Thailand needs foreign investment to stay competitive - just to whom it concerns
Entry posted by Rempler ·
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From some reactions I got by PM's I realized that there might be some interest on biz news about Thailand from international perspectives.
As mentioned before, after some deep analysis "The Economist" is the only biz-newspaper whom I personally trust, therefore I add another small story published by them about the need of foreign investments (which is clear to everybody) and its dimensions/size (!!!) for the improvements in infrastructure and partially education.
Just to whom it concerns
Glow in the dark - Dec 8th 2005 | BANGKOK
From The Economist
Thailand needs foreign investment to stay competitive
MORE than 100km (62 miles) south-east of Bangkok, Glow's gas-fired generation plant churns out the electricity that keeps the lights burning in one of Asia's largest cities. Glow's significance goes well beyond the power it generates. Like all the former Asian ?tigers?, Thailand is racing to turn itself into a modern service-based economy, in the face of fierce Chinese and Indian competition. The Thai strategy involves revamping the country's ramshackle infrastructure, with the aid of huge amounts of foreign capital.
Glow is an almost entirely foreign project?majority-owned by one French company (Suez), built by another French company (Alstom) and financed by numerous international banks. More foreign investment is crucial to financing the ?mega-projects? demanded by Thaksin Shinawatra, the Thai prime minister. Over the next four years, the government plans to invest 1.7 trillion baht ($41 billion, or 26% of gross domestic product) in infrastructure, spanning electricity generation, transport, housing, irrigation, health and education.
The need for fresh investment is clear. Bangkok is still choked by traffic despite the opening?three years late and $900m over budget?of a mass-transit system. Transport costs still weigh heavily on business and the telecoms network is outdated, with only a tenth of the population hooked up. Even the country's reliable electricity grid could be hit by shortages in a few years unless new capacity is commissioned soon.
Inferior infrastructure is accelerating Thailand's loss of manufacturing jobs to cheaper Asian rivals. Its status as a regional hub for the car and electronic-components industries is under threat from China in the north and Vietnam in the south. To compensate, the government wants to turn the country into a centre for regional trade and business?hence planned new highways to the north into China and stretching west as far as Burma and India.
Daniel Lian, Morgan Stanley's South-East Asia economist, says Thailand must also shift from generic mass manufacturing into specialist markets with higher, more defensible profits. Medical tourism is one option. Bumrungrad Hospital, Bangkok's top private clinic, is admired for world-class but cheap heart by-passes, cancer care and cosmetic surgery. So popular is the ?Thailand tuck? that one third of the hospital's 1m patients are now foreign. Long-stay tourism is another niche, with Japanese pensioners spending their entire winters on Phuket beaches. Thailand also has a fledgling fashion industry, whose designers recently toured Beijing and Paris.
But it is the ?mega projects? that could do most to lift growth following what Pridiyathorn Devakula, governor of the Bank of Thailand, calls ?a perfect storm??high oil prices, a drought, a tsunami, unrest in the Muslim south and a downturn in the global electronics industry. These have slowed Thailand's economic expansion from 6.2% in 2004 to a forecast 4.7% this year. At a Euromoney conference entitled ?Amazing Thailand? in Bangkok last month, Mr Pridiyathorn assured investors that?despite Mr Thaksin's reputation as an economic nationalist?up to 600 billion baht or 35% of the value of the mega projects will be open to foreign tender, including the big transport and power schemes. Almost two-fifths of the initiative's cost will be funded by private-sector borrowing, both foreign and local.
Some foreign investors already see Thailand as a good alternative to China, offering safe, profitable and well-managed projects?as well as a more open political climate and better middle-management. Megan Reilly Cayten of Citigroup, which played a large role in financing Glow, says that: ?Thai power projects are exemplary in Asia.? But while European and American investors are generally keen, the real battle may be between the Japanese and Chinese?a struggle that inevitably has political and strategic overtones. Some 300 Chinese firms have already invested in the country and Japanese banks and trading houses, with their balance sheets repaired, are returning to the region.
But are the Thai government's finances robust enough to ensure its mega projects get off the ground? This month's failure to float Egat, the electricity monopoly, could lead it to pare back their scale, already cut from more than 2 trillion baht. Foreign investors are likely to want the government on board?with all its financial guarantees?before they commit themselves to expensive, long-term deals. A boost from infrastructure investment would certainly be handy for Mr Thaksin, whose popularity has been sliding lately as growth has slowed. He has stayed uncharacteristically silent during the recent economic downturn, blaming a misalignment of the heavens for his misfortunes. ?Mercury is no good, so I'll just wait until next year to talk,? he told reporters recently.
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