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Here is your Mekong Memo Thailand for the week of January 12, 2024.
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The big topic this week is cannabis again, so the first three summaries are all different angles on that story.
Cannabis U-Turn: A Policy Reversal in Motion
Thailand, after its 2021 decriminalization of cannabis, is now proposing a ban on recreational use. The government's draft bill, seeking public feedback, aims to limit cannabis to medical and health purposes, introducing fines and jail terms for recreational use. This sharp departure from the status quo follows concerns over drug abuse and fulfills the new government's election promise.
Backlash Against Cannabis Control Bill
Pro-legalization advocates in Thailand are criticizing the Health Minister's endorsement of a new cannabis control bill without public consultation. The bill, which aims to restrict cannabis use to medical purposes, has been met with concerns over its impact on the cannabis industry and inconsistencies in regulating cannabis compared to other substances. Advocates emphasize the need for policies based on scientific evidence and public involvement.
Global Implications of Cannabis Policy Shift
Thailand's move to ban recreational cannabis use, following its decriminalization, has global implications. The policy shift impacts the international cannabis market and sets a precedent for other nations. Thailand's experience highlights the challenges in regulating a newly legalized industry and the balance between public health concerns and economic opportunities.
Aviation Landscape: New Entrants and Expansion
The aviation sector has been seeing quite a bit of activity.
Thai Airways is resuming its Perth-Bangkok route using a Boeing 787 and expanding its European network by re-starting direct flights to Oslo and Milan. All three routes will see their first flights from March 31.
The industry is also welcoming eight new airlines, including P80 Air, Landarch Airlines, Really Cool Airlines, Pattaya Airways, Asian Aerospace Service, Avanti Air Charter, and Asia Atlantic Airlines, collectively adding 60 aircraft. At the same time, however, incumbent domestic operators are claiming that they face challenges in meeting revenue targets due to high costs and limited flight capacity.
Two distinct seaplane companies, Thai Seaplane and Siam Seaplane, have emerged in the market. Thai Seaplane focuses on connecting tourist destinations within the Andaman region with shorter travel times, planning operations in the third quarter of 2024. Siam Seaplane, aiming for an Air Operator Certificate in early 2024, targets routes from Phuket or Krabi to various islands and from Bangkok to the Gulf of Thailand.
AirAsia is keen to promote Bangkok as a hub, similar to Dubai, and is seeking government support for reducing jet fuel excise tax to improve efficiency.
Read more: Airline Ratings (TG to Perth), VnExpress International (New Airlines), Nikkei Asia (Competition), TTG (TG to Perth), Bangkok Post (Challenges), Khaosod English (Seaplanes), ITTN (TG to Europe), Bangkok Post (AirAsia Hub Vision)
BoT Under Pressure from PM and Industry
The Bank of Thailand is facing mounting pressure to reduce interest rates. Prime Minister Srettha Thavisin, while giving lip service to the central bank's independence, has suggested rate cuts to aid the economy and alleviate debt. The Joint Standing Committee on Commerce, Industry, and Banking is also urging a rate reduction, citing high borrowing costs and an uneven recovery. Despite these calls, the Bank is continuing to maintain a cautious stance, weighing economic factors and the impact of government stimulus measures.
Wine Import Tariffs Slashed
The government has approved substantial tax cuts on alcoholic beverages and entertainment venues, ostensibly to support the tourism industry. Thai wineries are voicing concerns over potential market flooding by European wines, fearing competitive disadvantages. The tax reduction includes halving excise taxes on wine and spirits and eliminating import tariffs on wines for a year. (Ed.: As an aside, tropical viniculture has developed at an incredible pace over the past two decades, and Thai wine has surprisingly come into its own of late).
CPI Falls Below Target Range
Thailand's consumer price index (CPI) has been below the central bank's target for eight consecutive months, with a 0.83% drop in December. This trend, in contrast with regional peers, is cause for an economic strategy reassessment. Core CPI, excluding energy and food, is showing a slight increase, indicating some underlying economic strength.
THB Expected to Rise Against US Dollar
The Thai baht is expected to strengthen to 33 against the US dollar in the near term. Market confidence in US Federal Reserve interest rate cuts as early as March is driving this view. The baht's movement will be influenced by these rate cuts and the resulting weaker dollar, with forecasts suggesting it could stabilize at around 34 to the dollar by year-end. The shift is also supported by increased fund inflows and a potential boost in tourism, particularly from Chinese visitors.
Read more: Bangkok Post
Advancing FTA Talks with China Despite Trade Deficit
Thailand is set to resume free trade agreement (FTA) negotiations with China this year, with hope of addressing a nearly US$30 billion trade deficit. The Thai government views the FTA as a means to increase trade and investment, despite concerns over domestic industry protection and potential job losses. With China as Thailand's largest trading partner, the FTA is expected to cover a broad range of sectors, including agriculture, manufacturing, and services, and is likely to include an investment protection agreement.
Read more: Asia News Network
TDRI Calls for More Competition in Banking
The Thailand Development Research Institute (TDRI) has identified a disparity in Thailand's banking sector, noting that the spread in interest rates for deposits and loans is significantly higher than to global averages. This discrepancy, marked by low deposit rates and high loan rates, suggests limited competition among Thai commercial banks. TDRI recommends leveraging state-owned banks to introduce more competition, with the hope that this will lead to higher deposit interest rates and lower loan rates, encouraging the development of a more efficient economy.
Read more: Thai News PRD
Genting Singapore Eyes Bid for Casino License
Genting Singapore is angling to position itself as a potential bidder for a casino license in Thailand, should the country legalize integrated resorts. Analysts suggest that Genting Singapore might pursue a joint venture to enter the Thai market, drawing on its experience in expanding within the Asia-Pacific region. Thailand's shift towards considering integrated resorts, including casino gaming, is still wildly speculative, with nothing more substantial than rumors at the present time, but the street has expectations of progress this year. The competition for licenses is anticipated to be intense, attracting all major industry players, should licenses become available.
Read more: Casino.org
Growth Anticipated with Confidence and Sales Up
The economy is projected to grow between 2.8% and 3.3% in 2024, according to a forecast by the Joint Standing Committee on Commerce, Industry and Banking. The optimism is supported by a rise in consumer confidence, reaching a 46-month high in December. Central Pattana (CPN), one of Thailand’s leading retail groups, anticipates a 20% growth in retail sales in the first quarter, mostly driven by the Chinese New Year festival.
Electricity Tariff Capped at 4.20 Baht Per Unit
The Energy Regulatory Commission (ERC) of Thailand has decided to cap the power tariff at 4.20 baht per kWh from now until the end of April. The decision follows a reduction in the fuel tariff by 50 satang to 0.3972 baht per kilowatt-hour. This is good news for industry and consumers, but the Electricity Generating Authority of Thailand (Egat) has faced significant losses from subsidizing electricity bills. Capping the tariff at this rate could lead to liquidity issues for Egat, delaying debt repayment and causing more problems, later.
Property Sale and Mortgage Fees Reduced
There is an extension in reduced government fees for property sales and mortgages for until December 31, 2024. The reduction applies to detached houses, semidetached houses, row houses, commercial buildings, their accompanying land, and condominium units valued up to THB 3 million. The sale registration fee is now 1% of the assessed value, down from 2%, and the mortgage registration fee is 0.01% of the mortgage amount, reduced from 1%. Both sale and mortgage must be registered simultaneously to qualify for these reduced rates.
Read more: Tilleke & Gibbins
SET Optimistic About Foreign Investment Flows
The Stock Exchange of Thailand (SET) expects a recovery in investment returns this year, in line with regional trends as foreign capital inflows have resumed since late 2023. Despite being net sellers last year, foreign long-term investors continue to maintain a significant stake in the market. The SET expects increased foreign participation in the Thai stock market with signs of economic recovery and a potential decline in interest rates. The SET plans to extend trading hours and improve supervision of listed companies, proactive measures to support market performance and investor confidence.
Read more: Bangkok Post
And now for something completely different. Arts and entertainment can have a profound effect on public discourse and the anticipated release of the next season of The White Lotus, set in Thailand, is hoped by many to add fuel to the inbound tourism fire:
"The White Lotus" to Drive Brand Thailand
The filming of "The White Lotus" Season Three in Thailand is eagerly anticipated to benefit the local economy and tourism sector. Following the economic boost seen in Hawaii and Sicily from previous seasons, the production in Thailand is expected to inject millions into the economy, create employment opportunities, and support the recovering tourism industry. The show's portrayal of Thailand's landscapes and culture is expected to attract global attention, boosting the country's image as a premier travel destination at a time when many around the world are keen to begin traveling again.
Read more: Thai Enquirer
That’s it for this week, have a very happy new year!
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