Investing In Thailand
It’s Sunday night and I was in the throws (if you see the way I try and type with my stumps you would understand this sentiment) of writing this submission when I saw Frank Visakay’s latest submission titled ‘so much money, so little
time’ and I couldn’t believe that we were both thinking along the same lines in our writing. Perhaps this is just one of those deja vu moments or perhaps it is just something in the air, but what ever it is, let me tell you where
I am going with this submission and you will see where the connection is between the two. Ok, lights, action, DJ Cue the music… on comes the sound of the twilight zone… di di der di di der di di… hang on, wasn’t that the music from
close encounters… erm, um, ah, oooh heck, I just cannot seem to get it right when trying to write musical scores from the dum dum dum duuuuums in my head… tsk!
Anyway, to a background of de di de di dee or what ever, onto the Bangkok film set rolls a mist from the klong, and as the camera pans up and then down into the bowl of Kao Tam Kung, a picture emerges amongst the shrimp legs and bits of rice of a bright young(ish) lad venturing onto the shores of Phuket in Thailand for the first time. The airport is bustling and the placards are up by pock marked faced drivers with names such as ‘Mr Smith from Vinegar strokes’ or ‘Paradise Hotel tours… a place where you will get yours’ blazoned across them. The young man shrugs off a tout or two as they shout “taxi cab sir, limousine sir…” and heads off instead for the sign with ‘Novotel’ written across it. He packs his luggage into the back of the waiting van and waits expectantly for the other hotel guests to clamber aboard. Finally the Van takes off and as he looks out of the window at what appears to be paradise after the muggy smoky grim claustrophobic atmosphere of Bangkok where he stayed for 2 days, he starts to feel the van slowing down as the driver pulls up to a stop outside a shop saying “Phom bpai hongnam, rohr Krup” whatever that means. The occupants’ all look around at each other as the driver skips out and darts through the door of the shop, and then 30 seconds later, we all look on with bemused interest as 3 girls come gleefully out of the same shop door and cascade down upon them with beautiful smiles from happy beautiful brown faces, with flowing black hair the like they have never seen before.
Then they start; “James Bond island sir, sexy massage parlour sir, you want some souvenirs sir, would you like to change your hotel sir… good price for you… how about investing in a time share sir… 70% discount if you spend 3 hours with us tomorrow sir…” on and on they go with the hard sell and how little did they know that the land of smiles would just turn out to be one more place of fun where every twist and turn would be geared up to find ways to try and get the green horns to relinquish their ever readies… and so it begins, and so it continues, and so it never ends…
So, as we bring ourselves to the present moment and look back across the 20 months I have spent here, I would say that I have probably been subject to every conceivable angle, ploy and tactic from both foreigners and Thais alike to help me to part with my dosh, to help me let go of my wonger and for me to try and invest or spend my money on something here in Thailand. I have to say that every time I encounter it, that it simply becomes a wonderful game to play and I enjoy it so much that my mind is constantly tuned in to someone trying ‘it on’ just so I can lure them down a path only to end it up with me saying ‘nah forget it’ and walking away. It’s a wonderful and fun experience to be subjected to the tricks that some here will try and pull and some of them are so good that if they where placed in the position of leading a team to negotiate a complicated multi billion dollar contract then I am sure they would be giving their opponents an interesting experience and may even come out winning.
So as I meander on through life in bonking bangers, it always has me chuckling when someone approaches me to just ‘try it on’ and it makes me positively chortle even more when I see some ‘dope’ come along and get suckered in instead and taken for the proverbial ride of their life. Frank’s latest submission was a wonderful testament to some of the ‘hard luck mucker’ stories that are out there and despite the ice cold buckets of water that Frank will attempt to throw over their heads and to my leaving helpful little notes around the place suggesting that they ‘should’ ‘perhaps’, ‘maybe’, ‘most definitely’ go and read stickman first, well we just keep seeing it time and time again with people coming, people investing, people getting burnt, followed by the same said people flinching with a shout of ‘jep’ and them walking away with some sort of a strange new limp that they never had before along with a puzzled look on their faces. I think it was Vinny Jones in Snatch who said this line, but “You should never underestimate the extent of people’s stupidity”, especially here in Thailand, but you don’t need me to write yet another submission on that one as I am pretty sure it’s obvious what happens in certain quarters here and all of us no doubt know someone who has learned the hard way.
Fortunately for me I have not been burnt yet and hopefully never will either because I take a very cautious approach to life here (especially when that ‘life’ involves my own) but the consequences of taking such a cautious path means that I have also started to slowly adopt and have a selfish lifestyle with it too… it’s all about me, me, and oh let’s not forget… me! Basically, my view of the world in Thailand is that if it doesn’t satisfy ‘me’ or if ‘I’ don’t put ‘myself’ first and think about what it is that ‘I’ want then it simply doesn’t happen. Pure and simple! Call me Ebenezer Scrooge if you will, say that I am an old miser if you want, you may even want to say that I am a self possessed selfish ‘it’s all about me’ son of a gun if you must (what is a son of a gun anyway… a bullet?) but I can tell you now, it would have to be a very sound and sensible thought out business proposition that added up in terms of the numbers backed up with concrete evidence or a visit from the ghost of Christmas past wielding a blow torch, a belt of unpinned grenades and some very powerful pneumatically controlled pliers to get me to release the money from my overseas wallet whilst living here in Thailand…
But why, you may ask, have I decided to adopt such a somewhat selfish and inward reflecting view of life in a society that rewards notions such as Greng jai, Nam Jai, of being part of the collective and where sharing is considered important. Well it’s all very simple really and apart from the obvious day to day tricks that one encounters here from the Thais who are doing their level best to help us part with our money, it is also down to the fact that the average Thai is also the biggest, craziest, zaniest selfish sod of them all too and I am merely following their lead.
‘Huh! But what happened to the notions of ‘greng jai’, the need to be part of the collective and to the ‘sharing’ mentality that we are led to believe are important in Thailand’, I hear you mutter…
Well it all basically boils down to what the Thais believe to be their place in the ‘Thai horizontal system’, and I don’t mean the missionary position to all you skewed warped mind lot either. In a book titled ‘working with the Thais’, which seems to be very dated and has pictures of guys from what looks like the 1970’s in it, you will be told that the Thais are a social lot and that everyone fits into a sort of social circle, and it is your place in this circle that dictates how they will treat you.
First and foremost they have their family circle (The inner sanctum) and the notion of blood being thicker than water is far more prevalent here in Thailand than say ours is in the west. Back home we think nothing about waving good bye to the parents at the white picket fence of their single home or to the old folks granny flat or home that we have spurned them into with a thought that we may pop back in a year or two, but here the family still form a sort of 1950’s hierarchal family nucleus with family life and extended family such as aunts and uncles all coming in to rescue and taking the side of poor little ‘Tongrob who cannot do anything wrong sort of forgiving manner’ regardless of the fact that two minutes earlier he was seen rolling over someone’s head with his motor bike.
The second circle is termed to be the ‘cautious circle’ and it is the one where most people you meet on a regular basis and say ‘hi’ to or who you work with or who you depend on for formal day to day survival that will be placed here. It is called the cautious circle because this is the circle where most people are less forgiving and where ‘face’ in particular plays a major part. You all want to get along fine and as you see each other regularly, then keeping things friendly, courteous and sabai sabai is very important.
The last and third circle is where everyone else sits and is called the ‘selfish circle’ or as I like to coin it, the ‘don’t give a shit circle’. It’s the place where everyone else gets placed, and especially you the foreigner along with all the other soi dogs and other people in a Thai person’s ‘outside’ world. You see from a Thai perspective (and I guess in most people too) they tend to figure that as they are very unlikely to see you again, then who gives a shit what they do because it won’t be a face issue for them. So when the guy blunders into you on the street as he meanders down the soi, or honks his horn as he under cuts you in the traffic queue, it is all down to this third circle. Even the girl behind the Sushi counter at the National Stadium who tried to rip me off once with a ‘I’ll change the note he just gave me from a 100 baht to a 20 baht and tell him he still owes me 80 baht sort of thing’ because a) she thought I wouldn’t notice and b) what does she care, I am someone in her ‘selfish circle’ so who gives a hoot, is all part of this social circle thing that the Thais live by. The fact that I maybe wearing a suit with a Thai ID badge around my neck indicating that I work here and as such probably walk past her almost every day to the BTS station just wouldn’t register in her ‘third circle’ head, and although she may not remember me, I sure as shit remember her and will never buy from her again because you only get to try it on with me once. But as long as you know that the Thais have their selfish circle too then you too can just as blatantly play them at their own silly selfish game and be just as ignorant and selfish in your behaviour too, Just try not to lower yourself down to their level mind. I also believe that having the skill and ability to read people helps significantly here too and having the skill to spot a shite hawk at 50 paces helps heaps as you will see many of them here.
Also try to not let all of these notions and terms for describing you using words of the heart (jai) as well as beaming those many smiles lull you into a false sense of security either because the Thais will use a smile like a negotiating weapon against you if they can. The problem here is that the majority of foreigners wouldn’t be able to tell the difference between, for example, a Yim Thak Thaai (polite smile for someone you hardly know) with a Yim mee lessanai (The smile which masks something wicked in their mind) or perhaps to the Yim yae-yae (I know things look bad but no point crying over spilt milk smile) which you would often see right after he has just taken off your front vender on the new BMW you just bought.
I had only been here two months when the first real proposal came in for me to invest in Thailand and it happened at the inevitable place that most foreigners find themselves and that was in Phuket sitting in a bar in Soi Eric in Phuket. Whilst I was sat there chatting to the Thai couple who run the bar and watching the usual lot coming in and bar fining the ugly ladies at the bar, my Thai friend leaned across and said to me: “Hey Casanundra, the foreign lady who currently owns (he meant rents) this small bar has told me it will be coming up for renewal next year.”
Me: [Sipping my cocktail with a cherry on top] “uh-uh”
My friend: “well… she has told us that if we can come up with 50% of the key money then we can have half ownership in the bar or if we preferred, to buy her out and pay 100% and become the owners. What do you think?”
Me: “Hey! Good opportunity for you… I’d say go for it”
My friend: “I am glad you like the idea, but unfortunately we don’t have the money… how would you feel about lending us the 1.4 million baht to pay for the key money and we pay you back over three years and we can share all the profits of the bar 50:50”
Me: “You want me to lend you the money and you will pay me back?”
My friend: “Sure… and share half the profits…”
Me: “Err! What guarantees will I have that I will get paid back? Do you have any security that I can use, like a Condo or an expensive car for example?”
My friend: “No we only rent our house and only have a motorbike. But hey, you are practically our family now, so you can trust us to pay you back… don’t worry too much about that”
Me: “errrr yeah um right! Let me think about it ok… but tell me as I am curious, what is the daily intake at this bar?”
My friend: “oh we usually take in around 10,000 baht per night, sometimes up, sometimes down.”
I take out my PDA and start stabbing some numbers into the calculator…
Me: “ok, is that your average intake or a wild estimate?”
My friend: “Oh, I don’t know, what is an average?”
I explain to him what an average is and as the light bulb comes on in his head, I get an “oh, I don’t know!” followed by a Yim Mai Awk (I’m trying to smile but can’t kind of smile)
I roll my eyes and tell him to find out. I decide to look around the very quiet Soi Eric and decide to just make my own estimates and aim for a more realistic 6,000 to 7,000 baht instead, although I suspect that some nights this would be stretched to reach 1000 baht. I then ask him what his expenses are per night.
My friend: “Well we top up the drinks we use and we top up the ice and we pay the girls a percentage for the drinks and bar fines that they bring in etc… let’s say about 2000 baht per day”
Me: “uh-huh, and are there any rent or electricity / water charges per month that I need to be aware of or does the key money cover this?”
My friend: “Oh yeah, we have to pay about 24,000 baht per month all in…”
Me: “and your salaries are?”
My friend: “I take 8,000 and Puky takes 10,000 baht. The rest goes to the lady who owns the bar.”
Me: “ok, let me see then…”
I do some quick fire calculations. Estimated Income = 2,555,000 per year. Estimated Costs (730,000 + 288,000 + 216,000) = 1,234,000
That leaves 1,321,000. I say the last figure out loud and my friend behind the bar gets excited when he hears this number and says “see you almost earn your key money back in year 1”. He beams his best Yim thang nam taa (I’m so happy I could cry smile) and I can sense that he is very excited at the prospect. Maybe he thinks he has me onto a winner and should be beaming a Yim Cheua cheuan (I am the winner smile) instead… but then I continue.
Me: “Ok, now we have established a sort of income versus costs ratio, let’s now go through the payback that I would really be getting then…”
He looks at me with a confused lopsided Yim Sao (Sad smile) and says: “errr, that’s easy, we just split 1,321,000 two ways right?”
Me: “Errr noooo not quite. You see for me to lend you the money it actually costs me money in lost interest from my bank. Let me explain”
So I start writing the following on a napkin: ‘risk element’ to me for variation in profit / other unknown expenses = 250,000 per year ‘off’ the projected revenue to be safe (If it isn’t used then we can always use it as an end of year bonus). He looks up at me with a befuddled look because he couldn’t in his Thai eyes quite see where the risk to me was. I tell him that it’s not about him but about the industry and he must recognise that if he wants me to lend him the money that I want some level of protection. I then calculate a monthly payback to me, plus interest to see what that would be and roughly work out that over three years with this money in my bank earning 4.5% interest that I should be paid back = circa 1.5 million baht / 3 years = 500k per year. Again he cannot quite understand why I would want to pay myself back with interest as ‘we are sharing the profits’ but I remind him that this just makes it a break even for me, nothing more. I also point out that this would mean paying me back 42k per month for my loan before any profits ‘every’ month to which he gives me a yim soo (an in the face of an impossible struggle smile)
I then show him that it now leaves us with 571,000 to split between us as working profit. But before he starts getting excited again, I point out to him that as he and his girlfriend are taking a salary then I must also too, so I quite generously (for them) only take a salary of 18,000 (to match their combined salary which equalled 216,000 per year for me. At this point he tries to argue that I have already been paid a salary with my loan repayment of 42k per month for my original investment and that I shouldn’t get a salary. I look at him and explain to him like a father to a child that if that was to be the case, that he and his girlfriend should also forfeit their salary too and that together we can all run the risk against any income being earned against how well the bar performs. I also point out again that he shouldn’t confuse my loan repayment with my salary as they are totally different things. Naturally he couldn’t quite understand this argument but I continued on with my numbers.
I explain that ‘after’ my salary has been paid, we are now left with 355,000 to share 50:50 = 177,000 or 14,791 baht per month or when combined with salaries, 32,791 per month income… not a lot is it really? Ok I know we can always fall back on the 250k risk contingency I took out in my calculations and add in another 10k each month on top of that figure but I am not sure that would be guaranteed given the way Phuket works and who knows what mafia or police guys are hovering around in the sidelines for additional payments. So I tell my friend that it really isn’t a lot of money back for the risk of me putting up all the money 3 years in advance in a business that in one soi alone is competing with say 30 other similar bars, not to mention me having to rely on him and his girlfriend to do ‘the right thing’ and not cheat me as I have to work away in Bangkok. So I tell him that based on his numbers that I cannot see it working and say “no thanks!” and leave it at that.
One year later (April this year) I get a phone call from him again. The lease has come up and could I then loan him 500k for one year to invest in this bar. I do the calculations again but this time I add in a 25% return on my money because the risk is higher as we are sharing the profits three ways (The original foreign lady remains a part owner) and it works out that he couldn’t afford the 52k repayments per month to pay me back in 12 months and so there endith my first and last opportunity to venture into and invest in the bar business in Thailand.
The next one came from a Thai woman who wanted me to set up a student exchange program between here and the UK. What the hell do I know of this industry? For some reason she thought that as I was an English teacher at the time that I would have an unlimited resource of students in England who would all want to come to Thailand… My contribution would be the money (Surprise! Surprise) and hers would be the Thai contacts. Errr! No thanks!
After that, came the request from my friend in Chiang Mai to set up a joint venture whereby I provide the collateral to lease 4 cars and for him to run a car rental business on my behalf… I was to supply the money and he was to supply his automotive expertise. Errr! No thanks!
Then came the multiple requests over the pace of a year for me to buy into a coffee shop, or how about a restaurant, maybe a papaya pok pok salad bar then… Errr! No thanks again, and again and erm um again! I mean what the hell do I know about the food and restaurant business? Jeez!
Then came the ‘let’s set up a business as I want to be an insurance broker’ from the missus… I considered it all for about 30 seconds and realised by the wife’s responses that we where onto a non starter because the minute I started asking her my usual set of questions that I have at moments like this, I just got met with the usual Thai glazed look and there it ended. I did say to her however that if over a period of a year if she could show me a rate of return and new customers coming in that supported a worthwhile business venture then I would consider setting her up properly as a business. So far I am still waiting for her to bring in a single customer and so I don’t think I need panic just yet.
In each case and for each request, I always do the same thing, I ask where their business plan is, what their market is, who the target customers are, who are the competitors, what is their strategy, what margins are they aiming for, what is their contribution and so on and on and before I even get to finish asking the questions I am always amused at the glazed distant looks I get back as their minds start to wonder off, which leaves me thinking that they aren’t that serious then, so no money from me. NEXT PLEASE!
The latest one I have received is to set up a language school somewhere but I think I’ll give that one a miss too… how about an English agency supplying teachers to schools then… please no!… how about setting up a recruitment agency or an agency of expertise that we farm out to companies… hmmmm…. Um…. Erm…
Anyway, you get the picture, and thankfully by taking this cautious stance, I will never be subjected to the Yim Haeng (I know I owe you money but I don’t have it smile) which I am sure many who have lent money to a Thai have come to recognise all too well and it never seizes to amaze me how many guys actually come here and take the risk without doing the sums. For me, now that I know that the Thais have these three social circles and understand much better how we by and large sit in their ‘don’t give a shit circle’, coupled with the Alien law and ‘us versus them’ rules and regulations that are stacked up against us, I feel that the risk is just damned too high as you have no guarantee of getting a payback or anything back at all. I honestly believe that the Thais all seem to have this notion of ‘wanting their cake and to eating it too’, and if the size of some of the Thais wobbling around out there these days is to be believed, well they are taking that notion a little too far too, but they ain’t getting a piece of my pie that’s for sure.
The other thing is that the Thais seem to also adopt a sort of ‘kid in a sweet shop’ mentality whereby they are happy to display a varied assortment of sweets for us all to look at and enjoy but they don’t want us to buy any of them. They don’t mind asking us to invest in the sweet shop and to stocking the sweet shelves up mind, but if you try and stick your hand in the cookie jar, all you’ll see are some stale bread crumbs coming back out. In all reality you get diddly swot by return and many people don’t seem to realise this when they decide to come here and throw all their money into a money pit adventure in Thailand. In fact, I am sure that given half the chance, the government here would rather implement a visitation tax on all visitors whereby they just club you over the head as you enter the country with a large baseball bat, to then taking out the contents of your wallet and to sending you back on the plane without you ever having left the airport. Why? Well that way, they would be able to get what they really want from you (your money) without the hassle of having to endure the onerous prospect of a) having to learn the international language of English (because let’s face it, they don’t really want to learn the language) and b) They wouldn’t have to subject their subjects to putting up with us odorous, repulsive, barbarian Farangs either and the money will eventually filter its way down as some government help the Thai populace social scheme instead.
At the moment I am still looking at good places for my money in Thailand but I have yet to find somewhere to put it worthwhile and so it stays offshore safe and sound compounding interest instead. Whilst I am on the subject of investing here, me and the missus went on a property search last weekend and despite the excellent efforts of our friendly estate agent we were both very disappointed with the lack of quality properties available in the Bangkok area, not to mention the over inflated prices that some of these people seemed to be asking for what are in effect what we would call back home ‘council flats’. At one point I almost asked a lady who was showing us around a property if she could give me a snort of what ever it was she had just been sniffing because she was obviously hallucinating but managed to bite my lip in time.
I am not yet convinced that the payback in the Bangkok property market is there at the moment and every time I do a compound interest savings projection versus the cost of buying a property here (even if it does rise by 30-60%) I cannot quite make the numbers add up into anything sensible or worthwhile when you take the cost of selling the same properties back into an even more over inflated market in say 5 years time. Let’s put it this way, if I am not prepared to pay 8 million baht for the condo dump today I sure as hell don’t expect that someone will pay 10-12 million for it in a few years time when I come to sell it either even if I have fully refurbished it. So right now, although we are still looking and remaining hopeful of finding something decent, I am also not holding my breath in anticipation either but maybe our friendly and helpful estate agent will surprise us and pull something worthwhile out of the bag.
Finally, if you do want to invest in Thailand, I and a few friends here have decided to set up a new bank account here and we are going to call it the OBEM (One born Every Minute) bank. All investments in the OBEM bank will provide a guaranteed rate of return equal to 100% of your original investment (i.e. we will give you your original money back less your modest allowable withdrawals) and our fee for providing such a service will be gained from ALL the interest we can muster out of it whilst it is in our care. I guarantee that the rate of return in this fund to you will be 100% higher than what you would get if you were investing it elsewhere in Thailand. Maybe I should also set up a secondary service called the ‘The airport arrival sanitary check fund’ where you can leave all monetary donations with us and we will simply provide you with a healthy but sensible allowance with all balances to be collected upon departure before you go back home…. Hmmmm what a life saver that would be for the stupid mongers who love to leave their brains at the check in desk… now there’s an idea… but if you do decide to invest here, just remember to come and talk to me afterwards and I’ll just leave you with one of my best Yim Yaw (I told you so) smiles to think about as you limp away feeling sorry for yourself.