Unhappy New Year!

With so much flood miseries in the last 2-3 months, there was more than a fair share of dire predictions by the country's renowned scientists, astrologers and fortune tellers. The consensus was that the Year of the Dragon would be fraud with both natural and man-made disasters of the highest degrees! No wonder tens of thousands of citizens of Thailand chose to "pray in" the New Year rather than attending the usual count-down parties. There were of course the traditional high numbers of accidents (3,375) and deaths (335) as people went up-country to spend the four days weekend with families and friends. This year many brought back basic food stuffs as much as they could carry, to ease the ever increasing cost-of-living burden in the city. The level of holiday spendings in 12/11 too went down drastically as the result of flood damages to homes and businesses. The one hope and joy for millions who watched HM the king's new year address on television, was that HM looked and sounded much stronger than he has ever done in the last two years.
 
Our pretty PM leads on

On 19/12/11 PM Yingluck attended the 4th GMS Greater Mekong Sub Region meeting in Naypyidaw in Myanmar during which she presided over the signing of oil and gas exploration concessions granted to PTTEP for two additional blocks, south of Yangon, She also reaffirmed Thailand's commitment and further investments in the multi-billion dollars Dawai port and industrial development projects, which would become Thailand-Myanmar's core economic cooperation for decades to come. On 22-24/12/11, China's Vice President, Xi Jin Ping (in line to be the country's next President), made an official visit to Thailand during which he witnessed the signing of four social and economic agreements, including a Yuan 70 billion currency swap agreement for trade transactions between the two countries. In mid 12/11 the Yingluck cabinet approved more vague resolutions e.g. the THB 20.11 billion funds for rehabilitation of flood damaged infrastructure, to be paid out in 3 days!? They also approved a THB 60.7 billion budget for rehabilitating flood-hit industrial plants and residents (THB 5,000 for each victim) nationwide. So far, however, actual pay-outs to flood victims have been at a snail pace. With more floods expected in the next raining season starting in 5/12, the industrial sector has become increasingly nervous about the undue delay in the implementation of concrete flood prevention programs by the government for the short, let alone the medium and long term.

Gearing up for the grand return

Amidst rumors of a cabinet reshuffle in 1/12 or a possible change of government, PM Yingluck made her prime ministerial visits to the military, naval and air force bases in mid 12/11 in order to spend some "quality time" with the chiefs of the armed forces. In the mean time, her DPM's were busy consolidating her power base with more lightening transfers of key provincial governors, police chiefs and board members of government enterprises. Her minister of foreign affairs was also accused of having secretly removed Thaksin's name from the black list and of having personally delivered a new Thai passport to him in Dubai on 25/11/11.the unrelenting moves to help Thaksin to return to Thailand in all his glory as soon as possible, were consistently attacked especially in the social media. Once again, taxpayers were haunted by the prospects of clever policy corruption, conflicts of interest and compromised diplomatic relationships as Thaksin continued to travel freely to meet his "friends" in countries that his PM sister was scheduled to make her official visits and to witness the signing of a number of formal MOU's and bilateral agreements. Confused minority voters simply could not help being suspicious and alarmed by what was going on publicly and secretly behind the scene. At the Kampuchea border, a "piece of rocket" fell out of no where. Then, when Kampuchea shot at a royal Thai Air Force plane, the ministry of foreign affairs made no attempt to protest. A key red shirt MP warned in the House that the government should "prepare" citizens for the impending "loss of Thai territory" before (not after) the World Court came out with their judgement on the Khao Phraviharn case in 2/12!

Looming conflicts

Notwithstanding the still unsolved flood related problems, the Phue Thai Party has started to clamor strongly for charter amendment especially article 291. Heated debates went on whether or not to set up a new constitutional drafting assembly or to appoint a charter panel of 34 "constitutional experts". Alas the issue was "still to be studied" by PM Yingluck. Most people however were calling for a national referendum before and/or after the drafting in order to avoid possible confrontation. As a result of another public outcry, 9 political party leaders met to conclude that the highly controversial article 112 on "Lese Majeste" should not be touched, even though many believed there should be some kind of preventive measures built in to avoid politicians from abusing the law for their own purposes.

Bank“robbery”

With ballooning fiscal spending budget (THB 2.38 trillion) as well as additional funds needed for mega infrastructure (THB 2.7 trillion) and flood prevention (THB 350 billion) projects, the Yingluck government has decided to summarily issue ministerial decrees (!?) to push THB 1.14 trillion FIDF debt from ministry of finance to the Bank of Thailand. They have also proposed that commercial banks increase their contributions to DPA (deposit guarantee fund) from 0.4% to 1% in order to raise enough funds to service the transferred debt. The central bank's governor as well as other financial gurus protested and warned the Yingluck administration of dire consequences e.g. the need for the central bank to print more money, thereby pushing inflation rates up while weakening the Baht currency as well as jeopardizing the nation's financial standing and credibility. The Opposition has strongly challenged the Yingluck government over their immediate need to increase government borrowings from THB 2 to 3 trillion, while other countries in the world were tightening their belts to weather the EU sovereign debt crisis and the global down-turn. The hefty increase in DPA contributions would probably have to be passed on to both depositors and debtors of the commercial banks in view of the negative market sentiments prevailing against the banking sector worldwide.

The wobbly economy

The Great Flood had damaged some 8,413 factories nationwide, resulting in THB 229 billion loss. Manufacturing index in 11/11 shrank by almost 50% yoy. Farm income went down by 9.8%. Government revenue collection was THB 137.83 billion or 0.7% below the THB 923 billion target. Export fell by 12.4% yoy at USD 15.49 billion, the first decline since 09. Import amounted to USD 16.87 billion, down 2.4% you, resulting in a trade deficit of USD 1.47 billion. Total export for 2011 was projected to expand only 16.7% compared to 28.5% in 2010. The THB recorded it's biggest annual loss since 2005, ending the year on a weak note at THB 31.59, down 5.1% in 2011. Yen was at THB 40.75. EURO was at THB40.80. Meanwhile oil prices have been creeping up once again to well above USD 100, due to the intensifying political tension in the Middle East. The SET finished the year also on a weak note at 1025, down by 0.72% from 2010 closing of 1032. Dividend yields went up 27.4% with an average return of 3.72% and an average P/E ratio of 12.07 times.

Not a pretty picture

With 2011 GDP plunging to as low as 1.8%, many economic and political gurus have been coming out with their pessimistic forecasts for 2012, based on the on-going blatant political interferences and the inevitable (bloody or otherwise) confrontations, the substantial increases in oil and gas prices (no subsidies for the transportation sector), the higher wages and increase in property taxes (albeit deferred until 2Q and 3Q respectively), the climbing inflation and interest rates, the weakening Baht, the stagnating export demands, the falling commodity prices (failure of price guarantee program), the still confusing flood relief and prevention plans, the lack of transparency and vital details in government's revised budget, the government's intent to create new debts to the tune of THB 3 trillion, the fear of more severe flood and other natural disasters (because of global warming and government mismanagement), and last but not least, the failure of the Yingluck Administration to inspire domestic confidence and to restore international image of the country. As the result, the private sector has generally shifted their business mode to "expect and prepare for the worst". After all, hoping for the best could well prove to be wishful thinking this year!

 

Vongthip Chumpani
7/1/12