Thailand Slips Behind ASEAN Competitors

A new report by the ASEAN Focus Group on perceptions of business in ASEAN and its neighbours confirms the decline of Thailand as an attractive place to do business since the heights of 2005. International investors, both those who have already established operations in Asia and those who have not, are now more likely to be planning investments in Vietnam, Indonesia and Malaysia rather than Thailand.

The survey was conducted in December 2008, when the political problems caused by the anti-democracy movement were at their most intense and this may have had some impact upon results. It is also always possible to criticize the methodology by which surveys like this are conducted but there seems to me no reason to suspect systematic bias or lack of robustness.

The authors describe the main findings as including:

“Expansion plans: despite the adverse global financial climate, a majority of respondents of respondents are planning or considering commercial expansion in the region, with China, India, Vietnam and Malaysia perceived as the most attractive South East Asian investment locations. Indonesia has experienced a dramatic increase in attractiveness as a commercial target – and this is probably due to an extended period of political stability.

Free Trade Agreements: there seems to be significant evidence that the expectations of the benefits of Free Trade Agreements significantly outweigh the actual benefits, possibly due to lack of education and understanding.

Evidence, meanwhile, of the damage caused by the PAD mob continues to mount. The Airports of Thailand posted its first ever loss since being listed for the fourth quarter of 2008 (after the anti-democracy mob seized the international airports) of nearly 1.7 billion baht. Tourism in the world as a whole is likely to decline one or two percent this year, as people have less money and are less willing to take overseas holidays. Measures taken by the government to assist the vital tourism trade in Thailand so far seem inadequate.

Increase the Minimum Wage

Wage inequality – that is, the ratio earned by the top 10% compared to the bottom 10% – has increased in Thailand enormously between 1995-7 and 2004-6. In fact, according to the Global Wage Report 2008-9, only Argentina saw a bigger increase among countries providing data. The report writers argue that it is those countries which experienced the worst economic crises which have experienced the largest increases and, in the case of Thailand especially, the increase results in a widening of the gap between the middle earners and the lower earners. In other words, it is the people at the bottom who are falling even further behind.

The current economic crisis is likely to make the situation even worse. Job losses are already mounting – there are 50,000 new unemployed across the country and the figure is expected to rise by up to a million, caused both by the financial crisis and the PAD disaster. The full number of unemployed is never entirely accurately known owing to limitations in technical capacity in the Ministry of Labour and because large numbers of people return to rural locations and share under-employment in agriculture. The informal sector is also very large and only partly documented.

It is not clear what the incoming Democrat-led coalition is planning to do to alleviate the suffering faced by the unemployed. There will be no increase in the minimum wage for January 1st, when it has been customary for such an increase to become effective. It is to be feared that the failed right wing ideology that has become endemic in the Democrats will lead to no increases in the minimum wage at all, on the pretext that this will make businesses more competitive – in reality, of course, this type of low wage cost manufacturing competitiveness has already disappeared from most industries in Thailand and the need is to upgrade infrastructure and, most urgently, the quality of the education system. The proper answer to the ongoing crisis is to follow Barack Obama’s example and launch a range of large projects to improve both economy and society. That is unlikely to happen in the new atmosphere of money politics.