Q&A: Thailand’s Economic Prospects Amid Ongoing Protests
By Nopparat Chaichalearmmongkol
BANGKOK–Weeks of protests over a controversial bill that would have provided amnesty to deposed former Prime Minister Thaksin Shinawatra, allowing him to return from self-imposed exile without having to face corruption charges, have unnerved investors in Thailand, a country with a history of political unrest.
So when Thailand’s Senate decided to kill the bill on Monday, it should have come as welcome relief. Those leading the rallies against the bill, however, say they’re not giving up. On Wednesday protestors, including lawmakers from the opposition Democrat Party, began a three-day nationwide strike, in a move to further discredit the current government led by Yingluck Shinawatra, Mr. Thaksin’s younger sister.
Business leaders have called for an end to the demonstrations, fearing that prolonged protests could harm an economy running a current account deficit and lower-than-expected economic growth of 3.7% for the whole of 2013.
Paiboon Nalinthrangkurn, chair of the Federation of Thai Capital Market Organization and head of TISCO Securities, talked with the Wall Street Journal about how investors view the current turmoil and what long-term impact it will have on a country that partly depends on foreign investment for future economic growth.
WSJ: What are investors saying now that the amnesty bill has been rejected?
Mr. Paiboon: I think investor sentiment has somewhat improved but it may not be as good as before, because there remain street protests. When compared with last week, investors are now less worried. Many believe that the current protests will not be prolonged, as the original demand from the protesters [to kill the bill] has been met.
WSJ: How will the current circumstances impact economic stability?
Mr. Paiboon: Whether or not stability will return depends on whether or not the protests will be called off. Street rallies that are not prolonged and see fewer demonstrators will not affect the economy much. Based on what we see now, the situation is not terrifying. Domestic consumption should [also] still be intact.
WSJ: Are there worries about ongoing political tensions and the participation of more protestors this time around?
Mr. Paiboon: It looks like Thailand’s political conflicts will not be solved any time soon. Domestic political risks are considered relatively high. We do not know how the government will find its way out of problems such as the rice subsidy program, which has resulted in huge losses [for the government], and the 2 trillion baht infrastructure investment law, which authorizes the Finance Ministry to borrow a lot [to fund projects]. Problems like these mean Thailand will still have to live with political risks.
WSJ: How is the present social pressure on Thai politics a worry for investors?
Mr. Paiboon: Investors’ concerns remain high, compared to earlier. Heightening concerns have been caused by street protests, which admittedly made everything look bad [in the eyes of investors]. But the overall situation is not so unfavorable that foreign companies will have to evaluate their investments in Thailand or overseas tourists [will be] scared away.
WSJ: Compared with past prolonged protests, what is the economic impact of this one?
Mr. Paiboon: Compared to the times when the [anti-Thaksin] Yellow Shirt protesters closed the airport and the 2010 [pro-Thaksin] Red Shirt protests in Bangkok, I think the impact of the current protests is much smaller. This is because the rallies have been peaceful, and they have just started. Having said that, it remains to be seen how long the street demonstrations will continue. So far, there has not been any severe or violent incident, while the government has been handling the issue quite well by backing down from the controversial law and employing no forces to control the crowds.
WSJ: The flooding in Bangkok a few years ago seemed to have a bigger impact on foreign investor sentiment than ongoing political protests. How much of a difference will this protest make?
Mr. Paiboon: The current rallies pose considerably much smaller impact than the flood crisis. Protests can take place anywhere in the world, especially under the rule of democracy. Investors have already anticipated demonstrations. And if the rallies do not run for long or involve acts of violence, there should not be any effect on investment sentiment. But the 2011 flood was obviously the state’s failure to handle the crisis, [which] ended up expanding to various parts of Thailand, particularly many economic zones.
WSJ: Do you think investors have learned to accept the risks of doing business in Thailand?
Mr. Paiboon: If anyone wants to do business here and does not learn to accept political risks, they should not come in at all. It is a very different world now in Thailand compared with 10 years ago when the country’s political risks were low.
WSJ: What can the government do to reassure them?
Mr. Paiboon: The government should be really committed to all the policies they have announced or will announce. At the same time, they should handle other issues, such as street protests, according to international standards or under the rule of law.