Thai Economic News...Worse Than Expected...ouch!

Worse than expected?  That must be really bad!Really, with all the bad news about the world economy lately, how could anyone be surprised by bad economic numbers from anywhere at this point?  The numbers out of Thailand are indeed “dismal” and the fact that things are going to get worse before they get better is certainly no trivial matter.  Quite depressing, to be honest.  Why?  Because I think that a degree of the drop in the Thai numbers didn’t need to happen.  Much of the pain is certainly due to the world wide wipe out.  But a good percentage is self inflicted."This my thinking:"First, Thailand is good at hard-drives, trucks and crafts/home furnishings (among other industries)—these three specific industries that are all but dead right now because of a lack of $ in export markets.Some of Thailand’s other major advantages (low tariffs, educated workforce, good infrastructure) will not entice new orders all by themselves either.  So these industries are not going to recover until after you see recover in other regions first.Second, agriculture is Thailand’s export leader.  Regional economic depression means that orders for exotic fruit are going to be down.  The fact that there were rice shortages last year (poor harvests) means that Thailand (and Vietnam and others) held onto their rice exports instead of selling them thus lowering the export numbers.Third, the Tourism industry, which (I think) is second to agriculture in the Thai economy, is absolutely dead right now.  There just are not any more western tourists (or Chinese) going to Thailand right now.  I suppose that this could be seen as a good thing if some of the sex-tourism industry dries up.A subset of, and increasing large part of tourism and the domestic economy is medical services (medical tourism).  Obviously, anything elective (lasic, tummy tucks, eyelid folds, boob jobs and sex changes) are going to be on the back burner when people are unemployed.Fourth, Banking/finance and logistics services are hurting as banks have no money or are not lending and orders are down all across Asia (and everywhere).Fifth, even before the economic downturn, Thailand was not a low-cost leader in ASEAN or Asia any more.  Vietnam and Cambodia have cheaper labor, as does China.  Hong Kong and Singapore have busier ports, better banking services and more western logistic headquarters.I think that for 20 years now Thailand’s position has been a question.  Are they focused on Agriculture and tourism or are they a banking and logistics hub?  In the ‘90’s they actively presented themselves as the banking hub for mainland SEA, and with the lack of development in the other regional countries they are that kind of by default. They have a small but quality electronics sector, but they are by no means a world leader (except for one hard-drive plant).  Ditto for most other manufacturing capabilities.  But they are better in most than their close regional counterparts.  And they often benefit from reactionary anti-Chinese sentiments.Even though we started SRI in Thailand, within one year we had to move to China just to compete—in terms of price, production times and diversity of opportunity.  As I’ve said before, Thailand with 66 million people often can’t even compete with Guangdong Province with 90 million.  All things being equal, I’m more worried about political stability in Thailand than I am in China.  And that’s saying something.  Which bring me to…Finally, the self-inflicted wounds.  The Thais didn’t help themselves in the PR department last year.  ’08 was basically a disaster year for the Kingdom.  Boarder war with Cambodia, continued bombings in the south, foreigners arrested for stupid books, international magazines banned, a PM canned for a cooking show, kangaroo courts, Thaksin running all over the world, and the stupid protesters that shut down the airport for a week.   If you wanted to scare away business this would be the perfect formula.And they haven’t learned their lesson yet.  Now it’s the Red Shirts that are going to do the same thing the yellow shirts did (ok, they've stopped short this time).  What’s worse is that there are almost weekly reports of new arrests for lese majeste and large political protests threatening to do the “same thing” as the last protests that shut down the airport.

Side Note: This color thing has really gotten out of control the last few years.  Before blue and yellow were just nice ways of enjoying a holiday and supporting the king/queen.  Now, the wrong colors can get you beat up (if you're Thai) or mocked/questioned (if you understand the Thai around you).What's really a shame is that the once tolerant edge of Thai culture is being worn down.  True, Thai's are still GREAT (more than they should be) to most foreigners.  But no longer can you rationally have a discussion about politics with business people over lunch.Last time I was there (a month ago) it was so sensitive and so in-your-face that even discussions about the economy were difficult because of the political overtones.I have a friend that can’t even read the book The King Never Smiles in his own house because his wife (Thai) would get offended.  I don’t say this to bash her, just to point out that the obsession with the king (and really all things political nowadays) is really affecting relationships in Thailand on many many levels.

And, in news that will certainly make world stock markets rise in expectation, Thailand and Lao opened a boarder train and Lao and Vietnam opened cross-boarder money exchange (classic communist news piece--no news whatsoever, just names of officials)!  Don't hold your breath for the SEA version of the EU though.I joke with people all the time that Thailand is a great place to vacation but a lousy place to do business.  We still do work there, but, to be honest, it’s usually when we can’t find what we need in China, Taiwan or Vietnam.  Sad but true.At least the fishing is still good.