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Inflating Thailand in 2008

  • Written by Klaus
  • April 23rd, 2008
  • 9 min read


Black Pagoda Patpong Bangkok


Third World Countries-First World price?

In the following text, I will attempt to make some predictions regarding the past and future of Thailand from an economic and social standpoint, but the main concern of this paper will be to answer the following question.

Will Thailand remain an affordable place to live and retire? Or will it become another posh and pricey destination like the French Riviera, Hawaii, or Acapulco?

With some currencies at an all time low against the Thai Baht, an enormous influx of investment capital from the Pacific Rim and Europe, the massive development of the Eastern Sea-Board as a Pan Asian real estate Mecca, combined with an industrial complex within Thailand that produces everything from pencils to fat screen televisions and sleek and flashy Toyota and Mitsubishi pickup trucks, and you have the formulae for a viable self sustaining in country consumer driven economy that could render Thailand’s export market rather obsolete.

Unfortunately, consumer driven, market economies are a bit more complicated to maintain than economies based on export and tourism. The volatility and fluctuations of a consumer driven market system are definitely something that needs to be considered in regards to the future economic prosperity of Thailand.

A recent paragraph on Stick (Stick Mark II 30 / 3 / 2008) penned by an anonymous writer, purports that Thailand “is a sinking ship.” Many expats are (and have been) saying similar things. However, a really thorough multiregional analysis always beats the hell out of ideas based on subjective, simplified, random skewed observations made in one geographic area within one demographic.

“Thailand is slowly slipping down the order when it comes to tourist destinations, unless of course it is the nightlife and its company that is the agenda. It is visible that tourist numbers are well down”.

While I agree that tourist numbers are down in some areas such as Kanchanaburi (for instance) I think that the nationwide numbers prove otherwise and besides:

No-one cares-it is irrelevant. What is relevant, is the amount of money and not the amount of people coming here, and for what reason, how long they will stay and exactly how their wealth will be distributed-and most importantly, the sustainability of economic systems generated by the “visitor / expat group and the relationship(s) to emerging and or existing local economic systems.

But anyway let’s get to proving this.

More than 14 million tourists visited Thailand last year, by an official count, and the number of arrivals continues to climb.. (Seth Mydans, New York Times, March 26, 2008).

The number of visitors will in all probability continue to increase regardless of the events of the past few years and how the public views them.

I and others, (most easily understood-Somerset Maugham,) have always viewed the phenomenon of Anglos coming to Asia as a sort of ritual-act / cultural-phenomenon that is expressed for any number of reasons ranging from the pop culture / hedonist adventure paradigm all the way to: the deep seated driving forces imbedded at not merely the cultural level, but possibly (and more importantly) also as a biological imperative in many cases.

It is a well known fact that social / cultural movements usually are begun by a relatively small group of adventurous visionaries. The second stage is usually where a larger group of people see the viability, relative safety, and reward system of being included in the system. The third stage usually is where the mission statement, original ideology and subsequent rewards of the system have more or less deteriorated, and the system is then commercialized and sanitized in order to take advantage of the ever increasing numbers of people that wish to be included in that system. These 3rd stage people are following a dream, and even if only 20% of that dream is left they will continue to chase it in ever increasing numbers.

I am fairly certain we are near stage 3 in Thailand.

With that in mind, let us consider the demographic of the visitor / expat group, the effect on the local economy and the ensuing price vs. value of goods and services in Thailand.

The changing face of the “Tourist”

Let me try to make this short and try to simplify it, as many of you are probably taking in the somnambulistic qualities of what I have written and are forgetting that what is written here (if true) will in all probability have a direct effect on all of you.

Demographic #1)

Old retired people– (Singles and couples)

from Finland, Sweden, Norway, Germany, USA, England, etc. come here for retire and got big $. Also theydo not care how much cost is. They just pay. Again, they got $$$$$.

Demo-dummies #2)

“The Russian horde”, I am forced to watch these numbskulls buying an entire wardrobe at places like Big-C and Tesco. The time I spent waiting for 50 plus pieces of clothing to be rung up I had time to think. Hmmm, could have bought it all tailor-made for a lot less. What I have witnessed is that this demographic has no shortage of money.

On a personal note, I would prefer if they deported the Russian women-many of which seem to act more like snarling beasts than actual women. Unfortunately I am probably in the minority in this line of thinking. Nonetheless I believe that they are called Russian women simply because (if you have any sense) you will in all probability be “Rushin” to get the hell away from them. But in all fairness I think it will take a few years and the Russians will thaw out and relax into the Thai world of “mai pen lai”, “jai yen”, “mai mi alai”.

Unfortunately (at the rate things are going) the (young) Thais themselves may have forgotten these cultural principles by then. Terrible waste really, after almost a decade, I had finally become comfortable living an apathetic existence, safe in the knowledge that despite all my efforts and ambitions I should just smile, be cool and generally concede that my life as I knew it is now over. I have become a cartoon.

Temporary demo dummies #3:

The invasion from the North: (Please note-Genghis Khan’s BMW will soon be delivered).

Korean, Japanese and Chinese tour groups. Previously (according to statistics) people from this demo had just enough pocket cash to buy Pad Thai and a bottle of Chang on any given day. Nonetheless, they do fill hotels, airplanes, buses, and have been known to devour hotel food out of sheer desperation.

Lately, this demographic is providing wealthier travelers.

Hotel owners beware. This group doesn’t react too well if “they feel” they are being taken advantage of. Also, they are usually not too polite about how they express this. Yelling and screaming are common, so is punching holes in the teak walls of new hotels.

This group expects Thailand to be the ultimate paradise that the conniving travel agent from their home town said it would be.

Demographic #4: Skilled labor from the East:

This is a powerful demographic, because they usually have been placed here to run the many new and emerging, (read Korean, Japanese, Chinese, Anglo) branch companies that are filling and creating the new industrial estates. Placement time varies from 3 months to over 2 years at a stretch. Incomes are fairly high and usually people from this demographic will rent a nice house and a new car and spend a reasonable amount of their money in Thailand.

Demo dummies #5: Farang Manufacturer / Entrepreneurs

A recent statistic has shown that (2/3s or more) of Thailand’s exports of manufactured / fabricated machinery parts (and products) are actually produced by Farang owned companies in Thailand.

Economic Systems

Thai and Farang Real Estate developers are getting rich. This creates shortages in building supplies and labor, creating the need for more materials. Leading to new and sometimes better products (everything from bricks to furniture), leading to more jobs, and more wealth flowing in and around Thailand.

It is my opinion we have reached stage 2 in this economic model. Now that a fair amount of people have proven that large amounts of money can be made in real estate and its associated business, a larger amount of people (both Farang and Thai) are trying to reproduce what they view as a viable economic system that seems fairly safe.

The Eastern Seaboard is undergoing an enormous expansion. Draw a line from Chonburi City and bisect the land mass with highway 344. My prediction is that in three years this very large tract of land will become densely populated. This land mass stretches from the industrial estates near Chonburi City, northwest to the airport and includes all the land west of Highway 344 as it stretches to the ocean. Projects at the sea, where highway 344 ends (about 30 Kilometers south of Samed Island), already contained “30 M. Baht” houses over a year ago.

East Pattaya, (formerly a place to buy an inexpensive house) has seen a dramatic increase in price and a subsequent drop in the quality of the houses. As has other regions far flung such as the 304 industrial park near Prachinburi.

Sustainability in the Wheel of Roulette

It has been suggested that the market driven economies always depend on the continuous conspicuous consumption of the local population.

Oh sorry, as long as everyone is working and buying, the money flows in a beneficial circle and the system is maintained.

The system also is dependant on the real (or perceived) need / desire {and ability} to purchase the products or services within the system.

The Industrial Parks seem to be sustainable given present global economics.

The Tourist industry should remain, even if some of the foibles are gone.

The Real Estate Market normally would be dependant upon the proportion of end users to speculators. In the West, the system as it stands now in Thailand would end up in a huge bubble. But given the principles, incumbents and variables specific to the market here in Thailand, it is my opinion that the Thai real estate market will not follow the general model of the West. It should remain viable with a possible slight “flat line” of short duration followed by a continued increase in property values.

Conclusion

Although I have not factored in the “price of tea in China”, or the factors of globalization upon the Thai mindset, I do believe that Thailand has the advantage of time. It is established and recognized worldwide. It is a destination that is irresistible and will remain so. It has a large expat demographic of present and future residents that have large amounts of disposable wealth.

Thus, the prices will be commensurate.

Stickman's thoughts:

Sounds fair to me.