By Pooky, this blog economics journalist
Can the Thai people survive the onslaught of ASEAN free trade on its own territory? Well that is the question Thai Rath, the neutral mass circulated daily asked today.
Wave of Foreigners Expected:
Thai Rath says the ASEAN free trade area, Singapore being highly accommodated to anyone and unit registering itself as a Singaporean identity unit, and the ASEAN free trade concept of treating other ASEAN identities, as if they were local-all spells doom for Thais in Thailand.
And on top of ASEAN, many other countries such as the US, is rushing to form free trade agreement with ASEAN as a whole.
While that sounds unusually “Nationalistic” for Thai Rath, the paper that reaches 2 million Thai a day has a point. In a recent poll on ASEAN free trade, most Thai business says it is worried about increase competition in Thailand, and has little intention to exploit new opportunities in other ASEAN countries.
Thais Already Feel Threatened:
And judging by the initial reaction by many Thai industries, it looks Thai Rath is hitting a nerve “dead center” than sounding ridiculously protectionist. Thai fashion design industry has said that many cutting edge Thai fashion designer will die out because of new brands from ASEAN. The logistics industry says Thai logistics will die out. And the tourism industry, where about 30 Thai hotels are on the selling block, says at last with the free trade, they will be able to un-load the hotels.
The list goes on and on, to even include Thailand’s strongest industry and that is its agriculture and food. Already China has laid down concrete to invest sum US$3 billion in Thai food processing, and this even before ASEAN free trade talk.
Can Thai Compete?
But the fundamental question is can Thai firms compete? Well apparently it is both “yes” and “no.” In some it can compete, but in others it can not.
Take banking for example, it has been years since Kasikorn Bank went on a re-engineering binge, and the entire Thai banking industry, way back when Kasikorn started modernizing its bank, began also to modernize itself. But the Thai banking today, is about 30% control by off-Thailand banking interest. Or take telecom, both DTAC and AIS are off-Thailand controlled interest-and that is about 60% of the industry. It is the same way in insurance and the high-tech areas.
But where are the Thais able to compete. Well there is construction and related like construction materials. And there is the retail where foreign onslaught has been especially fierce, but the Thai is surviving. Then agriculture also sees a world class player like CP and in energy like PTT.
Then one has about 500 medium size firms by Thai standard and a handful of global class, in listed in the Thai stock market-mostly under Thai management even if the ownership can go up or down with the stock market-from anywhere like 25% to 50%. But these are considered Thai, by all means.
The Future is Un-Known:
So what is Thai Rath talking about? Because it looks like there are still some strong Thai players left.
Well, what Thai Rath is talking about is the future. Simply stated, CP, Kasikorn, Central and a host of other leading global class Thai firms, have been protected but that is being lifted, in a very near future. And the plain fact is, the banks, logistics, food, agriculture and high fashion-all feel under threat and have failed because of poor management, even being protected.
The root causes of this Thai management failure in many parts are deep, ranging from poor education to an in-efficient governing political system. For example, at many global size Thai state enterprises, the MD position still can not be filled because there are simply very few Thais who can qualify. And Thailand, as most knows now, is a very difficult and complex country.
A New York investment banker pro, who was involved in getting the Thai independent power generation going in Thailand said it simply that: “Thailand is one of the most difficult country to crack in the world.” But that is under the old rules that are changing now.
To sum it up, there is a shortage of good local class or global class managers in Thailand. Most have been protected by a deep web of protectionism,
Momentum Will Open the Doors:
As many have pointed out, a major part of why the Thai businesses rejected Taksin, is because Taksin took Thailand into the future of Globalism at such a rapid pace, many feared the move, and the reaction is the current “Nationalism.” As Thailand opens up to ASEAN free trade, as have always been expected from the free trade proponent Democrat Party, despite itself wrapping itself up in nationalism, the bottom line is that Thais are looking inward in a confused state-with very little foundation being made for the new environment-to be able to compete locally or take advantage of new opportunities.
Just pick up a typical Thai newspaper on any giving day, even the business oriented, and there are little on this subject. Thai Rath even went as far as saying that the current government agreement on ASEAN free trade is against constitutional procedures, and is illegal.
To sum it up, the Thai Chambers of Commerce said, Most Thais are afraid and not looking to exploit new opportunities. But ASEAN has left the window open for those who are not ready not to have to comply with all the agreement terms. But Thailand is not interested in using that option.”
Little Positive Response:
Take a typical Thai press and the stories are about this or that industry or sector facing extinction. Take a typical Thai government reaction and it is like more health standards in the face of increased competition in the food industry.
There is very little in the current government US$44 billion “Strong Thailand Stimulus” that is about helping Thai firm adjust to the new realities. Even the smart solution to Thailand in the “Creative Thailand Concept” is entirely under-funded, and like ASEAN free trade, most Thais say they do not understand it.
Most of the US$44 billion stimulus is going into road building and paving, building long-over due water systems, and grassroots middle level education-all scattered in about 9,000 small projects with little overall aim or direction, where corruption is estimated anywhere from 20% to 30% of total spending.
All of that means short-term gains for those involved directly, and the spending will help make Thailand extremely attractive to foreign investments in Thailand. But as far as Thai businesses are concern, medium to long-term wise, it looks like “Death to Thais” like Thai Rath says.