The Vongthip Letter Nov 07

Hardly anybody has a better grasp of the economical and political ongoings in Thailand than Khun Vongthip Chumpani of Bangkok Bank.

Khun Vongthip has “that urge to write.” Her monthly analysis of current Thailand is as refreshing as insightful as astonishingly crisp.

absolutelyBangkok.com will bring Khun Vongthip’s letters in full length – not even trying to summarize them or bringing them as a plagiarism of BangkokDan. Makes good reading – enjoy.

By Vongthip Chumpani*

Our prayers – answered: As expected, October was another miserable month in Thailand. On 13/10/07, Thai people were holding their breath when it was announced that HM the King had a stroke and was hospitalized. Most fortunately, he recovered quite quickly and was able to walk out of the hospital on 7/11/07. This, we believed, was due also to the fervent and steadfast prayers of his devoted subjects who tirelessly monitored the palace’s daily announcement of his condition.

During those 23 anxious days, a million people from all walks of life, visited the hospital to pay homage and convey their get-well messages. On 25/10/07, Thai citizens heard another depressing news. HRH Princess Kalayani (HM the King’s one and only sister who has been in the hospital since 6/07 for cancer treatment) went into another bad relapse. The people have been hoping against hope that HM and his beloved sister would recover and become strong enough to join the celebration, planned for HM’s 80th birthday on 5/12/07.

The caretakers

Early in 10/07, DPM Paiboon Watanasiritham suffered a heart attack while attending the cabinet meeting. He was given a bypass operation and was back at work in barely two weeks. When the royal decree was signed to officially fix the election date on Sunday 23/12/07, the Surayud Government announced they would not consider any more new legislation and expenditure.

They would however try to get some of the less controversial pending bills such as the Security Act (!) passed by the NLA. Many important bills, including Foreign Business Act, Retail Trade Act and Money Act, have been kept pending for the new government to reconsider. In the mean time, Chairman of CNS, General Sonthi was invited to join the Surayud government as DPM in charge of national security and of the general election.

Expect the unexpected

Up until 7/11/07, our dear politicians were constantly changing their partners and moving frantically from one party to another. In a matter of days, friends turned foes and enemies kissed and made up before turning around to break up again. Finally the dust seemed to settle on 7/11/07 when all the major parties officially registered and announced their candidates.

The real contention would apparently be between the Democrats (under Aphisit) and the PPP (former TRT now under Samak). The premiership however could be up for grabs also by leaders of the three medium size parties i.e. Banharn of Chart Thai, Suvit of Puea Pandin, and Prachai of Matchimatipatai. Left floating in the air still were the two “political kingmakers”, General Chavalit and Sanoh Thientong.

Hovering above them all, to make sure Thailand has a “clean and fair” election, were the stern Election Commission, the “samarnchan” government and the now-divided military. Things would turn very nasty from now until 23/12/07 and beyond!

High hopes indeed

In the next six weeks, confused voters would be bombarded with highly imaginative political campaigns, laced with sweet promises of all the goodies to be delivered if successful. Although party-platforms have been lined up like never before, intelligent voters have been skeptical and unimpressed. They would prefer to know how the new government would be coping with the economic woes, triggered by the impending U.S. “recession”, the historically high oil price (USD 100) and the huge influx of foreign funds, fleeing the U.S. and the greenback into Asian equity and capital markets.

They have been concerned and anxious to hear how the new government planned to finance all their fancy projects and generous social welfare schemes. Other questions raised were: (1) Which of the parties could and would team up with which parties? (2) What were their hidden agenda? (3) How long would the Opposition be willing to give the new government time to work on their campaign promises.

Back to square one?

Somehow, the country’s elites just could not stop complaining that the country has paid dearly for the coup in term of image, goodwill and opportunities, but has got nothing to show for in return. They feared that the political situation would soon be back to where it was before 19/9/06. Under the circumstances, many political analysts have concluded that the new coalition government would be weak and short lived.

Their reasoning was that the 111 banned politicians (former TRT Party’s executives) would not be able to wait out their 5 year sentence. Their pardon and subsequent return to power would therefore ignite another national conflict that would have to be solved by calling for a fresh general election, if not by another coup?!

Fear and confusion

While Thailand has been preoccupied with political issues at home, panicked investors of the world have been worried sick by the quick succession of bad news and conflicting investment trends. The plunging USD continued its steep dive while oil price was surging toward USD 100 and gold price went over the USD 800 psychological level. The Sub-Prime market crash in the U.S. continued to take its toll, not only on international investors but also on American and international financial institutions.

Again and again, world’s capital markets went on dangerously steep roller-coaster rides as global investors scrambled to shift their assets out of the U.S. and USD. Faced with their own rising inflation and over-heated economy, China too has started to shift their massive international reserves out of USD into other assets especially commodities. The mighty American investor, Warren Buffett gave a stern warning about China market’s excessive value, after liquidating his entire equity position in China Petroleum!

Inching on at THB 34 to USD

The Thai economic indicators of 3Q07 were somewhat better than expected due to the still robust exports and mild recovery in household consumption and private investment. Although exports to the U.S. shrank by 6.6%, exports went up 12.6% to USD 13.2 billion. Imports totaled USD 11.3 billion, up 9.3% yoy (including USD 150 million aircrafts). In 9/07 trade balance was USD 1.9 billion positive. Current account surplus increased to USD 1.8 billion.

Balance of payment shot up to USD 4.7 billion. Official reserves climbed to USD 80.7 billion. According to the Bank of Thailand, oil price has increased by 4% since the beginning of 07. Every 1% increase in oil prices has shed 0.04% off the GDP. Every THB 1 the currency strengthened against the USD, retail oil prices fell by THB 0.50-0.60. In line with other regional markets, the SET ended the month on a strong note at 907.

Do or die

With both the U.S. and Japan in slowing-down mode, Thailand would need to move fast to seek out new export market niches particularly in China, India, Russia, Middle East and even Africa. Carefully planned outward-bound FDI’s to the neighboring countries as well as developed and developing countries would have to be encouraged and jointly supported by the government and the private sector.

With ever stronger THB and shrinking demands from traditional markets, Thai manufacturers could no longer squeeze more revenues from their production and cheap labor. For their own survival, they would have to adjust their strategies quickly to become part of the powerful global supply chains. Own brands, higher value added product categories, and, production customization as closely to their export markets as possible, would all go a long way to boost the country’s export revenues.

À la Ocean 12

When the Nobel Prize Winner, Professor Joseph Stieglitz gave a speech in Bangkok on 31/10/07, many found it most refreshing to hear their own doubts, suspicions and fears about globalization being listed out by the good professor. Nowadays, it is no longer relevant to talk only about the rich and the poor countries but to also understand about the fast widening wealth-distribution-gaps in both the developed and the developing countries.

In our fair city of Bangkok, the rapidly rising oil prices has hit the low income people hard. Thefts, robberies and burglaries have increased dramatically in numbers as well as in their boldness. Construction workers of posh residential high-rises have been systematically raiding the neighborhood à la Ocean 12. So far the hard working taxpayers have been left to fend for themselves. If the BMA and the police continued to ignore these new security threats, Bangkok would soon become another unsafe city where well-to-do people live and work in walled-off enclaves.

* Vongthip Chumpani is an advisor to and former president of Bangkok Bank and a former advisor to the Senate Foreign Relations Committee. All views and opinions expressed herein are entirely from her own personal observations.