วันพุธ, มิถุนายน 01, 2559

Thailand: Why the Land of Smiles is Frowning

Prayuth Chan-Ocha,Thailand's prime minister. Photographer: Dario Pignatelli/Bloomberg

The “Land of Smiles” is frowning a bit too much for comfort these days.

June 1, 2016

On the surface, Thailand’s economy is holding its own. It grew 3.2% in the first quarter from a year earlier. Below it, the dynamics driving growth - a public-spending binge - mask the air of disapproval consuming the masses. As incomes stagnate and output lags Indonesia, Malaysia and the Philippines, Bangkok’s military leaders look perilously out of their depth.

That’s not the impression you get listening to Bank of Thailand Governor Veerathai Santiprabhob, who I bumped into last week at a EuroMoney investment forum in Bangkok. You tend to expect the official party line from a central banker appointed by a military junta. And Veerathai sure did accentuate the positive. “In the big picture,” he said, “we don’t have to be concerned about global economic volatility because we have better buffers than other emerging markets,” including low foreign-currency debt levels.

This last point is somewhat fair. It was a bubble in overseas debt that precipitated the 1997 Asian crisis, which began in Bangkok in July of that year. Today, Thailand faces a different economic crisis, but one just as dangerous in the long run: complacency.

As Veerathai tells overseas investors to smile and see the Thai sunshine, the junta is ignoring the structural problems festering even before they grabbed power in May 2014. They’re doing little to address the headwinds holding back competiveness, productivity, industrial capacity, state-own-enterprise inefficiency and education or eradicate corruption. The junta’s obsession with curbing dissent is colliding with a darkening global economy, evidenced by the 8% plunge in exports in April. The 15% drop in imports speaks to the sluggishness of domestic demand and the frowns on the faces of many of Thailand’s 67 million people.

Things are about to get worse as the all-important tourism sector slows with global growth, particularly as China loses altitude. Government pump-priming is easing the pain, but masking the depth of problems imperiling Thailand’s future. As neighboring Indonesia and the Philippines raise their manufacturing games, they’re vying for the automotive factories creating so many good-paying Thai jobs. So is Narendra Modi’s India. Complacency in Bangkok gives the Toyota’s and Honda’s that make Thailand the “Detroit of Asia” incentives to hedge their bets on a place that’s the economic equivalent of a stopped watch.

Since September, Prime Minister Prayuth Chan-Ocha unleashed more than $18 billion worth of short-term stimulus to shore up local demand. The central bank has left benchmark interest rates unchanged for the last eight policy meetings to support credit. But none of these efforts is creating new growth drivers, loads of new jobs or ensuring Thailand will keep its advantages in key sectors like autos.

“All this military-government largess is fine for 2016 growth, but come 2020, Thailand could be an also-ran in a region it once dazzled.”

It’s troubling, for example, to hear Deputy Prime Minister Somkid Jatusripitak effectively declare victory, saying the first quarter was “good news, and will be a turning point for confidence toward Thailand. This will show that the Thai economy has recovered.” Never mind that Thailand is lagging the Philippines (6.9% in the first quarter), Indonesia (4.9%) and even political-scandal-plagued Malaysia (4.2%). Or that Somkid was finance minister under populist leader Thaksin Shinawatra, whose regime was ousted in a 2006 coup amid corruption charges. Somkid resurrected many of Thaksin’s discredited ideas, like lavishing state funds on rural areas to win support.

All this military-government largess is fine for 2016 growth, but come 2020, Thailand could be an also-ran in a region it once dazzled. That was the striking thing about last week’s EuroMoney Greater Mekong Investment Forum. In year’s past, this annual event drawing more than 900 attendees was a Thailand lovefest. The focus was always on how Cambodia, Laos, Myanmar and Vietnam needed to learn from Thailand’s successes - its thriving banking system, political stability and Internet penetration.

But this year, there was far more discussion of opportunities elsewhere. Kamalkant Agarwal, head of Siam Commercial Bank’s international operations, for example, told me how the nation’s third-largest lender is increasingly looking abroad for growth. During the digital economy panel I moderated, talk quickly trailed off to Indonesia, which is in the throes of nascent startup boom. “We see lots of energy and opportunity there,” said Paul Srivorakul of Ardent Capital, one of Bangkok’s go-to mentors for entrepreneurs.

On the sidelines, when I probed government officials, businesspeople and bankers about the Mekong region, Vietnam was all anyone could talk about. Might U.S. President Barack Obama’s visit days earlier drive a new investment boom there? Thailand has wallowed in cautionary-tale territory for years now. If the junta doesn’t tend to economic upgrades, the talk may be of Thailand-passing - as in bypassing it altogether.

China’s slowdown raises the stakes. The downshift there, or even the “L-shaped recovery” Bangkok Bank China Chief Executive Officer Suwatchai Songwanich expects, is dreadful news for Thai resort owners, manufacturers and national government coffers alike.

Post-Thaksin-era Thailand is a disorienting place. The level of press freedom, degree of military involvement in the economy and basic dos-and-don’ts for Thais or visitors is a moving target. But when generals commandeer a nation, it’s best to have a plan. If two years on, Prayuth and his men have one, it’s high time they implemented it. After all, “Land of Frowns” has a rather unfortunate ring to it.