Experts say economic upturn will be gradual

The Nation (8 November 2007)

Both Thai and foreign economists and finance experts this week agreed that Thailand's economy was unlikely to recover immediately after the December 23 general election.

However, the election holds the promise of a good start to a better political situation and clearer economic policies that will restore the confidence of both Thai and foreign investors.

These findings came from a two-day conference organised by the Australian-Thai Chamber of Commerce entitled "Asian Growth: The Next Steps 2007".

Panellists shared the view that Thailand's economy could be expected to recover next year after the election of a stable government.

However, positive sentiment is unlikely to return overnight, because investors will remain concerned about several factors, including tighter business regulations and the baht's fluctuation problems, as well as external problems affecting the country's economy.

Australian Ambassador William Paterson said foreign investors wanted the new government to have clearer investment policies, as these were a key to driving the country's economic growth.
"Australian investors are 'waiting and seeing'," Paterson said. "We hope the new government will have economic policies that will draw foreign investors back."

The ambassador said the new government should be consistent and adopt measures to facilitate foreign investment. These should include abandoning amendments to the Foreign Business Act, because tighter regulations will destroy foreign investors' confidence.

He said Australian investors remained keen on Thailand's mining, manufacturing, banking, insurance and services sectors but were waiting for clearer policies.

Chamber president Gary Woollacott said businessmen were expecting all of the negative factors that had affected confidence over the past year-and-a-half to ease after the election.

"Although the economy will not immediately recover, it should gradually improve. We expect the new government will have liberal policies, to boost foreign investors' confidence," Woollacott said.

He echoed the Australian ambassador's call for cancellation of amendments to the Foreign Business Act and said foreign investors also wanted to see more stable trade and finance policies, including currency controls, and stimulating plans to develop competitiveness and boost domestic consumption.

Trade Negotiations Department deputy director-general Winichai Chaemchaeng said the Thai economy was expected to grow 4.5-6 per cent next year.

Despite such negative factors as the global economic slowdown, increasing competition and volatile oil prices, the baht is expected to be more stable, and Thai politics will enter a time of greater certainty.

Winichai said the government intended to liberalise more of the services sector despite having to preserve some businesses for Thais only. Liberalisation will proceed step by step, like it has in other Asean countries, and will go further under bilateral pacts.

Thailand and Australia will begin further negotiations on a free flow of services under their free-trade agreement next year. However, Thailand may need to reserve some sectors, such as telecommunications, for a few more years, he said.

Supavud Saicheua, managing director of Phatra Securities' research group, said the new government's biggest challenge would be promoting growth in the gross domestic product next year despite all of the negative factors. To boost trade and investment, the government should reconsider its policy of intervening in the exchange market via purchasing US dollars and selling baht, because this leads to fluctuations and erodes the balance of the system.