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Here is your Mekong Memo Thailand for the week of January 26, 2024.
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Pita Limjaroenrat Back in the Saddle
The Constitutional Court has exonerated Pita Limjaroenrat, former leader of the Move Forward party, from charges related to holding shares in a media company. The decision allows Pita to keep his parliamentary seat. Despite his suspension from legislative duties, Pita remained active, engaging with citizens and addressing their concerns but with his return to parliament, he claims his focus will now shift to advising the current party leader, with a party meeting in April set to decide on new leadership. The ruling, which had kept many observers on the edge of their seats, substantially strengthens Pita's position in the political arena.
Lithium Discovery Claims Slashed Under Scrutiny
In an embarrassing about-face, the government has revised its initial announcement of discovering the world's third-largest lithium reserves in Phang Nga province. Following expert skepticism, the deputy government spokeswoman clarified that the 14.8 million tonnes of mineral resources found are not solely lithium. The lithium content is only 0.45% of the total mineral resources, pouring cold water on earlier claims of Thailand having some of the biggest lithium reserves on the planet. The discovery does still represents a potential boost for Thailand's burgeoning electric vehicle industry, but the tailwinds won’t be as dramatic as initially expected.
BOT Keeps Rate Steady Under Pressure
The Bank of Thailand (BOT) has maintained its policy rate at 2.50%, despite calls for a rate cut by the Prime Minister and the Deputy Finance Minister. The central bank asserts that the current rate is appropriate as it balances economic growth, financial stability, and inflation. There has been no shortage of sniping from the public about high interest rates impacting living standards and economic recovery, however. The bank emphasized its role as a cautious regulator, expecting gradual adjustments in line with global trends and tailoring monetary policy to support economic recovery, especially post-COVID-19.
Court Decisions Point to Erosion in Rule of Law
Three recent legal decisions have raised concerns in some quarters about the erosion of the rule of law. A human rights lawyer was sentenced to an additional four years in jail for lese-majeste, based on social media posts advocating for reform of the royal institution. In contrast, former core members of the People’s Alliance for Democracy avoided jail time for leading the 2013 airport sieges, receiving little more than a slap on the wrist. The potential parole of former Prime Minister Thaksin Shinawatra, despite his conviction, further undermines public confidence in the justice system. Many in Thailand have always believed that there is a disparity in legal consequences, seemingly influenced by political and social status, but there is a growing undercurrent of discontent.
Read more: Thai Enquirer
FTI Pushes Back on PM’s Wage Hike Proposals
Prime Minister Srettha Thavisin is advocating for increased minimum wages across ASEAN in an attempt to shift the region's investment appeal from low labor costs to other factors like clean energy and good public health. The Federation of Thai Industries (FTI) warns that such wage hikes, particularly during a period of high loan interest rates, will adversely impact small and medium-sized enterprises. The FTI's concerns mostly center on the potential for increased operational costs and price hikes in labor-intensive industries. (Also see next article about industrial sentiment)
Industrial Sentiment Down
The industrial sentiment index saw a decline in December 2023, falling to 88.8 from 90.9 in the previous month, as reported by the Federation of Thai Industries (FTI). The reduction is being blamed on weakened consumer spending power (mostly due to high consumer debt) and concerns over exports. It is hoped that exports will see support later in the year due to improved global demand, but those hopes are being tempered by worries over wage increases and geopolitical conflicts. (Also see previous article re: FTI wage hike proposals).
Read more: Bangkok Post
Trade Negotiations with EFTA and EU
Thailand is set to host the eighth round of free trade agreement (FTA) talks with the European Free Trade Association (EFTA) in Bangkok, expecting to wrap up negotiations by mid-year. The EFTA is made up of members from four countries: Switzerland, Norway, Iceland and Liechtenstein. The broader European Union and Thailand are also in the middle of negotiating a trade deal, with Bangkok keen to get it wrapped up by early 2025. These pacts should go a long way to smoothing trade relations with Europe with agriculture, food, industry, intellectual property and services all expected to benefit.
Land Bridge Promise Meets Practical Challenges
The proposed land bridge project, connecting the Gulf of Thailand and the Andaman Sea, is still causing many to scratch their heads about its viability. While the government promotes the project for economic benefits, experts are raising concerns about its practicality and potentially negative impacts. The “bridge,” including motorways, railways, and deep-sea ports, would ease Malacca Strait congestion and boost trade through Thailand, but feasibility studies suggest limited benefits for container ships and potential environmental and community risks. The project's high investment cost and questionable assumptions about traffic congestion and cost savings add to the debate over its effectiveness. Despite these issues, Dubai Ports World is reported by the Prime Minister to be serious about investing in the project.
Stimulus Plans With Revised Growth Forecasts
The PM is claiming a need for substantial stimulus to address the country's financial "crisis," characterized by high household debt and low wages. The government still claims that it intends to distribute 500 billion baht among citizens to boost spending, but that project keeps getting pushed back and its not clear that it will ever come to fruition. the Thai Fiscal Policy Office is forecasting a modest 2.8% GDP growth for 2024, down from an earlier 3.2% projection, claiming the reduction is due to expectations of lower foreign tourist arrivals and reduced exports. In a bit of encouraging news, however, new business registrations in Thailand reached a decade high last year, seemingly indicating positive sentiment and a potential rebound in economic activity.
EEC Pushing to Boost FDI in Digital Sector
The Eastern Economic Corridor (EEC) Office of Thailand is targeting an increase in foreign investment to 100 billion baht per year, a healthy bump up from the current 70 billion, focusing on improving competitiveness, particularly in the digital sector. The Office highlighted a collaboration with the National Broadcasting and Telecommunications Commission to improve network infrastructure and promote investment in innovation-driven sectors. The EEC has already seen a cumulative investment of 2 trillion baht over six years and wants to attract more foreign investment to develop infrastructure, skilled labor, and smart cities within the region.
Read more: Bangkok Post
Household Debt to Rise Beyond 91% of GDP
Household debt is projected to increase to 16.9 trillion baht, accounting for 91.4% of the country's GDP by the end of this year. Non-performing loans in the banking system are estimated at about 152 billion baht. Despite commercial banks tightening lending practices, credit card loans, leasing, and personal loans have seen a significant increase. While the construction sector is specifically called out in the article, in general, the slow economic recovery and higher financial costs are putting pressure on debtors' repayment abilities, hampering long-term consumption potential.
Read more: Thai PBS World
Liberalization in Services on Horizon
The Commerce Ministry should liberalize 10 service businesses this year, including telecom services, treasury centers, and currency exchange businesses as part of a review of the Foreign Business Act of 1999. As things currently stand, these services require special permissions for foreign operation. The liberalization process involves public hearings and will require cabinet approval but once approved, foreign businesses in these sectors will no longer need permission under the Act. If the changes come to fruition, it will be a significant shift in Thailand's approach to foreign business participation and will almost certainly have positive effects on competitiveness and Thailand’s appeal to foreign investors.
Read more: Bangkok Post
Tourism Sees Extended Nightlife Hours
Extended nightlife operating hours to 4am have come into effect in areas including Bangkok, Pattaya, Phuket, Chiang Mai, and Koh Samui. It is hoped that this relaxation in the rules from a previous closing time of 2am will attract more visitors and boost much needed spending. The extension is part of a strategy to regain and extend tourism’s pre-Covid visitor numbers, which peaked at 40 million visitors in 2019. So far, early reports are that the change is improving Thailand’s appeal as a vibrant travel destination.
Read more: SCMP
Airports Introduce Stricter ID Verification
In a move claimed to improve security, the Civil Aviation Authority (CAAT) has put new rules in place for boarding pass checks at all Thai airports from January 16. The updated regulations require passengers to present a valid passport or government-issued ID card, and a requirement the name matches with their boarding pass. Anyone lacking proper identification or mismatched boarding passes will be denied boarding. CAAT's list of acceptable IDs for international travel includes passports, national ID cards, driver's licenses, and student ID cards, although it is not clear how acceptance of the last one will do anything to prevent cheating the system.
Read more: The Star
And now for something completely different.
While the focus of The Memo is on news for business, we often wrap with a fluffier piece. The fun story this week was about some guy who decided it was a good idea to drive around town with his lion (video), but the more important story is focused on the desperation facing Thai farm workers who think that things are bad enough in Thailand that they are better off in Israel:
A Farmer’s Dilemma: Poverty or War Zone
Thai agricultural workers are facing a tough choice: stay in Thailand and endure poverty or return to work in Israel in the middle of the ongoing conflict with Hamas. Nearly 10,000 Thai workers left Israel after the war with Hamas began, but some are now thinking of going back due to economic hardships at home. Despite the risks, including a recent attack near the Gaza Strip that killed 12 people, the higher wages in Israel are a compelling factor luring these workers back. This situation is a terrible reflection on the dire economic conditions in some parts of rural Thailand and the difficult decisions faced by migrant workers looking for a better future.
Read more: DW
That’s it for this week, thanks for reading!
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