What Thais Want?

 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