absolutelyBangkok archive · Business & Economics
Originally published Nov. 4, 2010
Another hectic month:
In October, things were somewhat calmer during the first two weeks. PM Abhisit managed to take off for ASEM Summit meeting in Europe and make his first official visit to Burma (after two years in the office). There were a few subdued political demonstrations to mark the anniversaries of the yellow and the red shirt uprisings. Following the arrests of some 19 “bomb-activists,” no explosives have gone off again in the city. Emergency decree in and around Bangkok, however, was not lifted. In mid 10/10 PM Abhisit found himself deep in a deluge of flood waters and foreign fund inflows.
His high profiled squabbles with his major coalition partners ended in an uneasy truce, just before Democrat DPM Suthep resigned abruptly — to run (and won a landslide victory) in the by-election in Nakorn Srithamaraj. PM Abhisit did not replace him and there was no cabinet reshuffle as was rumored. Then the video clip scandal broke, shaking both the Democrats and the Constitutional Court (to the core). On 26/10/10 U.N. Secretary General, Mr. Ban Ki Moon, paid a brief visit to PM Abhisit on in Bangkok on his way to Hanoi.
During his press conference, he firmly reiterated U.N.’s position that Thailand’s political problems are internal matters, to be solved by Thai people themselves. Meanwhile, the parliament has started their debate on the six proposed amendments to the 2550 constitution. During an interview with a foreign media, PM Abhisit confirmed that general election would take place in 2011, before his term ends. Meanwhile Puea Thai continued their bickering over the nomination of their prime minister. Some 15 MPs from Puea Thai and coalition parties were reported to be forming a new political group called Maitrichit.
By Vongthip Chumpani*
Water, water everywhere!
After 18 days of unrelenting torrential rainstorms since the last week of September, major cities in the northeast and the central regions of Thailand were overwhelmed by the worst ever floods in the last 50 to 70 years. As huge columns of water moved down the three river basins from the north down the Chao Phraya and from Khao Yai mountains down the Chee and Moon rivers, some 36 provinces were flooded along the way. According to the latest casualty report, over 3.5 million people were affected, 122 people died, over 1.5 million homes were submerged, and nine million rais of farmland were devastated by the floods.
Transportation by roads, rails and rivers came to a halt as flood waters caused mudslides and turned roads into canals, drowning vehicles and houses along their paths, leaving people stranded on rooftops and elevated roads. Schools, hospital and factories had to be evacuated and closed down. Retail trade came to a standstill as shop owners watched their merchandise disappeared in the water. Bangkok was spared because of the newly constructed (72 kilometers) flood prevention walls along the river banks. As flood water receded, a “cold wave” has moved in. With temperatures dropping steadily to the low twenty, flood victims were told to be prepared for an exceptionally long and “cold” season this year!
Nam Jai Thai
When the floods came, PM Abhisit shifted his tight schedules to make almost daily visit to the flooded areas where, for a change, he was warmly received everywhere he went. Within days, a high-powered call and rescue center was set up in the government house to monitor and coordinate rescue operations by the government, military, NGOs and civic groups. In an unprecedented move, the private sector together with the powerful mass media almost outdid government officials as they went all out to mobilize their own rescue missions. Matching the floodwater was the equally strong flow of sympathy, aids and donations in every shape and form.
On 1/11/10, the cabinet approved a THB 20 billion flood relief package for some 3.7 million victims in 31 provinces, with payment of THB 5,000 as emergency cash to each of the 632,000 affected families. Although it is still too early to estimate the total amount of collateral damages, the NESDB indicated that it could be as high as THB 50 billion, including flood damages in the south. They also estimated a drop of this year GDP growth by at least 0.32% as the result of the floods. PM Abhisit has asked his cabinet members to consider shaving off their normal budgets for flood reparation projects.
Asean Connectivity
In between the receding floods in the northeast, PM Abhisit could make it to the Asean summit on 28/10/10 in Hanoi. He was warmly welcomed by the Asean leaders who seemed to be in the same boat in trying to move their countries forward in face of the current global “recovery,” global imbalances and acute natural disasters. Although he missed the last meeting Asean Summit in 4/10, PM Abhisit was able to push forward his “Asean Connectivity” concept to empower the Asean Community with better infrastructures, logistics and ICT to facilitate the flows of people, goods and services among the Asean nations.
Joint regional funds were to be set up, to be supplemented by financial supports from international financial institutions such as the ADB, World Bank, etc. Human resource development, education and training too were being offered by governments of Asean +3 and +6. PPP projects were to be promoted to ease government budgets. At the meeting, Asean leaders discussed and agreed to adopt peaceful negotiations to settle their territorial disputes.
They also vowed to be more united in voicing their joint positions, at the next G20 and the APEC meetings, on urgent issues like the on-going currency war, the huge influx of speculative funds into Asia and the disastrous impacts of climate change. PM Abhisit and President Hun Sen seemed to be back on speaking term once again.
Steady does it
In 9/10 Thailand’s economy continued to expand satisfactorily especially in the manufacturing, tourism and export sector. Consumer confidence rose to 73.5%. Domestic consumption and investment, however, have both decelerated. Export rose to new historic high of USD 17.96 billion, up 21.8% yoy in terms of value and volume. Import totaled USD 14.71 billion, up 15% yoy in line with softening trend in the production sector.
Current account and balance of payments remained in the black with international reserves moving higher still. Manufacturing production went up 8% yoy, mostly from backlog orders in the vehicle sector. Agricultural production slowed down because of the severe drought early this year. Crop prices, however, continued to climb, up 31.4% yoy due to favorable global demand. Private consumption increased by 3% and private investment by 20% yoy.
Up, up and away!
Of the total fund inflows in 9/10, USD 604 million went into government bonds and USD 457million into Bank of Thailand bonds. With the “currency war” going in full swing among the world’s economic giants, Thailand could do nothing but wait and see. Meanwhile Thai exporters were screaming for stronger measures to stop the Baht from going through the roof. Some went so far as to suggest that Thailand bring back tax on capital inflow! On 12/10/10 the cabinet announced new (soft) measures to curb the strong Baht which included a 15% WHT tax on Baht bonds held by foreign investors.
To assist SME exporters, the government set up a THB 5 billion special fund for foreign exchange hedging purpose. On 21/10/10 the Bank of Thailand left the repo rate intact at 1.75% p.a., in line with the decelerated inflation rate of 2.8% in 10/10. As expected, the SET continued its bull run in October, breaking the 1,000 index once before ending the month at 985. The Baht closed on a strong note at THB 29.95 to USD, THB 36.76 to Yen 100, THB 41.44 to Euro, and THB 47.61 to Sterling.
With the QE2 (quantitative easing) package of USD 500-750 billion (or even USD 1-2 trillion!) to be announced by the Fed during the first week of 11/10, Asian governments were bracing themselves for a new deluge of USD fund flowing into their already volatile equity, bond and property markets. Asian finance ministers have started to lobby among themselves for some sort of policy coordination and exchange-rate synchronization during the APEC meeting in 11/10 in Japan.
Surviving future disasters
If anything, the countrywide and extremely costly flood disaster this year was a wake-up call for the Thai society. Climate change has turned Thailand’s long-held belief as a natural disaster-free country into a myth. Things will get worse, not better, in the next few years. The government, the private sector need to work together to find solutions to the major root causes of this year devastating droughts and floods. Town planning will have to be revised with the country’s natural geography and the fast changing climate in mind.
Construction permits will have to be carefully considered and approved in strict compliance with the building codes and environmental laws and regulations. Government needs to redesign national disaster warning systems and procedures. Mobilization of national rescue operations needs to be more unified and systematic. Our people will have to be taught and trained to prepare themselves for emergency situations so they know what to do when disasters strikes. It is critical for the government to make sure that an orderly priority is established, publicized and maintained during disastrous situations.
If anything good were to come out of this great flood, it would be the realization that we have to take much better care of our environments, that we can no longer take Mother Nature for granted and, that when the chips are down we can always turn to our fellow Thai citizens for help and courage. Hopefully, the flood has also washed away all our political misgivings. It was very costly so let’s make it worth it!
* Vongthip Chumpani is an advisor to and former president of Bangkok Bank and a former advisor to the Senate Foreign Relations Committee. All views and opinions expressed herein are entirely from her own personal observations.
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