The Vongthip Letter Nov 08

An unforgettable month: October 08 was indeed a horrifying month for the world’s business community. On 6/10/08, the European financial markets were spinning down what looked like a Black Hole. For days and nights, the European heads of state were shuttling back and forth trying to stop the world’s largest ever financial meltdown.

Prompted by UK’s PM Gordon Brown’s most workable formula, the EU governments coordinated to guarantee bank deposits and to pump in hundreds of billion of Euro into their respective banking giants, to keep them afloat, free up the frozen inter-bank markets and revive their stock markets. (BD: What this meant for Thailand with her very own set of additional troubles?)

Although global market sentiments seemed to have improved by end of 10/08, many believed more disastrous news were in pipe-line as large MNC’s started to announce the results of their last quarter. While the world was starring in the face of a global recession, developed and emerging countries alike went on full alert to prepare themselves and their citizens for the economic tsunami ahead.

By Vongthip Chumpani*

Bloody encounter: In Thailand, all hell broke loose on 7/10/08 when the Somchai cabinet decided to force their way to read their policy statement in the parliament, as thousands of unarmed PAD demonstrators surrounded the parliament compound. When hundreds of riot police started to fire “explosive” tear gas into the defiant crowd, leaving 2 dead, 4 without their arms and legs, and some 400 wounded, tens of thousand more demonstrators joined in.

The infuriated public condemned the government for their violence. All the three armed forces chiefs went on television, in their full uniforms, to “recommend” that PM Somchai resign to show his responsibility. True to their party’s political culture, PM Somchai continued unperturbed, even though he was greeted by hostile crowds of “PAD Clappers” wherever he went, except around PPP strongholds.

The Somchai government

Without much credibility left, the Somchai administration has become a defiant lame duck. The humiliated PM dutifully attended the ASEM Meeting in Beijing, held a (futile) meeting with President Hun Sen of Cambodia on the Phra Viharn dispute, and made his state visits to Laos and Vietnam. He has also decided to host the Asean Summit meeting in 12/08 in Chiang Mai instead of in Bangkok.

During 10/08, his Cabinet has managed to allocate an additional budget of THB 100 billion, to be injected directly to the grassroots (SML Program etc.) as well as to support farm prices. Another THB 140 billion has also been approved for the immediate construction of the Purple Line. A 6% salary increase for government officials and personal income tax-cut were also being considered. More populist spending was reported to be in the pipeline in case of a snap election.

Guilty!

After almost two years of legal formalities, the Supreme Court for Politicians passed their land-mark verdict on the Ratchada Case on 21/10/08. Thaksin was found guilty and sentenced, in absentia, to a 2 year jail term on grounds of conflict of interest and abuse of power. The furious former PM (who has jumped bail and escaped 5 arrest warrants) wrote an open letter to his international mass media friends to refute the guilty verdict.

He bluntly accused the Thai courts of conspiring with the military to oust him from power and keep him out of the country. The same message was then broadcasted to his adoring fans in Bangkok, the north and the north-east of Thailand, via a huge political rally, the internet, community radios and even a government’s TV channel!

Through it all, the Thai courts and the Thai military kept their cool in silence. It would not be long before the courts were due to pass their verdicts on other pending cases against Thaksin & Co., including the verdict on the dissolution of the 3 coalition government parties on account of their proven election frauds.

An eye for an eye

Much to the chagrin of one and all, the Somchai government continued to “disregard” the increasingly visible and hostile activities of the newly revitalized Red Shirt Army against not only the PAD but more recently the so called “high level elites” of the country. Over 600 websites and community radio in Bangkok, the north and the northeast, have stepped up their vicious slanders against the monarchy, the army and the judiciary.

Bomb threats and nocturnal shoot-outs around the PAD’s stronghold at the government house were more or less ignored. Political temperature rose considerably after Thaksin phoned in on 1/11/08 to address some 60,000 of his die-hard Red Shirt fans, gathered at Bangkok’s largest stadium. He blamed the Thai court for their conspiracy to keep him away from home for 10 years.

Buoyed by Thaksin’s latest do-or-die move, the hard-core PPP faction has gone ahead to push for the amendment of Article 291, to set up the highly controversial committee (Sor Sor Ror 3) to amend the 2007 Constitution, to seek amnesty for the 111 TRT Party’s executives and, last but not least, to even seek a royal pardon for Thaksin!

The growth engines

Throughout October, business people have been preoccupied by the daily catastrophic news coming first from the USA, then the EU, Japan, South Korea, China and the rest of Asia. Amidst dire predictions of doom and gloom, it was most difficult to keep one’s head on one’s shoulder. However, there was one consolation for the business people in Thailand i.e. Thailand would at least be better off than most of their peers in other emerging markets.

Thanks of course to the country’s more moderate growth rates and smaller speculative booms in the equity, the commodity and the property markets during the last few years. Moreover, both our financial and our real sectors have not plunged as steeply and sharply as our (small) stock market yet. Notwithstanding the optimism, Thailand would not be able to escape unscathed from the looming global recession. All possible measures must be taken to tighten our belts and prepare ourselves for a very rough ride in the next 6-8 months.

So far, not so good

Thailand’s 2008 growth rate has been revised down to below 5%. Inflation rate has tapered off to around 6% now that oil prices have plunged to USD 60. The Thai Baht has also weakened to just above THB 35 which should, by and large, benefit our exports. Although interest rates worldwide have come down hard and fast, our repo rate has been maintained at 3.50%. Thai banks’ average loan to deposit ratio has remained below 90% and off-shore borrowings at only 30% of GDP.

The negative impacts of global liquidity and credit crunch have not yet been felt in Thailand. Foreign MNC’s, however, have been told to fend for themselves as their parent companies had to struggle hard to raise funds in their respective home countries. Banks in Thailand have had no choice but to start curtailing their loan portfolios and to increase their loan margins.

Fresh funds would have to be injected by the government into the SME’s soon to avoid the crowding-out effect when the government too would have to raise funds to fuel their new spending programs and mega projects.

Change has come

As expected, Senator Barack Obama won a landslide US presidential election on 4/1/08 and triggered the Obama Fever worldwide. Now that the Americans have voted overwhelmingly for “Change,” the world would do well to understand and prepare themselves for these changes, sooner rather than later.

For now anyway, we could at least be glad that America would have a better, younger and stronger leadership. Like it or not, Thailand too would have to change, particularly our messy political system which has been so misused by our dear politicians to distort the true meaning of democracy, to destroy the check and balance in both our executive and legislative branches, and now, to discredit our judiciary.

Counting our blessings

Compared to a lot of countries, however, Thailand has been lucky to be able to maintain up to now, in spite of a number of horrible political faux pas, a resilient economy and a still strong and coherent society. Let us hope that our worst ever political crisis would come to an end without more unnecessary bloodshed.

Let us pray that time and circumstances would enable our urban and rural society to come together again soon to live in peace and harmony that Thailand has been known to enjoy in the last six decades, under the wise and selfless leadership of HM King Bhumibhol.

* 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.