Abhisit the Crow


It has been somewhat amusing to observe the preening Abhisit take credit for the one aspect of government performance over which he has precious little control – human rights, integrity in political discourse and behaviour, civil liberties and administrative competence have all suffered significantly this past year (as people have noted in a Bangkok University poll), yet Abhisit has sought to take credit for the supposed economic recovery and claims support from business groups.

The principal feature of the Thai economy is its extremely globalized nature and its vulnerability to external shocks – that is, the dependency of the economy on exporting and on tourism, as well as the very high percentage of GDP devoted to importing oil and gas, all of which means that there has been very little influence that the Thai government can do to affect international conditions. When the junta tried to intervene in capital markets during its disastrous period of misrule, they had to withdraw overnight in the face of market power and disfavour.

What influence a Thai government can wield comes from attempts to strengthen the domestic economy and domestic capitalists through community level efforts such as the Village Fund, OTOP and the 30 baht health care scheme, as well as making Thai organizations more competitive by, for example, promoting the spread of international retail chains. The Democrats, of course, throughout their history have opposed all policies of this sort.

More on the Agenda for Change


What impact would the decision to take Thailand on to the next stage of economic development have on the physical environment of the country? This next stage would feature strengthening domestic consumption to reduce vulnerability to external environmental changes, as discussed previously. It would be combined with greater levels of social mobility as people of talent could rise from poverty and achieve better lives for themselves and their families. It would also feature greater investment in those ‘enabling technologies’ which make it possible for all businesses to thrive – high-speed rail (OK, in Thailand non-deathly slow rail) links, decent internet access nationwide, preferably free and a coherent body of law fairly applied to everyone without prejudice. This kind of change would reduce the need or desire that people might have to migrate for work. Instead, people would be more likely to remain close to their homes and contribute to local development – so, provincial urban development would be promoted with better schools and public facilities. At the same time, perhaps the pressure on Bangkok’s public service and roads might be reduced. Towns would see better and more advanced retail outlets and agricultural production might change to pay attention to changes in demand for different types of food. Enhanced cross-border links would see more Lao, Cambodian and Vietnamese products in market places and shops. Some companies would move away from the industrial estates while others might be nudged towards more value-added production patterns and less environmentally unfriendly manufacturing. Incentives for attempting to create green products might see changes in the land cover – currently, growing crops for biofuel production appears to be an unsustainable approach but new forms of efficiency might see that change. On the other hand, we might finally see the large-scale solar panels that would provide considerable levels of power for the Kingdom as a whole. A lot of this, of course, relies to a considerable extent upon a return to genuine democracy and the possibility for distribution of resources away from Bangkok and back to the provinces. However, if the elites continue to cling to power, there is not much prospect of any helpful change in the next decade.

THe Agenda for Change in Thailand


This is the agenda for economic change for Thailand in the wake of the global financial crisis – it is very difficult to separate this from the political agenda for change but, under the current repressive Abhisit regime, it is simply too dangerous to speak honestly about politics and still live in the Kingdom. So, let us try to focus on the economic side:

Firstly, the principal problem remains the extreme vulnerability of the Thai economy to external economic change (because of the reliance on exports and tourism and the high proportion of GDP spent on importing oil and gas). This is revealed particularly  at the current time when job losses are nearly all in the manufacturing sector and have been caused by reduced international demand for Thai goods.

To deal with this: either (or preferably both) enable more Thai people to buy these products so that they are not reliant on international customers; or take more of the products out of the commodity class by adding value to them – people buy commodities (rice, shrimps, fruit) based on price because they see no differences between products from rival producers. Added value products attract an extra fee (a premium) because customers are more loyal to them – they have brands or logos or people recognise their higher quality.

Secondly, there is a need to improve the labour market and provide for additional social mobility – currently, it is next to impossible for Thais from poorer backgrounds to obtain the education and qualifications necessary to escape into the professional or managerial classes. Patronage networks exclude the poor, no matter how valuable or talented they may be and this is an increasingly inexcusable situation for a country seeking to elevate itself from mid-level income status to high-level income status.

Achieving this latter point requires significant change in mentality which it seems difficult to achieve without genuine democracy – and I am going to stay away from that topic today.

More on this topic later (and then it will be back to whingeing about the traffic, dogs, weather etc).

The Thai-Chinese Free Trade Agreement


The Thai-Chinese Free Trade Agreement (FTA) has made significant differences to the livestyles of many Bangkok residents and, indeed, people in all the large towns of Thailand. The combination of the reduction of tariffs on various agricultural products (fruit and vegetables – especially apples, garlic and onions) together with improved road links within the Kingdom and connecting with Kunming in Yunnan and the spread of large retail outlets such as Tesco-Lotus means that consumers have been enjoying the availability of cheaper, better quality produce in various categories. However, we live in a capitalist system and capitalism always leads to endless acts of creative destruction in which some are winners and some are losers. On the whole, FTAs tend to increase overall levels of wealth by reducing tariffs, which in general terms lead to inefficient uses of resources. The winners from the FTAs can look after themselves – the losers are the ones about which government should be concerned. In this case, it is the garlic and onion farmers of Chiang Rai in the north who used to produce these goods for the country but who cannot compete with Chinese farmers who need help. Younger, more educated farmers are more likely to be willing to switch their production methods or their job or their location (so would be receptive to government support in retraining and so forth which are active labour market policies); on the other hand, the older and less well-educated farmers tend to be those less willing or able to change their lifestyles and so need more government assistance in the form of unemployment benefits and the like (which are passive labour market policies). It is usually better to plan for these changes in advance but TIT (This is Thailand). This FTA is not perfect – these things rarely are and, because it was signed on a bilateral basis (a larger, ASEAN-China FTA will come into force later) it is more susceptible to the relative power of both sides. That is, the power of Chinese negotiators compared to Thai negotiators (my market is bigger than your market so your farmers can jump through more hoops to gain access) is much higher. However, in a win-win situation there is no need for both sides to gain exactly 50% of the benefit. It should not be seen as a context with China in which Thailand either wins or loses.

When Buffoons Are Given Power … (part 279)


It is difficult to imagine a scheme more ripe for abuse and inefficiency than this one. If it is true (and one must always be cautious about taking what appears in the newspapers at face value), then five private companies are to be given 100 million baht each to make films with a view to promoting Thai culture, as well as boosting the Thai film industry.

It is not clear how these companies are to be selected (which in itself raises suspicions) nor what criteria are to be used for determining the extent to which the money is being well-spent. If this had been a plan announced by Thai Rak Thai or PPP, then unelected senators would already be preparing cases for ‘corruption’ to send to their pals in court.

What kind of films can we expect from such a scheme? Well, it seems reasonable to assume that any kind of adult content or consideration will be right out – so, no use of cigarettes or alcohol (although violence towards children and women will probably be considered acceptable). Certain ideological positions will be favoured over others (there should be no need to spell this out – watch out if there are any Burmese characters included or farangs, come to that) (especially farangs buying up prime beach side land with a view to smuggling it out of the country). There will be lots of people bowing before monks, the timeless wisdom of old people and especially old farmers happy to exist on what they have, plenty of dangerous creatures out in the wild which mean we must have a strong military to protect us.

I am all for Keynesian solutions to economic crisis such as we facing at the moment but the people who need most help are those being laid off from their manufacturing jobs – women in particular, since new jobs (if the government ever does get around to doing something) will be concentrated in sectors in which men dominate most jobs (e.g. construction). For once, this is an activity that the private sector should lead – unless a very worthwhile film project cannot be made because of lack of finance, which does not seem to be the case here.

The Recession Is Not Over


Presumably there are political factors influencing the continuing and inaccurate series of newspaper reports that the recession is over, the economy is recovering and so forth (an alternative explanation is just that journalism standards are low here and that is also possible).

Today we learn, based on NESDB figures, that “The Thai economy emerged from the recession in the second quarter, thanks to a pickup in government spending.” This is not, of course, strictly speaking true.

What is true is that the contraction of the economy in the second quarter (4.9%) was not quite so disastrous as the contraction in the first quarter (7.1%). However, projections are that the economy will contract for the whole year some 3.0-3.5%. Recessions end when there is positive GDP growth – so, since the economy will contract at least until the end of the year (and probably beyond), Thailand has not exited recession.

The export sector continues to be the worst hit and this is where the bulk of the economy is concentrated. Since the nascent ‘recovery’ in the west, notably the USA, is being described as a ‘jobless recovery,’ the demand for Thai exports is not likely to rebound very quickly. The government spending has had an effect and, it is to be hoped, this will increase rapidly over the next few months (the delay in spending the money is at least partly due to the results of the anti-politician campaigns mounted by the unaccountable elites over decades) – the effects will be mostly in construction, since this is the principal means of developing the infrastructure. That means most of the new jobs will go to men, since men predominate in the construction industry.

However, it is far from clear that government spending is going to provide sustainable recovery in the economy – in other words, once the projects the government is planning to support end, will there have been secondary impacts in the wider economy to continue improvements without government money? For example, will improving the infrastructure make some activities profitable that were not profitable before and so people will open companies to take those profits. It is not yet possible to predict this accurately.

Of course, politicians have a duty to talk up what they are doing and encourage consumer and investor confidence but that does not mean it is right to misrepresent the facts.

The New Development Paradigm


The two major threats facing the effort to lift developing Asia out of poverty are the ongoing economic crisis and climate change, according to a speech by the President of the Asian Development Bank, Haruhiko Kuroda.

Southeast Asia is one of the most vulnerable areas of the world to the dangers of climate change – so many people live next to coasts with rising sea levels and next to rivers which may have increasingly irregular flows in the future. Rice-growing on mainland Southeast Asia in particular relies on wet paddy field agriculture and the amount of water required may be unavailable in future.

The economic crisis has caused significant contractions of regional economies as the export industries have been badly hit and migrant workers are being forced to return home, losing the substantial remittances that would have been paid.

So, to meet these challenges, Haruhiko Kuroda recommends the adoption of a new paradigm for development: which means, in fact, placing more emphasis on domestic consumption and consumption and on promoting technologies to deal with climate change. Encouraging domestic consumption (it happened here under Thai Rak Thai of course) would help to reduce vulnerability to external shocks, which is one of the main problems faced by Thailand. So, when something bad happens, people spend less money and exports are hurt. To counter this, particularly in the principal exporting countries (China, Thailand, Vietnam and so forth), it is necessary to let people become a little better off – that’s the mass of the people, not just the privileged elites. Once the working people can afford to buy things for themselves and their families, their demand substitutes for (in bad times) or complements (in good times) demand from overseas. It also makes the people themselves happier and more willing to participate in promoting the stability of the country, which also has a number of other benefits.

However, it does mean that (as I have observed elsewhere) the age of the low labour cost manufacturing age has past – let people add more value and pay them more is the way forward.

Air Freight Down


It is quite possible that the economic downturn will not be cured – sensible politicians around the world are working on the belief that Keynesian fiscal stimulation will bring us out of the problems that have been emerging. Yet we are still dealing with confidence and with people and people are, of course, occasionally irrational or just simply wrong. Perhaps all the billions of pounds or dollars that are being invested will not have the desired effect: nobody really knows.

What is clear is that Thailand is more deeply vulnerable to external shocks than most other countries. The reliance upon exports and tourism, coupled with having to devote 12% of GDP on importing oil and gas, mean that the Thai economy depends to an enormous extent upon what happens overseas. Today, more evidence of the problems mounting in the economy is emerging, in the form of a 23% decrease in air freight going through the country. Most of that decrease (which is for the fourth quarter) has resulted from a decline in January. Decreases in freight in either direction (inbound or outbound) are problematic because people want to organize two way flows of goods – if you have something coming in, then you have a good chance to send Thai goods out in return.

It is not possible to know which of various factors are more influential in this decline: some of it may be apportioned to a general decline in trade, some to the relocation of investment projects away from Thailand because of the PAD Disaster and some because of lack of demand specifically for Thai made products. Some freight has also been redirected to sea – cheaper and suitable for non-perishable goods but not for Thai agricultural products.

 

Stimulus Plan Considered


As a matter of principle, Paul Krugman apart, it is probably sensible to listen to economists and then reach the exact opposite conclusion. Economics is in some ways a wonderful intellectual pursuit in that it is capable of throwing up any number of complex, sophisticated and even elegant theoretical models which invariably suffer from the same, single, fatal flaw: they are all absolutely useless in explaining how people actually behave.

Now, ‘leading economists’ are being quoted in the Bangkok Post to pour scorn on the new Quisling government’s economic stimulus plan. There is, certainly, a great deal of concern about it: the budget is quite clearly calculated on the basis of most money being directed to Ministries controlled by the PADemocrats and hugely less to the Ministries held by coalition parties, irrespective of logic or need. Certain large ticket items are passed without a thought, irrespective of logic or need (and possibly even talking about them will lead to flags being raised and files opened or reopened). The ‘stimulus’ part is also subject to some searching questions: why, for example, is money being given to (Democrat-supporting demographic) salary-earning private sector employees and civil servants and nothing is available for (non-Democrat-supporting demographic) poor and redundant workers?

The Quisling himself has been all over the place trying to justify the policy, claiming it is or is not a one-off payment, it will or it will not be paid immediately and so forth. It is fairly clear he has little idea what the policy is or what it means – it is often the way with the extraordinarily rich, they can get high marks on their economics exams and yet be totally incapable of running a whelk stall.

Some aspects appear quite sensible, although that may mean they will never actually come to pass. Promoting the entrepreneurial spirit of redundant workers is clearly a good thing and was vital in mitigating the damage after the 1997 crisis. The support for SMEs and entrepreneurs introduced by Thai Rak Thai is crucial in promoting non-export related domestic growth and it would have been better if it had been allowed to continue properly subsequently.  

Why Exports Matter


Exports are set to be higher than forecast in 2009, according to the Department for Export Promotion. That is good, of course, since more exports means more Thai goods being sold around the world and more jobs and money coming back here. Thailand exports agricultural products (including frozen chickens, shrimps, fruit and vegetables) as well as manufactured items.

The growth of Thailand’s economy since the 1950s has been based on promoting exports, encouraging inwards foreign direct investment and some substitution of imports, as well as access to western markets, particularly the USA, as a reward for fighting against Communism. This was the growth model approved for all developing countries by the IMF and the World Bank.

The 1997 financial crisis showed some of the weaknesses of this model. Southeast Asia as a whole has always been very open to international trade for many centuries. That has the negative effect that what happens in the rest of the world has a disproportionately strong impact on the home economy. There are other problems too: keeping exports competitive can lead to pressure to keep costs down and this has resulted in low salaries, exploitation of some workers and suppression of rights such as freedom of association and collective bargaining.

The Thai Rak Thai government of 2001 brought about some changes to the Thai economy with a view to trying to reduce the negative effects. The country was to remain open to the rest of the world but more resources would be given to domestic entrepreneurs and rural people to encourage the development of skills and create other export goods which rely on added value (i.e. something which people want because of what it is rather than just because it is cheaper than its competitors). Putting resources into rural regions also helped with poverty reduction during a difficult economic period while reducing the incentive for migration and the various social problems that caused.

The events of the next few months will be influential in determining whether this model will continue or whether it will be replaced and, if so, by what. Closing the country to international business or adopting an anti-business agenda would not be permitted by international markets but there are still many other issues to be resolved.

Damage Caused by Right-Wing PAD Mob Will Take Years Just to Measure


The damage done to Thailand by the actions of the anti-democracy mob will probably take many years to measure and years more from which to recover – and that is not to mention the deaths and injuries the mob has directly caused already (and the many more likely to come, alas).

There is also the economic cost: more than 1.5 trillion baht has been wiped off the share prices on the index of Stock Exchange of Thailand alone. Foreign investors have been postponing decisions and actively moving away from Thailand. The tourism industry is suffering considerably with foreign arrivals down 30% on normal, attributed to the actions of the armed, right-wing PAD mob holding the country to ransom.

The normal business of government has been delayed and disrupted – running a modern, complex country is a difficult and time-consuming business and requires the best minds in government devoted to it – this was the reason the junta gave up military rule in 2007, not because of any desire for a return to democracy or any pretence at ‘reform’ but because even the jackboots realized they were simply not up to the job any more. Military juntas could get away with years of kleptocratic misrule in the 50s, 60s and even the 70s and beyond – but not today.

Perhaps the worst damage has been to the reputation of Thailand and the Thai people. Few people outside the country can imagine why the Thai people, so many of whom were killed in the desperate fight for democracy and freedom, seem to be happy to see democracy sacrificed for the sake of the vanity of criminals like super-rich media magnate Sondhi Limthongkul, a coterie of dangerous military types and a few thousand ‘useful idiots.’

It’s the Economy, Somchai


The Stock Exchange of Thailand’s index fell more than 1% yesterday and is down nearly another 11 points as things stand this afternoon. The Nikkei index in Japan has suffered its longest losing streak in 54 years. Both national and international factors have been identified – internationally, the biggest issue remains concern over what is happening in the USA. The interdependence of the world’s financial and trading systems is now so great that what happens in one place affects what happens around the world. And what happens in the world’s biggest economy is particularly significant for local conditions. We occasionally get stupid people writing in to the Bangkok Pot and elsewhere complaining of foreigners poking their noses into America’s election, as if these obvious facts were not true.

So, speaking from a Thai perspective, who would be the more useful (or less unhelpful candidate)? In terms of politics and peace, it seems clear that McCain would try to continue the dangerous failed policies of the current incumbent and this would raise the threat of terrorism worldwide, as well as keeping oil prices unnecessarily high. He might also be led into confrontation with China or Russia. It is not clear how much different Obama could be in this respect. To be electable, he will presumably have to navigate towards the middle ground and while his election would drain some of the poison accumulated around the world during the Bush years, it will take some time before confidence can be rebuilt.

In economic terms, the danger is of an inward looking presidency with the imposition of trade barriers. McCain seems to have no understanding of economics at all and would presumably have to hire some outsiders to do the thinking for him, while Obama will be aware of the importance of industrial and manufacturing America to his constituency and the problems that part of the country is facing from loss of competitiveness and outsourcing of activities to various lower-cost developing countries.

For the environment and general social issues, Obama of course is hugely preferable to McCain in setting an example for progress and optimism for the future – although, again, that is likely to be perhaps severely tempered by what he would be able to achieve in office.

It’s the Economy, Somchai


The Stock Exchange of Thailand’s index fell more than 1% yesterday and is down nearly another 11 points as things stand this afternoon. The Nikkei index in Japan has suffered its longest losing streak in 54 years. Both national and international factors have been identified – internationally, the biggest issue remains concern over what is happening in the USA. The interdependence of the world’s financial and trading systems is now so great that what happens in one place affects what happens around the world. And what happens in the world’s biggest economy is particularly significant for local conditions. We occasionally get stupid people writing in to the Bangkok Pot and elsewhere complaining of foreigners poking their noses into America’s election, as if these obvious facts were not true.

So, speaking from a Thai perspective, who would be the more useful (or less unhelpful candidate)? In terms of politics and peace, it seems clear that McCain would try to continue the dangerous failed policies of the current incumbent and this would raise the threat of terrorism worldwide, as well as keeping oil prices unnecessarily high. He might also be led into confrontation with China or Russia. It is not clear how much different Obama could be in this respect. To be electable, he will presumably have to navigate towards the middle ground and while his election would drain some of the poison accumulated around the world during the Bush years, it will take some time before confidence can be rebuilt.

In economic terms, the danger is of an inward looking presidency with the imposition of trade barriers. McCain seems to have no understanding of economics at all and would presumably have to hire some outsiders to do the thinking for him, while Obama will be aware of the importance of industrial and manufacturing America to his constituency and the problems that part of the country is facing from loss of competitiveness and outsourcing of activities to various lower-cost developing countries.

For the environment and general social issues, Obama of course is hugely preferable to McCain in setting an example for progress and optimism for the future – although, again, that is likely to be perhaps severely tempered by what he would be able to achieve in office.