Journalism: 1) Strong Issan Economy from Vote Buying? What Reuters will not tell you!

/ July 14, 2013
English: BANGKOK. President Putin with Thai Pr...

English: BANGKOK. President Putin with Thai Prime Minister Thaksin Shinawatra. Русский: БАНГКОК. С Премьер-министром Таиланда Таксином Чинаватом. (Photo credit: Wikipedia)

By Investigative Journalism into Controversial Thailand

Introduction

Continuing on the usual attack on Thaksin and Yingluck, Reuters reports with the headline “Thailand‘s boom: To the northeast, the spoils.”

What Reuters means if of course, Thailand’s northest region, called, Issan Region, is Thaksin strong-hold, and thus Thaksin and Yingluck, went to focus on the regions development. What that implies, is of course, an un-fair Thaksin and Yingluck to the rest of Thailand. And when considering how many times, Reuters and the likes of Bangkok Post, have said Thaksin and Yingluck have bought vote of the Thai people, through its populous policies, this is nothing new in their attack, to show that Thaksin and Yingluck have “Bought Vote.”

This time, Reuters imply, that Thaksin and Yingluck have “Bought Votes” of the entire region of Issan.

According to several reports, economic growth in Issan Region climbed 40% from 2007 to 2011, against 23% for the country and just 17% for greater Bangkok. Monthly household income also rose 40% between 2007 and 2011. And in 2012 investment rose 50%. Thaksin was of course, Thailand’s PM from about 2002 to 2006. Then after that there was the 2006 coup government and then the Abhisit government. So from 2007 to 2011, a big chunk of that was non Thakains government.

While mainstream press, such Reuters and Bangkok Post, points to Thaksin’s and Yingluck’s populous policy, as having bought the Issan Region’s people, pumping in funds and policies that have benefited the region,  there is no denying the fact, that other regions of Thailand also benefited from the populous policies.

Notrhern Thailand, the Central Plains and Southern Thailand also registered strong growth in the past 5 to 10 years, since Thaksin came to power in Thailand. There was not a single policy of Thaksin that specifically targeted the Issan region, for development. Even the high-speed train, will connect other regions of Thailand.

1)

Village Fund and Entrepreneurship

But is Issan growth all about Thaksin’s populous policies, like the village fund?

When Thaksin introduced his “Village Fund” the elite establishment of Bangkok were out-raged, very much along the same line the Yingluck’s rice scheme has out-rage them. TRDI for example, said the village fund has gone mostly to the poor borrowing to buy Thakain’s mobile phone.

From about 2004 to 2009 I was the project manager at a resort in Issan, and saw differently. I went to many of the so called borrowing event, and most of them, was for “Entreprenural Type Projects.”

In fact, I lost many workers who went borrowing the fund to start entrepreneurial projects such as “Fish Ponds,” “Restaurant” and even “Cookie Making.” In fact, my Issan girlfriend, who worked as the resort restaurant manager and making a good living, resigned her post, and opened up a small laundry, with five other people, and began to offer laundry service to many of the smaller resort in the area.

The fact is, Thaksin’s Village Fund was the first “Micro-Financing” the region has ever seen, and it was available throughout Thailand. Do micro-financing work? There are many arguments, both saying that micro-financing works and also that they do not work. But the fact is clear, since about 2003, micro-finance was available, and the “Power of Entrepreneur” of the Issan Region, was ignited.

But is that all to it, the ignition of the “Entrepreneur Power?”

The village fund program was launched in 2001 upon a government policy aiming at both village and urban communities starting up with the provision of 1 million baht to everyone of 70,865 villages and about  4,000 urban communities (National Village and Urban Community  Fund Office, 2010). The policy objective of setting up the village and  urban community funds was (1) to be a working capital for the career  development fund then people can have better job opportunities, more  income and low expenses or to reinforce people welfare (2) to be a  working capital for any argent matters (3) to save money for members  and provide capital earned from other funds (4) to provide loans for other villages in order to strengthen its economy (5) related to any  other matters that aim to develop life quality or welfare of village fund  members or to strengthen the economy or society according to the regulations defined by the committee (Sutthinooy, 2007).

Previous studies concerning village funds showed the strength of this policy that is people became able to create more jobs and earn more  income as well as be able to exchange knowledge about administration. This strengthened the communities. In contrast, the weaknesses were that the people had higher debts and misspent the borrowing. Also, the board of the fund administration made mistakes because they misunderstood  the regulations, corrupted, and lacked the knowledge in the accounting  system and financial reports which were complicated.

National Village and Urban Community Fund Office has a clear development plan to upgrade village fund into community financial institution with an aim to develop a standard and quality capital management system which can strengthen the community economy.

2)

What Reuters say?

Reuters Report:

Thailand’s boom: To the northeast, the spoils

By Paul Carsten and Pairat Temphairojana

UDON THANI, Thailand | Sun Jun 16, 2013 2:16am BST

The malls, factories and construction sites in Thailand’s northeast are emerging alongside its farms as a potent economic fuel in one of Asia’s top emerging markets. Growth in Thailand, Southeast Asia’s second-biggest economy, has begun to slow, but the economy of the northeast is in the grip of a boom.

The economic renaissance of “Isaan“, Thailand’s poorest and most populous region, has coincided with expansionary policies – from wage increases to farm subsidies – that are enriching an area at the heart of a “red shirt” protest movement that backed Prime Minister Yingluck Shinawatra in a 2011 election.

As a new middle class emerges, investors and companies are taking note. CLSA emerging markets guru Chris Wood cites the region in explaining long-term bets on Thailand.

“There is a macroeconomic ramping up of the northeast,” he said.

The potential may never be realised if a crucial 2.2 trillion baht ($71 billion) infrastructure programme becomes a casualty of the feuding between Yingluck’s ruling Puea Thai Party and its opponents.

But if the plan went ahead, as is generally expected, it would change the entire economic structure of the northeast, said Rahul Bajoria, an economist at Barclays Capital.

“It’s the next entry point for investors and consumers – if they link it up to China, it becomes the entry point to Thailand, not Bangkok,” he said.

“But it’s been difficult for the bureaucracy to execute programmes because they don’t know who will be in power in a year or two.”

Economic growth in the region reached 40 percent from 2007 to 2011, against 23 percent for the country and just 17 percent for greater Bangkok.

For the Issan region, monthly household income rose 40 percent between 2007 and 2011, the biggest jump of any Thai region. Interviews with businessmen and investment data suggest the trend is continuing.

The number of private investment projects in the northeast rose 49 percent in 2012 from the previous year, with the total amount invested more than doubling to $2.3 billion, according to the Bank of Thailand. Much of it is concentrated in property – from high-rise condominiums to town houses and shopping plazas.

“The northeast has a large population, a dense population, so the income is big,” said Naris Cheyklin, chief financial officer of Central Pattana Pcl CPN.BK, referring to the one-third of Thailand’s 68 million people who live there.

In April, Central Pattana opened a 2.75 billion baht ($88.7 million) mall in Ubon Ratchathani, near the southern tip of Laos, their third in the region.

POLITICALLY DRIVEN BOOM

Politics explains part of what is going on.

Yingluck’s government brought in a nationwide minimum wage of 300 baht ($10) a day in January. In some Isaan provinces, that was an increase of 35 percent, among the biggest gains in the country, on top of a nationwide 40 percent rise in April 2012.

Many workers, such as those building the 168 Platinum Mall in Udon Thani, are happy to return to the northeast for wages that are now on a par with Bangkok’s.

Isaan’s “red shirts” are among the staunchest supporters of Yingluck’s brother, former prime ministerThaksin Shinawatra, who was ousted in a 2006 coup but influences policy from self-imposed exile in Dubai.

While in power from 2001, his populist policies – from virtually free healthcare to low-interest loans to the rural poor – made him a hero in Isaan.

The red shirts formed the core of a movement that paralysed Bangkok in April-May 2010 in protest at the government of then Prime Minister Abhisit Vejjajiva and the forces that ousted Thaksin – the traditional Bangkok elite including top generals, royal advisers, business leaders and old-money families.

Those protests were put down with force, but the red shirts got their revenge in the 2011 election and now see the rewards.

“A lot of the boom is upcountry, and that is politically driven, partly, because that’s where Thaksin’s supporters are,” said Wood at CLSA.

The poverty rate in Thailand fell to 13 percent of the population in 2011 from 58 percent in 1990, according to the World Bank, but per capita gross domestic product in Isaan in 2011 was still less than an eighth of that of Bangkok at $1,600 a year, according to the state planning agency, the NESDB.

That is changing. Government policies have pushed up purchasing power by subsidising agricultural products such as rice, tapioca and rubber. Under Yingluck’s government, farmers have been paid 15,000 baht per tonne of unmilled rice, a 50 percent premium over market prices, according to exporters.

“During the Thaksin and Yingluck era, a lot has been given to Isaan, and the amount of money being poured into the region is significantly more than previous governments spent,” said Ittiphol Treewatanasuwan, mayor of Udon Thani, once a U.S. Air Force base for anti-communist operations in Southeast Asia.

Lives are being transformed. Panjaporn Phatanapitoon, general manager of the 168 Platinum Mall, said people in the northeast were now better educated, attitudes were evolving fast and urbanisation would come much more quickly than in Bangkok.

REGIONAL INVESTMENT

The 2006 coup that toppled Thaksin caused years of unrest, but political calm has returned since Yingluck’s election win.

“When we change the politicians, they change the policy. If there are more changes to these policies, it will damage the economy,” said Uthai Uthaisangsuk, a senior vice president at property developer Sansiri Pcl SIRI.BK.

Sansiri is developing two $127 million condominium projects in Khon Kaen, 240 miles (380 km) northeast of Bangkok, in 2013 and plans a third for $35 million in 2014.

“At least five years and then we’ll get something done,” Uthai said, highlighting the need for a high-speed train and further infrastructure.

Now such plans are in hand, given impetus by floods that devastated the industrial central region, near Bangkok, in late 2011.

“Logistics providers and consumer products are moving upcountry because of the floods,” said Patan Somburanasin, general manager of TPARK, a logistics company and subsidiary of TICON Industrial Connection Pcl TICON.BK, which is investing up to 2 billion baht in a 79-acre logistics park in the northeastern city of Khon Kaen.

Isaan should also profit as factories and distribution centres move in ahead of an EU-style ASEAN Economic Community (AEC) planned by the Association of Southeast Asian Nations (ASEAN) from late 2015 or 2016.

The AEC’s East-West corridor, a motorway and infrastructure route for trade, will stretch from Vietnam’s Danang port through Laos, Thailand and Myanmar to the Andaman Sea, cutting through the centre of the northeast and its commercial hub of Khon Kaen.

That will support Thailand’s ambitions to position itself as a gateway to China via road and rail links through Laos, itself seeing dramatic economic change.

The infrastructure programme and the urbanisation it will foster, if the plan goes ahead, will support Thai growth into the future, Credit Suisse said in a report, raising its estimate of trend GDP growth in 2014 to 2018 to between 4.5 and 5.0 percent from 4.2 percent.

No wonder, then, that Thai manufacturers such as CP All Pcl CPALL.BK, Thai Beverage Pcl (TBEV.SI) and Siam Cement SCC.BK, plus foreign firms with Thai plants such as Panasonic Corp (6752.T), Kraft Foods Group Inc (KRFT.O) and Fraser and Neave Ltd (FRNM.SI) are gravitating towards the northeast.

“If you look at all the corporates, every single large cap out there, they don’t talk about Bangkok any more. They talk about provincials,” said Patrick Chang, head of ASEAN equity for BNP Paribas Investment Partners. “The sexy stuff is the provincial urbanisation and the way it impacts consumption.” ($1 = 31 baht)

(Additional reporting by Pisit Changplayngam and Apornrath Phoonphongphiphat in Bangkok; Editing by Alan Raybould, Jason Szep and Nick Macfie)

3)

Non Thaksin Growth Factors:

What other factors have propelled Issan Region to rake in a growth, again, of some 40% since 2007? What are the information that the likes of Reuters and Bangkok Post are not reporting?

There are about four factors to consider on the Issan Region growth that has nothing to do with Thaksin. They are tourism, regional trade, Issan people’s regional and global hard work ethics, and the fact that Issan’s is “Coming From” the bottom of the pile in Thailand’s economic base, being the region is the least develop region of Thailand.

4)

Tourism:

First on tourism, tourism is big business in Issan. The region has a unique culture heritage, very different from other region. Is there any question that for the past four to five years Issan mountainous region, such as Khao Yai National Park, only hours away from Bangkok, has boomed massively? Then Laos and Cambodia has emerged as a major tourism destination, and both those countries, are right smack next to the Issan Region. Many tour operators now simply mix the Issan region tourist attraction, with those in Laos or Cambodia and offer them, as a package. Because of Laos and Cambodia, the interest in the Issan region tourism, has increased massively.

5)

Regional Trade:

That tourism, plays into the concept of “Regional Trade” where Issan has become the shopping destination for many, such as shoppers from Laos and Cambodia to the region, and also to the people of Bangkok going to the Issan Region to shop at the border markets. The bottom line fact is Laos and Cambodian economies are booming, benefitting the Issan Region. Then there is the link of the Issan region, to Vietnam and China, planned for decades with little to do with Thaksin or Yingluck.

Let’s look at only Laos and not even Cambodia.

Laos, a small land-locked country, is now rapidly becoming a regional linking hub between its larger neighbors. After years of isolation, Laos is opening up with now around 12 international border crossings and three bridges (and soon four) over the mighty Mekong River.

The importance of Laos’ opening is confirmed by the central position it occupies in the Asian Highway Network (AH) project, sponsored by UNESCAP and largely funded by the Asian Development Bank. The 141 000 kilometer-long road network crossing 32 countries aims at interlinking the Asian continent.

Regionally, of all Greater Mekong sub-region countries (Cambodia, Laos, Myanmar, Thailand, Vietnam and China’s Yunnan province), Laos has the greatest planned AH density of all, both in regard of its territory and its population. It also has the largest AH network for the number of cars owned by its population. It thus becomes evident that those highways aren’t built for Laos’ internal traffic, but rather for transforming the country into a land-bridge in a larger regional road network that will eventually link China to Singapore and Vietnam to India.

What it means for China, Thailand and Vietnam

For all three countries, passage by Laos is a way to bring the economic growth from which are already benefiting their centers, to their peripheries. For China, it means its inner provinces far from the coast who could benefit from more trade and exchanges with Southeast Asia. For Thailand, it means its Issan region in the Northeast, bordering Laos that lags behind in terms of access to prosperity that could benefit by being linked to Vietnam or China. Finally, in Vietnam, while the North and South have known high levels of economic development, the Center has been a lot slower to launch, thus the relevance of integrating with Northeastern Thailand and beyond via Laos.

The three countries have invested a lot in road infrastructure in Laos, and China more than any other. With the integration of Laos into the ASEAN free trade area in 2008 and the coming free trade agreement between ASEAN and China, the timing of the completion of these roads is perfect.

6)

Quality of Region’s Workers

Isaan  can refer to either the name of the Isaan people, their language or the northeast Thailand region. There are about 20 million Isaan people, most of them living in Northeast Thailand. The Isaan are known throughout Thailand as people who want to live life to the fullest. They are seen as a hardworking, hard playing, and hard luck people who have a sturdy sense of independence in spite of being looked down on by some from better off regions of the country.

Then what many forget is that many Thais of the Issan Region, work outside the region, all over Thailand, regionally and also globally, often as labor. These labors would typically work hard to save up funds, spending little, and then take the funds back to the Issan region. Is there any question that the Issan region people, who work away from the region as labor, are exposed to many cross cultural aspects and accepts work that many Thais do not accept anymore? And what do these Issan people do when their out of Issan work is done? They of course return to the Issan Region to settle down, bringing with them, a wide ranging experience and a hard-work ethic. How are these wide ranging experience and willing to work hard put to work? Well, this Issan population base becomes a fertile ground for business, meaning, well verse workforce that is willing to do hard work, that also have a high propensity to save.

7)

Flood Safe:

Then apart from tourism, regional trade, the people of Issan, there is also the flooding a few years back that is driving factories to the Issan Region, to escape the flooding potential. With better logistics and a work-force that is willing to work, and also being the gate-way to the MeKong area countries, Issan Region have become a major manufacturing center. This aspect has even less to do with Thaksin or Yingluck, but about geography and nature.

Withoon Kamonlnaruemet, the president of the Khon Kaen branch of the Federation of Thai Industries and a committee headed by Khon Kaen Governor Sombat Triwatsuwan plan to request a 50 million baht (US$1.6 million) appropriation to conduct a feasibility study and create the blueprints for Northeastern Thailand’s first industrial estate. “Khon Kaen has all the favorable conditions to attract investors here. We are a hub in the Northeast for logistics, education, and health care. And we have golf,” Mr. Withoon said.

“The probability is about 70%,” Mr. Withoon predicted. He attributes the high likelihood to the 2011 floods which severely disrupted production and brought billions of baht in damage to factories in Central Thailand. “Businessmen are not in a position to take on any more risk,” Mr. Withoon explained, “and the government hasn’t come forward with a short-term plan or a long-term plan to deal with the threat of flooding. So, an industrial estate in the Northeast is looking pretty good to investors.”

8)

From a Low Base:

The last aspect of why the Issan Region has performed exceeding well is that the region, for decades was known as Thailand’s poorest region. As a poorest region, the potential for growth is of course great, un-like regions that have grown and prospered, such as Bangkok area, and the potential has mostly been spent. To put it bluntly, the factors that came into place, being tourism, regionalism, and the people of Issan, have together, went to propel a back-ward region, to the rake in massive growth. This is just catching up with the Issan Region’s potential.

The economy of Issan is dominated by agriculture, although output is poor and this sector is decreasing in importance at the expense of trade and the service sector. Most of the population is poor and badly educated. Many labourers have been driven by poverty to seek work in other parts of Thailand or abroad. Although Issan accounts for around a third of Thailand’s population and a third of its area, it produces only 8.9% of GDP. Its economy grew at 6.2% per annum during the 1990s. Other sectors of the economy have been growing more quickly than agriculture, although this growth can be misleading. The number of factories grew from 1908 in 1975 to 44,000 in 1995, but 34,312 of these were rice mills. In 2000, 76% of factories in Issan were breweries or food or tobacco processors.

Issan’s economic disadvantages have caused great poverty. In 1995, 28% of the population was classed as below the poverty line, compared to just 7% in Central Thailand. In 2000, per capita income was just 26,317 baht, compared to 208,434 in Bangkok. Even within Issan, there is a rural/urban divide. In 1995, all of Thailand’s ten poorest provinces were in Issan, the poorest being Sisaket. However, most wealth and investment is concentrated in the four major cities of Khorat, Ubon, Udon and Khon Kaen. These four provinces account for 40% of the region’s population.

9)

Conclusion:

In sum, what can we say about the Issan region’s growth? Is Reuter’s right, that Issan growth is just from “The Spoil” of Thaksin’s winning elections after elections in Thailand? How do we explain other regions of Thailand that also benefited from Thakain’s policies, but grew half as fast? Is there more to the situation?

Related articles

Related posts

Leave a comment