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Here is your Mekong Memo Thailand for November 10, 2023.
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Paetongtarn's Rise Fuels Intriguing Theories
The political landscape in Thailand is rife with speculation as Paetongtarn Shinawatra takes the lead of the Pheu Thai Party. Theories abound, from her natural grooming for premiership in a male-dominated arena to bizarre conjectures of a planned mid-term replacement to boost the party's chances. Amidst satirical comments and YouTube speculations, a third, more outlandish theory suggests a covert alliance between Pheu Thai and Move Forward, aiming to disrupt the status quo. These theories reflect the complexities and uncertainties of Thailand's political future as the next election looms.
Read more: Thai PBS
Resilience in the Face of a Northeast Asian Headwind
Thailand's economy faces significant headwinds due to geopolitical tensions and a downturn in key Northeast Asian economies. The Thai baht has hit a 17-year low, influenced by high oil prices and U.S. interest rates, leading to a hike in local interest rates. Efforts to boost tourism, especially from China, have not fully materialized, with Chinese visitor numbers still below pre-pandemic levels. Despite this, Thailand's trade dynamics suggest some resilience, with a focus on sectors less dependent on Northeast Asian markets and potential growth in trade with the U.S. and Southeast Asia. The country's challenge lies in maintaining stable democratic leadership to navigate these economic shifts.
Read more: ThinkChina
A Patchwork Forecast for Global Investors
First the positive: Thailand's Board of Investment reports a 31% increase in project applications, suggesting strong investor confidence. Foreign Direct Investment has risen again, with China leading the charge. The electrical and electronics sector tops the investment list, hopefully indicating significant employment and export contributions will be following. The IMF has upgraded Thailand's 2024 GDP growth forecast to 3.6%, supported by strong private consumption and external demand. Inflation remains constrained (see next article), with measures in place to address household debt and financial stability.
Singing from an apparently different songbook, The Federation of Thai Capital Market Organizations reports that their “Investor Confidence Index” dropped to a five-month low and returned to the bearish zone in October, apparently weighed down by the Israel-Hamas conflict and capital outflows.
Inflation Takes an Unexpected Dip
In October, Thailand's inflation rate decreased unexpectedly, influenced by government subsidies on energy and electricity, marking a significant shift from the previous month. The year-to-date headline inflation remains moderate, suggesting contained inflationary pressures within the central bank's target range.
Read more: FXStreet
Auto Industry Tug of War: EV vs ICE
Thailand's Board of Investment is endorsing tax incentives to promote the auto industry's shift towards automation, robotics, and electric vehicles (EVs), while also trying to sustain the internal combustion engine (ICE) sector. This dual approach is necessary due to the industry’s significant role in the nation’s economy and this support is rooted in the automotive sector's contribution to exports, job creation, and the extensive supply chain network within Thailand. The industry is recognized as a vital sector, with Thailand being the largest automotive production base in ASEAN and 10th largest globally.
Specific incentives mentioned:
Qualifying companies investing in automated systems or robotics are eligible for a 50% corporate income tax exemption on the invested capital over three years.
For projects in the country using automated machinery to produce at least 30% of total output, a tax exemption of 100% of the invested capital is granted.
Applications for these incentives must be submitted by 2024.
Read more: Bangkok Post (Tax Breaks), The Star (Tax Breaks), Khaosod (Toyota), Xinhuanet (Changan Auto), Thai PBS World (Saudi Investment), Bangkok Post (EV Registrations), Bangkok Post (Transition to EV)
NBTC to Allocate 3500 MHz Spectrum in 2026
The National Broadcasting and Telecommunications Commission (NBTC) is set to allocate the coveted 3,500-megahertz spectrum band in 2026, a key frequency for 5G services. A comprehensive spectrum management roadmap is underway, targeting completion in early 2024. This plan is crucial for telecom operators, as the current bands held by National Telecom will revert to the NBTC in 2025. The future auction is intended to facilitate the optimal use of the spectrum, considering the significant investments made by private operators in the 4G and 5G networks. The NBTC's decision will influence the competitive landscape of Thailand's telecom industry and its 5G capabilities.
Read more: Bangkok Post
Bankruptcy Hits Miss Universe's Corporate Crown
JKN Global Group, the Thai owner of the Miss Universe pageant, has entered bankruptcy proceedings to address a “liquidity problem.” The company's plan includes business and financial restructuring, with continued operations during the process. This follows a significant share price drop and a missed bond repayment deadline.
Airbus Targets Helicopter Sales Spike
Airbus is targeting a 20% growth in Thailand's helicopter market, focusing on disaster relief, search and rescue, and maritime security. With a 30% market share and 71 helicopters in operation, Airbus hopes to secure half of Thailand's military and public service sector growth in the next decade. The strategy includes new service centers in Bangkok to support regional customers, collaboration with Thai Aviation Industries, and a commitment to sustainability with a net-zero goal by 2050, emphasizing newer engines and sustainable fuels.
Read more: NNT
Minimum Wage Hike: Promise Unfulfilled
Thailand is set to increase the minimum daily wage by the end of next month, although it will not reach the 400 baht level previously promised by Prime Minister Srettha Thavisin. The adjustment, described as a New Year's gift, is part of a gradual plan with the 400-baht rate expected to be implemented in select provinces by the end of 2024. The Labour Ministry is conducting surveys to determine fair wage adjustments across all provinces, aiming for a balanced approach that considers the impact on businesses and employment.
Read more: Bangkok Post
Global Business Finds a Safe Haven in WHA
WHA Group is experiencing strong growth, capitalizing on the reconfiguration of supply chains due to U.S.-China trade tensions and lingering effects of the pandemic. CEO Jareeporn Jarukornsakul anticipates a record year following a significant profit rise, as the company expands its industrial estates in Vietnam and Thailand. WHA is positioning Thailand as a Southeast Asian hub for electric vehicles, attracting major Chinese EV makers, and is advocating for government support to further attract investment, particularly in renewable energy and high-tech industries.
Read more: Nikkei Asia
Ayutthaya Proposed as Logistics Nexus
Thailand's Joint Standing Committee on Commerce, Industry, and Banking has proposed transforming Ayutthaya into a logistics hub, capitalizing on its central location, good transport network links and the upcoming Thai-Sino high-speed rail. The proposal is intended to elevate the economic value of the province while being mindful to preserve its World Heritage status. Ayutthaya's industrial estates, a cornerstone of the province’s economy, especially stand to gain from increased Chinese investment, particularly in the food processing industry.
Read more: NNT
Tourism Chasing 2.38 Trillion Baht Target
Thailand's tourism sector is on a tear, on target for 2.38 trillion baht in revenue by year's end, with 1.67 trillion already secured. The Tourism Authority of Thailand is fueling this push with extensive promotional activities, publicly sharing an even higher goal of 3 trillion baht for the 2024 tourist year. Visa exemptions for travelers from Taiwan and India are set to fuel the late-year surge, building on the 21.8 million foreign visitors and 194 million domestic trips recorded so far this year.
Read more: The Thaiger
Export Sector Stands Resilient
The Thai National Shippers’ Council reports a positive outlook for Thailand's exports, anticipating a maximum contraction of 1.5% for the year. Despite the slowing global economy, the sector saw growth in recent months, with a trade surplus in September and stable orders for Q4. The council remains cautiously optimistic, citing favorable exchange rates and strong performance in sectors like automotive and agriculture, while acknowledging risks such as high global interest rates and potential geopolitical conflicts continuing to weigh on sentiment for the coming year.
Read more: Bangkok Post
Consumer Confidence Continues to Improve
In October, Thailand's consumer confidence index hit a 44-month peak, buoyed by government stimulus, a surge in tourist arrivals, and robust exports. The University of the Thai Chamber of Commerce cites reduced living costs from government price cuts and a visa exemption scheme as key factors, alongside a high willingness to spend on tourism, signaling strong economic recovery signs. Concerns linger, however, over the Israel-Hamas conflict's potential impact on global energy prices.
Read more: Xinhua
And now for something completely different - the focus of the Memo is on news for business, but this story of the defacement of a building that has defined the Sathorn Skyline for years is an important read about the preservation of heritage in Southeast Asia.
The Disrobing of an Architectural Icon
We at The Memo have never been fans of Sumet Jumsai’s work (The Nation building was an appalling eyesore), but the iconic 'Robot Building' in Bangkok, a symbol of Southeast Asian postmodernism, is undergoing a major renovation that has sparked outcry from conservationists and its original architect.
The refurbishment by United Overseas Bank is claimed to be necessary for energy efficiency and the improvement of employee working space but involves significant changes to the building's distinctive features, leading to debates about preserving modern architectural heritage during a period of rapid urban development.
The design of the Robot Building was famously inspired by Sumet’s son's toy robot, and it incorporated several robotic elements into its facade. These included two antennae-like structures on the roof, eyes which were represented by round windows, and a ribbed exterior that mimicked the articulation of a robot's limbs. Ironically, in years gone by the building was celebrated for incorporating energy-saving features.
Read more: CNN
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