News / Economy

Tensions Put Thailand on Sidelines of ASEAN Investment Plans

Anti-government protesters hold Thai baht banknotes to donate to protest leader Suthep Thaugsuban (unseen) as he leads a march through central Bangkok, March 28, 2014.
Anti-government protesters hold Thai baht banknotes to donate to protest leader Suthep Thaugsuban (unseen) as he leads a march through central Bangkok, March 28, 2014.
Reuters
Continuing political uncertainty, derailed infrastructure plans and sliding domestic demand are making big Thai companies look more keenly at investing elsewhere in the neighborhood rather than in Southeast Asia's second-largest economy.
 
At the Reuters ASEAN Summit, two of the country's largest companies, Siam Cement PCL and Charoen Pokphand (CP) Foods PCL, outlined growth strategies that are now firmly focused outside their home country.
 
“We are investing more in ASEAN and less in Thailand, where we focus on high value-added products,” Siam Cement chief executive Kan Trakulhoon said during an interview in Reuters Bangkok office on Thursday.
 
CP Foods told the summit how it is targeting 75 percent of company revenue to come their foreign operations within the next five years, up from 65 percent currently.
 
“Growth in emerging countries will surpass the domestic market,” said chief executive Adirek Sripratak, noting his company plans to expand in nearby Philippines and Vietnam.
 
On Friday, there was another piece of gloomy data on the Thai economy, as factory output fell for the 11th straight month in February, by 4.4 percent compared with a Reuters poll forecast for a 3.5 percent drop.
 
For months, the outlook for growth has worsened even though officials hope exports - which account for about 60 percent of the economy - will rise and lift the economy this year.
 
The central bank recently cut its 2014 economic growth forecast to 2.7 percent, compared with 4.8 pct last October, just before anti-government protesters took to the streets to seek the removal of Prime Minister Yingluck Shinawatra.
 
A decision earlier this month by the Constitutional Court to annul the result of the Feb. 2 general election has plunged the country into political limbo, raising fears that the economy will struggle to pick up speed anytime soon.
 
“If political crisis is prolonged, Thai cement demand is likely to be negative,” said Siam Cement's Kan, who runs the country's largest industrial conglomerate.
 
Pricey political "overhang"
 
That political uncertainty has been weighing on foreigners who invest in Thai securities. A March 14 research note from Nomura showed foreigners have been net sellers of Thai equities this year, with net sales of $837 million. Indonesia and Philippines by contrast have seen net purchases by foreigners of $1.01 billion and $171 million, respectively, so far in 2014.
 
“If I look across the region, I would say there are better prospects than Thailand right now until we get some sort of resolution to the political overhang that remains there,” said Andrew Swan, head of Asian equities at the world's biggest money manager BlackRock Inc, said in a summit interview in Hong Kong on Wednesday.
 
Political unrest could also threaten the country's credit rating, which all three major rating agencies currently have on a stable rating of BBB+/Baa1, in the investment grade category.
 
“If ongoing political uncertainty continues to drag, the country might be on a watch list,” Ng Kheng Siang, head of Asia Pacific fixed income at State Street Global Advisors, which has just over $2 trillion in assets under management, told the summit on Tuesday.
 
Some corporates in Southeast Asia are generally overlooking Thailand in favor of the faster-growing markets of Myanmar and Cambodia, as well as further afield in Asia.
 
Singapore's Oversea-Chinese Banking Corp., Southeast Asia's second largest lender, said that despite a fall in valuations in Thailand, it has little appetite to make any acquisitions there at present.
 
“Culturally the Greater China market appeals to us a bit more than the Thai market,” said the lender's chief executive Samuel Tsien, who is currently trying to buy Hong Kong's Wing Hang Bank Ltd.
 
The chief executive of PT Astra International, Indonesia's largest listed company by market capitalization, said it anticipates that Southeast Asia's largest economy could overtake Thailand as the region's biggest auto market within two years. Thailand is also a major production base for international auto manufacturers, but Indonesia is hoping to supplant it in coming years.
 
Reduced investment pledges
 
Thailand's troubles are hurting its investment numbers. In the first two months of 2014, pledges from foreign investors were 43 percent lower than a year earlier - and those from Japanese investors were down 63 percent.
 
“FDI this year may be less than $8 billion, the average long-term rate, because manufacturing FDI will disappear quite a bit as investors are waiting to assess the situation,” said Pimonwan Mahujchariyawong, an economist at the Kasikorn Research Center.
 
However, some portfolio investors still see opportunities. The $12 billion Templeton Asian Growth Fund, run by emerging-markets investor Mark Mobius, increased its allocation for Thailand to 27.12 percent in February, up from 24.7 percent at the start of the year, according to data from Lipper.
 
That's a bet economists believe could still pay off in the long-term, with Thailand's proximity to Myanmar, Vietnam, Laos and Cambodia.
 
“Its integration into manufacturing supply chains around the region, suggest that FDI flows will remain positive in the medium term,” said Benjamin Shatil, an economist at JPMorgan in Singapore.

You May Like

African States Push to Keep Boko Haram Offline

Central African telecoms ministers working with Nigeria to block all videos posted by Boko Haram in effort to blunt Nigerian militant group's propaganda More

Falling Oil Prices, Internet-Savvy Youth Pose Challenge for Gulf Monarchies

Across the Gulf, younger generations are putting a strain on traditional politics More

Philippines Call Center Workers Face Challenges

Country has world’s largest business process outsourcing, or BPO, industry, employing some one-million workers More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.8896
JPY
USD
119.26
GBP
USD
0.6475
CAD
USD
1.2451
INR
USD
61.816

Rates may not be current.