Letter from Vongthip
January 7, 2012
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
