The Vongthip Letter Sep ’10

Reasons to celebrate: On 12/8/10, HM Queen Sirikit’s 78th birthday (also Thailand’s Mother’s Day), the people were in for a joyful celebration with their families over the long weekend. Local tourism managed to boost the number of tourists and hotel occupancies in most upcountry popular destinations, notwithstanding the heavy rainstorms and floods in some areas. With low unemployment (shortage of workers prevailing now in many areas) and good crop prices, domestic spending has increased markedly.

The economy was also gaining momentum while political reconciliation and stability seemed to have been restored. The new line-up, following mandatory retirement of key military, police and government officials on 30/9/10, seemed to have been achieved quite smoothly so far. The FY 2011 Budget Bill, totaling THB 2.06 trillion, passed the 2nd and 3rd readings. The three days grueling budget debate went on far into the night as opposition took the opportunity to repair their negative image after the red shirt violent uprising in May.

The government too was quick to explain that government borrowings have been halved to THB 400 billion and that it was their aim to achieve a balanced budget in five years. The public was assured that the 7% VAT would not be increased as was the rumor. The country’s tax base, however, would have to be expanded now that out of the population of 63 million, only 2.3 million people have actually been paying their personal income tax in this country!

By Vongthip Chumpani*

Election success: The Democrat Party’s better than expected success in the by election on 10/8/10 and the BMA Council election on 29/8/10 have given PM Abhisit the much needed time and space to work more aggressively on both the economic and social problems that have been plaguing the country because of political abuses and interferences. Apparently the Abhisit government’s numerous accomplishments in the last twenty months (mostly under unprecedented duress) have not gone unnoticed and unappreciated by intelligent and influential Bangkok middle class voters.

In 8/10 only seven provinces (including Bangkok) were kept under the emergency decree while court cases against government officials, the yellow and the red shirts, continued to be processed. There were also a number of explosives thrown at strategic locations e.g. NBT TV station, Bhum Jai Thai Party headquarters and party bosses’ hangout. Alarmed by the renewed threats of violence, the CRES announced they would send soldiers to guard some 464 spots, identified as targets for violence.

In 8/10 the Abhisit government was caught in a bind between Thailand’s two mighty allies i.e. the USA and Russia, both of whom “asked” Thailand to hand to over to them the infamous international “death merchant” whose planeload of deadly war weapons was impounded at an airport in Thailand a few months ago. PM Abhisit announced that Viktor Bout case would have to be conducted in accordance with the Thai laws and cleared by the Thai court first before any extradition could be considered.

World Expo 2020

On 5/9/10 PM Abhisit flew to Shanghai to pitch Thailand as host for the 2020 World Expo in either Chiang Mai, Ayuttaya or Chonburi/Pattaya. The bid to showcase Thailand was prompted by the quest for national pride and unity as well as the need to implement many of the much needed mega infrastructure projects that had been put on the back burners in the last five to six years because of political conflicts. While in China, PM Abhisit took the opportunity to ride their high speed train and inspect their modern rail systems that Thailand has now planned to construct, with China’s technical and financial cooperation and assistance.

To remain competitive especially when Asean Single Market became effective in 2015, Thailand would have to upgrade and expand her basic infrastructures e.g. regional standard railways and effective waterways linking not only the north and the south, the east and the west, but also the networks of highways, railways and waterways our neighboring GSM countries. In 8/10, the private sector continued to move aggressively to campaign against corruption. Blueprints to beef up the country’s competitiveness based on IMD criteria, included a clear work plan called Collective Actions to come up with anti corruption guidelines and declaration for volunteering SET listed and non listed companies to adopt in 11/10..

Much accomplished

The climate change this year has caused more severe floods and landslides in the north, south and northeast along the Mekong River. Although rice farmers have not quite got what they wanted from the still volatile rice market, the prices of rice and other agricultural products e.g. rubber, maize, palm oil, sugar and fruits of the season were doing much better due to food shortage being experienced elsewhere in the world this year. Crop insurance program seemed to be working well in spite of some teething problems. Legislation on Farmer Welfare Fund was being tabled in the parliament.

Unorganized market debts restructuring and refinancing by government banks was moving steadily ahead. Good debtors were given special credit cards entitling them to borrow up to 50% of their one year regular repayment. Out of 1.2 million debtors, half have agreed to government work-out proposals, 400,000 were successfully refinanced with guarantors, and the rest were put under micro financing scheme, as per Sisaket model. So far, THB 600 million has been disbursed by the Rajprasong victims. PM Abhisit’s proposed minimum wage increase from THB 150 to THB 250 has been agreed by the private sector to take effect in 4/11.

Win some, lose some

The dramatic turn-round of Thai Airwayse (from THB 20 billion loss last year to THB twelve billion profit this year) under the new CEO, was singled out by PM Abhisit as a role model for other state enterprises to follow in term of positive corporate culture change, compliance with international KPI standards, transparency and good corporate governance. During the last week of 8/10, the highly controversial Map Ta Phut issue was at long last settled by the Administrative Court’s ruling that took three hours to read.

Only two (PTT Glycol and TPC) out of 65 frozen projects were rejected by the court, based on National Environment Board’s list of 11 types (out of 18 proposed by the working committee) of industrial projects considered to be harmful and requiring strict and complex environment and health impacts assessment, as published in the royal gazette on 23/8/10. Some 43 plaintiff villagers were heart broken by the ruling and vowed to continue their fight. Many believed that confidence of the industrial sector has been restored and that the affected villagers would be better taken care of by government from now on.

Most however tend to think that Map Ta Phut has been overpopulated by “dirty industries” and that the government should set up similar industrial estate elsewhere to accommodate further industrial expansion. A number of local key petrochemical groups have announced their decision to venture abroad with some of their new projects.

War and peace

In 8/10 Thaksin continued to keep a low profile, surfacing only in early 9/10 in South Africa to show off his photo with Mandela and to phone-in during a red shirt political concert. Meanwhile, more opposition MPs were reported to be moving quietly to join (in name or in spirit) the government coalition parties. A number of famous fortune tellers have come out to warn the public of possible violence in 10/10 that could lead to another change of government.

A few Puea Thai Party bosses have sent out signals for reconciliation talks with the government. PM Abhisit indicated that any peace talk would have to first be cleared within the Puea Thai Party, and should be based on his own five-points national reconciliation plan. Words needed to be supported by deeds i.e. the ongoing red shirt threats of violence, bombing, sabotage and assassination must also end. A couple of weeks after PM Abhisit’s three-hour televised debate with the country’s non government “experts” on Khao Preah Vihear issue, the Thai public was pleasantly surprised to see the quiet restoration of Thai-Cambodian diplomatic relation.

PM Hun Sen too has taken a 180 degree turn-around during his unscheduled meetings with PM Abhisit’s spokesman and deputy minister of commerce while they happened to be in Cambodia. PM Abhisit and PM Hun Sen were set to meet officially during the up and coming regional meetings in October and November this year.

Confidence in Thailand

The Thai economy continued to grow steadily in 7/10, with 45% increase in commodity prices, healthy consumption, 15% increase in tourist arrivals and a surge in private investments. Export grew 21% yoy to USD 15.48 billion and import (including gold) by 36.5 % to USD 16.22 billion. Although trade balance and current account were in deficit of USD 791 million and USD 1.1 billion respectively, the balance of payment was USD 1.41billion in the black. Official foreign reserve went up to USD 151.5 billion. In 8/10, the Baht went from strength to strength to end the month at THB 31.29 to USD, THB 39.68 to Euro and THB 36.84 to Yen 100.

Early in 9/10 PM Abhisit called a special meeting with the Bank of Thailand and all concerned to ensure the THB remained in line with other Asian currencies and not subject to any hot speculation against the currency. While importers and outbound tourists were happy with the strong THB, exporters and inbound tourism were bracing themselves for an even stronger THB as the green back continued to plunge. Notwithstanding the progressive increases in interest rates, the SET continued to surge confidently to end the month on a strong note at 913.

* 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.