Given growing disenchantment with the reformist
minded administrations elected in India and Indonesia last year perhaps the
citizens of Thailand may not mind too much that their next election has been
postponed to 2016 or 2017 or possibly 2018 : could be a moving target. The army wants to make absolutely sure they
get the context and the choice right to avoid any repeat of the Thaksin era
when voters went for someone who did not play by their rules. At the same time sad to say, but perhaps
predictable, the army is making a mess of the economy. Thais will get fed up with that at some point
and demand change. Meanwhile some opinion
leaders are already upset. The Bankgok
Post was scathing about the latest set of excuses for delay. One piece was extremely critical even by
tabloid standards. I hope the writer has
a second passport.
You can claim that Thaksin soeur left a mess. The rice scheme, illegal or not, certainly
screwed up the country’s finances. There
was a lot of cleaning up to do. Still as
that becomes a distant memory – well a year or two anyway - the question Thais
are beginning to ask is what about the economy?
The answer of course is that the military does not do economics. It has three priorities : stability, stability
and stability. Even so stability
requires the population to remain docile.
If the economy is stagnant there will come a point where failure to
manage the economy will become a threat to the holy grail of stability.
For now, as in China, the army are attempting to
eradicate corruption at least in the public sector. Again as in China this means no official
wants to sign anything; and just in case anyone gets the itch to sign there is
a new review body, the Budget Monitoring and Scrutiny Committee. Any project over Baht 1 billion – roughly
US$30 million - has to go through this body.
Perhaps I should say go to, since once there almost everything, and $30
million mean anything of importance that is of sufficient scale to help the
economy, goes in and then gets stuck.
Nothing seems to come out. The
pig and the python spring to mind. Good
intention; bad execution.
This committee appears to have one objective
only. Put all government projects into a
deep freeze. At least that is what they
have done, so if it is not the objective they need to go back and reset the
objective. In the meantime plenty of
tenders have been released, and in theory orders have been given, but until
these are signed by the appropriate authority the documents are worthless since
contractors do not get paid until they have the correct signature.
With no oil lubricating the system and the Generals
putting the fear of god, or nearer to home fear of a firing squad, into the
bureaucrats, the bureaucrats are doing what they do best – nothing. So a whole industry – and construction is a
very large employer - atrophies with its order book running off while any other
company, and that is a large chunk of corporate Thailand, that does business
with the government has that part of its business sitting in a state of
suspended animation. Perhaps this approach
will pay off longer term, but for now it is an anchor around an economy that
was only drifting along at 1 or 2 knots in the first place.
Bangkok itself remains a sprawling city with plenty
of pockets of charm. Still the most
visible feature for those of us who have been voyaging there for some years is
the sprawl. The offices of Modernform,
our largest investment in the country as of June 2015, illustrate the
point. When this market leader in furniture
decided to build a 25-storey office tower in the 1990s, they went for a dirt
cheap plot of land, 30 minutes from downtown.
It was the only commercial building in the area. When I first went there in 2003, it was
almost on its own, surrounded by sad looking fields. Now it is at the centre of a vibrant zone
full of auto dealerships along with the inevitable shopping malls; and it takes
45 minutes to get downtown – on a good day.
To the casual visitor Bangkok seems calm, peaceful
and pleasant if painfully hot. As always
I indulge in the excellent local curries : green is my favourite. It comes in a variety of permutations,
chicken, fish etc but all with the same distinctive flavour; and you can get it
at most restaurants except the very top and bottom. Even not so great chains can conjure up a
version of this dish. I would think the
Thais might be a bit bored at it by now; it is ubiquitous, but for the
intermittent transient it is a treat.
The red too comes recommended as does fried chicken in bay leaves, and a
restaurant called Bua.
Back to business : if you do not have to deal with
the government then things are better.
Healthcare is doing well. Our
friends at Modernform are expanding in this area. 2015 should be a record year for them in that
part of their business making up for weakness elsewhere. Hospitality is also doing well, helpful if
you provide furniture to that sector.
The Russians have largely vanished from Pattaya but Chinese tourists are
proliferating. The average spend is not
the same, but there are many more of them.
The financial market is not asleep.
Tourism related stocks are holding up while construction companies are
slumping.
The population is taking its cue from its
superiors. As the government sits on
cash, most Thais are also being more careful.
Consumption is down including the purchase of property. Again investors have noticed and reacted to
staggered release schedules, slower take up, and rising rejection levels at
banks of optimistic loan applicants. It is
a tricky time to be a developer. Even
the best run like Supalai where the management team is world class will likely
see margins squeezed. I would be more
interested in buying back in if the share price went lower.
One area where there could be some excitement is
in the telco space. There is a lot that
might or unfortunately also might not happen with new technology, new spectrum,
auctions, possible court cases, licences ….. the list goes on. There is even the possibility of
M&A. Overall the end game prognosis
is for a better service for businesses and consumers, but Thailand is in danger
of falling behind if someone does not sign the necessary documents. Then there should be more profit for incumbents
– if also more cap ex. But oh dear all
of this requires the army, I mean the government, to get off its ample backside
and allow these auctions to take place.
On curr
