Political chaos looms, adding to uncertainty

Friday, February 26, 2010

Thaksin speaks to a red-shirt meeting from Dubai - So connected, so alone

Tensions may even escalate, say pundits


Parista Yuthamanop
Bangkok Post

While today's landmark court case regarding ousted premier Thaksin Shinawatra will have profound implications for his family's wealth, few, if any, pundits expect the ruling to mark the end of the political and social conflicts that have split the country.

Indeed, political tensions within the fragile coalition government of Abhisit Vejjajiva may well escalate, judging from the signs of growing disgruntlement among the partners.

The fear for the business community is that the Year of the Tiger will continue to be one of uncertainty and risk. Mr Abhisit's first year in office focused primarily on short-term stimulus programmes aimed at easing the country out of the recession. Political reconciliation largely took a back seat to economic survival.

Supavud Saicheua, a managing director of Phatra Securities, noted that during the Surayud Chulanont government, investor confidence was shaken by initiatives to tighten enforcement of the Foreign Business Act and the use of nominee shareholding structures. Authorities later backed away from such changes in the face of investor opposition.

"In the eyes of investors, the rules of the game change when politics change," he said.

Thailand's political instability has cast a negative light on the country's image, and complicated efforts to develop long-term development strategies for the country. Successive governments, for instance, have recognised the need to reduce Thailand's dependence on exports for growth - but the country depends on exports as much as ever, a danger for the medium term considering the tenuous state of the global economic recovery. Private investment meanwhile has plummeted since the 2006 military coup.

Sethaput Suthiwart-narueput, the chief economist at Siam Commercial Bank, says Thailand today relies on exports and consumption more than ever.

While most Asian economies have seen private investment rebound to match that prior to the 1997 Asian economic crisis, in Thailand, investment is at just 70% of pre-crisis levels.

"One change after the 1997 economic crisis was that the investors became more cautious. But the government has not invested," Mr Sethaput said.

Earlier this week, a survey by the Japan Bank for International Cooperation (JBIC) showed Thailand as the fourth most attractive regional investment destination for Japanese firms, after China, India and Vietnam. In recent years, Vietnam has surged past Thailand in attracting foreign investment.

Inadequate logistics networks, particularly rail networks, has resulted in Thailand being one of the most dependent and inefficient users of oil in the region relative to economic output.

The government hopes that the Thai Khem Khaeng project, committing 1.43 trillion baht over the next three years, will help address the problems in national infrastructure and pave the way for a more efficient, productive economy in the future.


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