Thailand teeters on trade

IF YOU thought the US election campaign was tough, watch out when Thailand goes to the polls early next month.

Prime Minister Chuan Leekpai, a Democrat heading the six party coalition in power, has most to fear from the Thai Rak Thai party of business tycoon Thaksin Shinawatra.

Thaksin is being investigated for corruption. His two-year-old party has somehow won the support of 100 MPs, but it is not represented in the parliament, and its policy, apart from being anti-Chuan, is unclear.

Throw in exploding ballot boxes, and the near certainty that Thailand’s notorious hit men will take out a few candidates for their standard fees, and you can be very glad to live in WA or even Florida.

This election is the first to be held under the auspices of an independent Election Commission set up under Thailand’s new constitution designed to make the process “fairer and more transparent”.

Sadly, instead, it is shaping up as the old cliche of the best government money can buy.

The Asian crisis of course started in Thailand when the collapse of the baht helped trigger massive with-drawals of foreign capital around the region, and a string of competitive devaluations.

Chuan’s government briefly made the running in the comeback stakes, by pledging to reform the entire political and economic base and particularly the corrupt and weak banks.

There are two reasons why this did not happen:

* a short-lived candy floss boom on the Thai stock market diverted the attention of politicians; and

* the unexpected development of some excellent technology products stoked up soaring exports and made reform seem less urgent. Foreign exchange reserves and the trade surplus both rose, helping liquidity and keeping interest rates low.

Since then the Bangkok stock market has virtually got the gong – down 40 per cent this year amid volume so low it has been seriously questioned whether the country needs a stock exchange at all.

But the technology sector may be more resilient.

Thailand has a population of 62 million people and a low-wage workforce that is generally better educated and more skilled than that of export rival China.

This gives it an edge in medium value-added products, a category that covers a lot of electronic goods.

Growth in exports of integrated circuit boards, the number one seller, is expected to be double digit for the next two years.

Shares in Delta Electronics (Thailand), an affiliate of the giant Delta Electronics Co. enterprise in Taiwan, have caught the eye of foreign investors, along with Hana Microelectronics.

The electronics sub-index has done much better than the broad Thai stock market.

A fiscal stimulus package from the government last week included tariff cuts on imported components and was good news for the industry.

But there are risks on the downside. The daily profit warnings from US computer and consumer electronic companies are not supportive of Asian suppliers.

Thailand is a net importer of oil and the high price is hurting margins and putting the focus back on debt restructuring.

Thai banks are still in an awful pickle, with non-performing loans put at a startling 1,500 billion baht (A$66 billion) or 31 per cent of the entire financial system.

Foreclosures and bankruptcies proceed at a snails pace and foreign investors have not forgotten the murder of Australian corporate accountant Michael Wansley, whose killer has not been caught.

WA exported goods and services worth $332 million to the country in the year to June 30, and imported half as much. WA companies would like to sell more food and agricultural goods, but Thai agrifood tariff barriers are high.

Economists at HSBC have tipped that economic growth in Thailand will slip from five per cent this year to 3.5 per cent in 2001.

Even that presupposes that the December 6 elections do not degenerate into a fiasco, adding Thailand to the list of Indonesia, the Philippines and Taiwan which now carry serious political question marks.