.

5. The oil spill in Koh Samet was a major environmental disaster. Did authorities and the culprit, PTT  Global Chemical, deal with it the right way in your opinion?

I have no information on this issue, I just read it in the newspapers. I don’t want to express an opinion on the issue as I do not have enough information on it. But personally, I feel that the damage is under control. However, this is a symptom of the Thai energy governance problem.

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