“Government spending is the problem. The private side of the Thai economy is operating as normal”; Thailand’s political turmoil has caused a backlog of 200 foreign investment projects worth $12.3bn awaiting government approval

Updated: Friday May 23, 2014 MYT 11:51:44 AM

Turmoil hits Thai projects

NEW YORK: Thailand’s political turmoil over the last six months has caused a backlog of roughly 200 foreign investment projects awaiting government approval, the equivalent of about US$12.3bil, according to a senior government official.

Ajarin Pattanapanchai, deputy secretary general of the Thailand Board of Investment(BoI), expects the projects, each exceeding 200 million baht (US$6.17mil) in value, will be cleared by August.

“It is around 400 billion baht (US$12.3bil) … It will take about two to three months to clear it,” Ajarin told Reuters in an interview while in New York to speak with US investors.

Thailand has been without a proper government since December. As a consequence, the BoI board, which approves major investment applications, was not reappointed until last month.

Its two-year term expired in October 2013.

Protesters took to the streets of the capital Bangkok in November, accusing the government of Prime Minister Yingluck Shinawatra of corruption and nepotism.

Yingluck, the younger sister of ousted former premier Thaksin Shinawatra, was herself removed by a court ruling May 7, but her caretaker government remains in place.

On Tuesday, Thailand’s army declared martial law in a move to restore order and investor confidence. Nearly 30 have died in sporadic bouts of violence and troops now patrol the streets.

Thailand’s economy shrank 2.1% in the first quarter from the prior three-month period, with exports remaining weak and domestic activity battered by the months of protests.

“Government spending is the problem. The private side of the Thai economy is operating as normal,” Ajarin said, blaming much of the contraction on a slide in government spending given its caretaker status.

The state planning agency NESDB said public sector investment fell 19.3% in the first quarter from a year before and private investment fell 7.3%.

Foreign direct investment, as measured by the value of BoI applications, declined in the January-April period to just under 220 million baht from 224 million baht in the same period a year ago, Ajarin said.

“In my opinion it (politics) should not impact FDI more than 10%,” she said.

The comparison year-on-year will be difficult to make because December 2013 saw the end of a multi-year sustainable investment promotion policy that drew several hundred projects applications in the final weeks of the year.

Applications under 200 million baht were being processed, Ajarin said.

Despite the turmoil, Thai stocks are up 8% year-to-date after sinking 6.7% in 2013. However, one measure of foreign investor sentiment has dropped. Assets under management in the US-based iShares Thailand Equity exchange traded fund fell to US$545mil in April from over US$1bill in the same period a year ago, according to Lipper.

Ajarin said the biggest opportunities for foreign investors included automotive manufacturing, which accounted for 11% of GDP and was the biggest in South-East Asia. However domestic car sales are falling and 30,000 jobs have been cut this year.

In addition, she sees food processing and aerospace engineering, given its ability to produce precision tools, as other areas ripe for investment. – Reuters


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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