Reply to the Professor’s Economics 101
Reading Stick over breakfast, including the recent sub from 'The Professor" about the Thai economy… Sorry, Professor… but I thoroughly disagree with the reasoning, observations and conclusions behind literally every point you make. But then I smile… when did 'academia' ever say anything relevant to those who live in the real world? You jest "I was at dinner with the Prime Minister the other day… " to which I add: do any politicians live in the real world, either?
Let’s examine a few of your 'facts'
1) "The leading sector in the Thai economy is Automobiles and Automotive parts. Many companies, such as Ford and Toyota, have major plants here"
Whilst no one doubts this statement, one also needs to understand the facts that support it. The Thai Automobile industry was artificially created by massive foreign investment and the importation of plant, machinery and technology required to start it off. Vehicles are assembled here – but crucial research, design and R&D is carried out elsewhere.
Agreements had to be negotiated at the outset to protect the industry from foreign competition. The whole industry was ring fencing through the imposition of high import taxes against the importation of more efficiently produced, cheaper vehicles from abroad. And as we all know, the Thai consumer has to pay for this through hugely inflated vehicle prices and lack of choice.
It is a well known fact that the industry remains uncompetitive. Companies maintain a large expat workforce to monitor, amongst other things, quality control. Job training is expensive – but often wasted when the Thai worker in whom a lot has been invested, suddenly – without warning – decides to up and leave. I have neither time (nor inclination) to write more but assure you that I hear a lot of moans, criticisms and frustrations from those within the industry. I don't have first hand experience though I do hear the same tales many times over from different sources.
2) "The next sector in importance, you may be surprised to learn, is financial services"
On which you have nothing to say, I note.
There has been huge investment, takeovers and mergers here by foreign banks over the last 10 years. This is where the 'financial services industry' you mention has sprung from. Western technology, systems and know-how. And, it will continue to grow. More on that later…
But lets look at your comments about tourism. Quote: "tourism is growing rapidly, as evidenced by arrivals at Bangkok and Phuket airports. If you look at the people arriving and the queues in Immigration you see families, tour groups of couples from China, hordes of Russian lovers… but very few people you might visually categorise as sex tourists"
(Prof, Why this reference to sex tourism again?)
Fact: the majority of Chinese and Russians tourists are not big spenders. Stick has reported from business owners over the last year or two… the numbers are up – but the takings are down. Hoards of 'board and lodging' low spending package tourists are hardly going to bolster the local economy in the way that western tourism ever did. As for the long queues and over-burdened airports… it clearly escape your attention that there are many THAIS travelling nowadays. Therefore the NET effect on tourism could well be far less than you give it credit.
3) "In descending order… cement, auto manufacturing, heavy and light industries, appliances, computers and parts (Thailand is the world's leading producer of hard disk drives)"
Whilst I agree there must be a trickle down effect from inward investment, lets be perfectly clear on this: foreign businesses invest here for one reason only – PROFIT. And the bulk of that gets repatriated. Why are they here? Cheap manpower, low taxation, fewer regulations, less concern over environmental concerns and of course access to Asian markets within Asean are their main priorities. And as we already know, should other pastures seem greener – they can and will be off like a shot!
4) "Thailand is often cited as being the world’s largest rice exporter, which title I believe has been recently lost to Vietnam"
My dear Professor, next time you are supping and dining with Thai politicians, see if you can get them to explain precisely why Thailand lost out to Vietnam… ? However, I doubt very much he/she would want to implicate him/herself by telling you the truth about their failed schemes to control the market.
5) "GDP in 2012 grew at over 6% which is quite healthy by today’s international standards while 4th quarter 2012 GDP grew at a startling 19%"
Dear Professor: if you can tell me how these -or ANY – economic stats are compiled and what figures they are based on… then you will have already saved me the job of having to point out how meaningless they bloody well are!
6) "Another way to look at the perceived strength of an economy is through its stock market, and The Stock Exchange of Thailand is currently at a 15-year high"
And so is the Dow… and S&P…
Quote: "While stock market index growth sometimes runs contrary to the strength of an economy, very often it is an indicator of the willingness of institutions to buy or invest in local companies"
I am just going to ignore this! What are we playing… Economics for Dummies?
7) "Lastly, we can look at a country’s currency. While currencies are often manipulated by a government in the short term (by adjusting interest rates and the money supply) over the long run currency rates are determined by relative supply and demand. If investors wish to invest in a country, they need to buy that country’s currency, which keeps it strong"
In your defence you are trying to simplify complex issues… but your underlying thinking is flawed. Sorry to be blunt, I have not read such ***** in a long time. I would simply argue that the major reason for Thailand's current boom, which I believe is sustainable for several years yet, is due to that great evil with the inescapable potential for the ruination of lives: credit expansion. It has been waiting in the wings, now fully out in the open for all to see. It is rampant, it has taken over, it is being snapped up and taken full advantage of by all who have access to it. But then one day we have to learn the truth… though many never do realise it… THERE IS NO MONEY! So, my dear Professor… it is all just an illusion.
I have written several articles published on this site over the years pointing out that above all Asian countries, Thailand has been the massive beneficiary of huge amounts of capital and investment from abroad, which started with the arrival of the US in the 60's and the build up to the Vietnam war. Everything has been handed on a plate.That influx, that largesse, has continued unabated (albeit in different forms!) and unrecognised ever since.
Just musing: It was surely no coincidence that last night (before reading the Professor's sub this morning) I was wandering around the market in Chiang Mai, seeing EXACTLY the same merchandise for sale that I used to see here 10 years ago! Nothing had changed… will it ever change… unless we change it for them? Remember the Asian Tiger propaganda? Like… we'd better watch out?
I have witnessed an interesting decade for Thailand. I am positive about the future. But isn't there something missing in this country? I end on a smile.
I think many of you know exactly what that missing thing is…