Letter from Vongthip Chumpani 6/3/09
The 14th ASEAN Summit Meeting in Cha-am/Hua Hin, hosted by PM Abhisit, went without a hitch,
thanks to excellent preparations by all concerned particularly ASEAN’s new Secretary General, Dr. Surin
Pitsuwan. All the back-to-back ministerial and non-ministerial meetings went just as smoothly and the 10
ASEAN heads of state were able to sign the agreements that heralded the beginning of the ASEAN
Community, to be effective in 2015. Under the ASEAN Charter, the goals, objectives and blue prints for
the new economic regional community have been drawn up, with accelerated deadlines. ASEAN Plus 3
and Plus 6 Meetings were scheduled for April 10-12 in Phuket, after which PM Abhisit would take
ASEAN’s key position to the G-20 Meeting in London on 2/4/09.
A breath of fresh air
Much to the pride and joy of the people in Thailand, PM Abhisit has emerged from the ASEAN Summit
Meeting as a young and modern Asian leader, poised to take his country and ASEAN forward. Many
ASEAN leaders could not help expressing their confidence and admiration for Thailand’s new PM. In an
unprecedented move, ASEAN leaders also met with representatives of 3 Asean non-government groups
i.e. Parliamentarians, Youths and Civil Society Organizations (except from Cambodia and Burma who
met separately with ASEAN Chair). It was also agreed to institutionalize such meeting at future ASEAN
Summit. Among political, economic and social guidelines spelt out in ASEAN Charter, human rights and
climate change issues were highlighted for further discussion and cooperation. The plight of the Rohingya
refugees was also to be worked out jointly by countries concerned. Citizens of ASEAN countries would
now be known as Aseans.
Show us the money!
At the 14th Asean Summit, ASEAN also agreed to increase the East Asian Emergency Fund from USD 80
billion to USD 120 billion to help countries with severe currency and cash-flow problems during financial
crisis. With unabated confusion and panic amidst worsening news from key financial markets, many
believed another major correction could be just around the corner. Countries with large USD reserves
have started to diversify their investments e.g. to finance their own MNC’s staggering operations abroad,
to stock up oil reserves, and/or to acquire foreign assets. In anticipation of the crowding-out effects,
governments with climbing fiscal budget deficits have started to borrow internationally to sustain their
faltering economies. The still-healthy international banks joined in to launch their multi billion USD bond
issues. Although Thailand’s offshore borrowings have been comparatively small, it would do well for us
to start sourcing funds now before the international liquidity dried up or turned off!
Survive or sink!
While pushing Stimulus Package I through the parliament and bureaucracy for speed implementation, the
Abhisit government was simultaneously trying to put together Stimulus Package II, to be announced in
4/09. With THB1.9 trillion being budgeted for medium and long term infrastructure projects, it would
definitely be most difficult for Thailand (or any other emerging market countries) to rely mostly on
domestic funding, supplier credits and/or G-to-G soft loans from friendly developed countries. The
Abhisit government would have to bear in mind Thailand’s political constraints and fiscal disciplines
when they considered the viability and successful implementation of the so-called PPP (Public and
Private Partnership) projects, of which the country has no previous experience.
On 24/2/09, NESDB revised their economic forecast for 09 down again, due to the fast deteriorating
global economy and our own worse-than-expected actual figures of 2008 i.e. GDP growth of +2.6%;
private investment +3.2%; public investment -4.8%; consumption +2.2%; export was up by 16.8% to
USD 197.7 billion; import +26.4% (to USD 175.1 billion), and both trade balance and the current account
balance in the red i.e. USD 6.5 billion and USD 3.5 billion respectively. Their new forecast for 2009
showed a bleaker picture with GDP growth between 0% to -1%; private investment -3%; public
investment +8%; consumption +3.1%; export -13%; import +23%, and balance of trade and current
account both in small surplus of USD 1.8 billion and USD 2.3 billion respectively. The 1/09 figures, just
released, were much worse than expected: export -25.3%; import -36%; CPI -0.4%; industrial capacity
utilization 57.1%. There were, however, surplus in trade balance (USD 1.69 billion), current account
(USD 2.29 billion) and balance of payment (USD 1.97 billion). International reserves went up marginally
to USD 110.7 billion.
All heading south!
After a 1% cut in 12/08 and another 0.75% last month, the Bank of Thailand lowered the Repo rate again
on 25/2/09 by another 0.50% to 1.5% p.a. Their rationale was the high uncertainty in global economic
prospects and the country’s shocking GDP contraction in 4Q08 (-4.3%). Although a larger interest rate
reduction was anticipated, the central bank has been mindful of small depositors who have been suffering
from their fast shrinking interest income since the world financial meltdown began in 10/08. Both foreign
exchange and interest rates have been kept in line with other Asian currencies in the effort to boost export
and attract tourists as “competitive devaluation” continued to rage on worldwide. Meanwhile the USD
went from strength to strength against most currencies while oil prices remained soft around USD 40. The
THB too was heading south to end the month weak at THB 36.50 level. Throughout 2/09, the SET
struggled up and down (around 410-30) as world’s key stock markets continued to test their new
While official unemployment rate this year was expected to be around 2.5-3.5%, a recent survey reported
that 16% of Thai companies planned to reduce/lay off their staff and 39% plan to freeze/reduce salary in
the next 12 months, compared to the global average of 27% and 24% respectively. Things however have
been looking particularly bleak in the construction industry due to 50% reduction in new public and
private projects. Amidst cut-throat competition, many Thai contractors decided to slash their prices by 10-
20% to keep their companies going until things turned for the better. With government’s recent subsidies
and tax incentives, the Minister of Labor has been quite successful in liaising between employers and
employees in the manufacturing sector for an orderly downsizing and/or retraining to their workforces.
Although tourists have returned, business travelers have more or less disappeared. While hotels have been
biting the bullet, high-end retails shops and restaurants have started to close down. Meanwhile, thousands
of foreign workers, most of them illegal, have been laid off, turned back and/or sent home.
Back to basic
Although the latest cool spell has been colder and has lasted longer than usual, the hot season has arrived
much earlier and with higher-than-normal temperatures. February ended with devastating droughts in the
North/ Northeast and floods in the South. Thai farmers, who have been suffering from plunging
commodity prices and droughts, have welcomed Abhisit government’s timely subsidies, debts forgiveness
and other cash distribution schemes. PM Abhisit and his cabinet also planned to personally visit all the 76
provinces within the next two weeks, to better understand the problems and provide correct solutions and
timely remedies. The army and local large corporations too have launched their drought relief campaigns.
At long last, Thailand has woken up to “Climate Change” and the urgent need to protect environments
and conserve energy. PM Abhisit has announced his full support for alternative energy and local
production of biofuel from our abundant agricultural crops. If a global depression were to materialize,
Thailand would be one of the countries that could indeed survive on self-sufficiency economy.
The party is over!
While the world seemed to be collapsing around us, Thailand’s elites, politicians, bureaucrats, military,
middle class, grassroots, indeed all the people in Thailand, would have to wake up to reality and set aside
their personal interests and ideological differences - for now anyway. For the country survive, everyone
would have to roll up his sleeves and pitch in with constructive advice, ready support and unqualified
cooperation. This is indeed not the time for idle bickering, useless criticism, petty complaints that are both
distracting and destructive. Like all other countries on this planet, Thailand would have to go through this
“Mother of Economic Crisis” all on her own, without any outside help. Many have come to believe that
this great recession could turn into a global depression any time and that it would take years, not quarters,
to the world to get back to normal. So the sooner we could get our acts together the better. We would
have only ourselves to blame if we continued to put ourselves before our country and leave the
government to carry out their uphill tasks on their own as things continued to deteriorate worldwide!