May 26, 2010

Thai Strife Threatens Investment

Filed under: Uncategorized — ktetaichinh @ 4:13 am

See a sample reprint in PDF format. Order a reprint of this article now
MAY 18, 2010, 2:28 P.M. ET
Dow Jones Reprints: This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers,
use the Order Reprints tool at the bottom of any article or visit
Thai Strife Threatens Investment
BANGKOK—Thailand’s standing as a major investment destination is coming under question as its government
fails to resolve the country’s bloody political crisis and economic damage mounts.
Sporadic street battles continued in parts of Bangkok’s central business district on Tuesday, though they were
noticeably less ferocious than the previous five days, when at least 37 people were killed and many more
wounded. There was one reported death on Tuesday.
Still, a political solution seemed as distant as ever. The government rejected a cease-fire plan backed by leaders of
the so-called Red Shirt movement that involved using the country’s Senate as a mediator. Government officials
said they won’t negotiate until the protesters—who want new elections to oust a government they believe serves
only Thailand’s elites—agree to disperse.
There was little sign of that happening on Tuesday, as new food supplies appeared in the protesters’ heavily
fortified camp in a ritzy Bangkok shopping zone, despite a multiday military clampdown aimed at depriving the
area of necessities. It wasn’t clear how the food, carried in takeout styrofoam containers in a pickup truck, got in.
The government announced a two-day public holiday was being extended to Friday as many areas remained too
dangerous to enter. Police banned the sale of tires in Bangkok without police permits so demonstrators couldn’t
set fire to them around the city.
The crisis was already causing severe damage to Thailand’s economy before the latest spasm of violence. But the
killings have added a new dimension, forcing businesses to contemplate more drastic steps to ensure safety of
their employees and causing some foreign investors to wonder if Thailand’s deep social divides can ever be
Some companies are considering moving employees to hotels near the airport so they can escape more quickly if
street violence spreads, while others are shifting their foreign direct investment, or FDI, to other countries
“Unless the crisis is resolved, law and order restored and a credible process of reconciliation begun, Thailand will
probably lose out in the FDI stakes for a long time,” says Manu Bhaskaran, chief executive of Centennial Asia
Advisors, an economic consulting firm in Singapore. Even longtime investors are wondering “should I be engaged
at all” in Thailand, says David Fernandez, a managing director at J.P. Morgan in Singapore.
Tüv Süd, a German company that conducts product testing and industrial certification, with operations
throughout Asia, was about to make an acquisition of a Thai oil-and-gas-services firm when the protests
“Because of the instability we are holding off,” says Ishan Palit, chief executive of Tüv Süd’s Asia operation. With
his German bosses generally eager to expand in Asia, those resources will now go to places such as Malaysia or
Indonesia, he says. “Until two weeks ago, the view was still that it was going to come back and be all right,” he
says. But now, “it’s gotten more serious.”
Thailand’s problems are “a bit more fundamental” than the past, adds Shane Oliver, head of investment strategy
at AMP Capital Investors in Sydney. “It makes it difficult to justify major allocations to Thailand,” he says. “I can
find other countries that are more attractive without having to worry about the political situation,” he says,
including stock markets such as South Korea and Taiwan.
Thailand’s conflict stems in part from tensions between Thailand’s sizable rural underclass—who make up a
majority of voters—and urban elites perceived to control the country’s key economic and political institutions.
The protesters are led at least in part by former prime minister Thaksin Shinawatra, a tycoon who cultivated their
support through populist policies and easy credit before he was removed in a 2006 coup. He lives in self-imposed
exile to avoid imprisonment on a corruption conviction, but supports the movement financially from abroad.
The latest violence broke out after government authorities decided to impose a new security perimeter around
the protesters’ main camp in a bid to squeeze their supplies. Protesters have fought back by throwing Molotov
cocktails and rolling burning tires toward the soldiers, with more gunfire heard late Tuesday.
Thailand remains a critical part of the global supply chain and an extremely important place for investors, with
65 million consumers and far better infrastructure for manufacturing than most of its neighbors. It has survived
political crises before, including violence in the 1970s and 1990s, and is still on track to post gross domestic
product growth of 4% to 5% this year on the back of strong consumer spending and demand for exports made far
outside the conflict areas. The country could rebound quickly if a resolution is found.
But Thailand was already struggling to fend off less developed, lower-cost, neighbors such as Cambodia and
Vietnam in attracting FDI in recent years. For the past two years, it received less FDI than Vietnam, even though
the latter’s economy is far smaller.
The country’s intractable political problems are contributing to the problem. David Simister, chairman of the
Thailand unit of real-estate services firm CB Richard Ellis, says demand for office and industrial space from
multinationals has been somewhat subdued since 2005, when protests first started rocking the capital in the
leadup to the 2006 coup that deposed Mr. Thaksin.
Now the situation has reached a new level of seriousness, he says. “This is unchartered and the level of tension is
much higher.” The company has moved its operations from central Bangkok to a suburban office space and set up
100 employees in temporary workstations.
Other businesses are also scrambling. The Stock Exchange of Thailand, which has remained open, is now
operating out of an undisclosed location after its leaders decided its main office tower was too close to the
Other companies are struggling to reroute product shipments and supplies around conflict areas, while some
staff are having a hard time getting to work because of the lack of public transportation.
“Virtually everybody is now being touched,” says Paul Quaglia, a director at Bangkok-based security consulting
firm PSA Asia. Multinational companies are “are not running for the exits—but they’re starting to look at their
maps to see where the exits are,” he says.
Inside the government’s fragile perimeter on Tuesday, the smell of rotting garbage wafted across the landscape as
bags of uncollected rubbish piled up along mostly empty roadways. A burned-out bus and sandbags blocked one
broad avenue that had been the scene of some of the most vicious fighting in previous days. Condominium towers
were pockmarked with bullet holes and a few shops, including a 7-Eleven convenience store, had been looted.
A new routine seemed to be settling into the protesters’ main encampment, however. Around midday, a pickup
truck loaded with hot takeout meals pulled into an area near the protesters’ rally soundstage, and other food
stations appeared to be well-stocked. A network of motorbike taxis buzzed visitors around the area and Red Shirt
guards set up new checkpoints close to their camp to regulate the limited flow of vehicles.
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by
copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit
The number of protesters was down significantly from recent weeks but remained relatively unchanged from the
weekend, when a core group of a few thousand or so people dug in.
—Wilawan Watcharasakwet contributed to this article.
Write to Patrick Barta at


Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Blog at

%d bloggers like this: