Local business leaders are relatively confident about Thailand’s economic strength despite the boiling political conflicts, but they admit that prolonged uncertainty could dent long-term economic confidence and discourage investors from pumping money into the economy.

Sigve Brekke, chief executive of cellular operator Total Access Communication (DTAC), said that Thailand had faced many critical challenges over the past few years, such as the 1997 economic crisis and the tsunami, but the country had managed to recover pretty well.

“So I believe the economic outlook is still fine, especially in the telecom industry,” he added.

With a 39-per-cent year-on-year increase in fourth-quarter net profit to Bt1.5 billion for the quarter, DTAC hopes the number of mobile-phone subscribers will grow by five million this year and that DTAC will have 30 per cent of them.

Prakit Chinamourpong, vice president of the Thai Hotels Association (THA), said the tourism industry had not suffered from the political turmoil and would not even if the conflicts intensified.

Kusa Punyarachun, a senior figure in the tourism industry and owner of World Travel Service Co, said total tourist arrivals had increased 35 per cent in January compared to the same period last year.

“Tourism can stand on its own, with little harm from political instability,” he said.

Hotel occupancy rates rose in January. Bangkok hotels were running at more than 80 per cent of capacity. Chiang Mai hotels had 60-70 per cent, Phuket’s rate stayed steady at 40 per cent, and so did Samui’s at more than 80 per cent.

Little effect is also anticipated on the Thai frozen-food industry, especially in exports. Poj Aramwattananont, president of the Thai Frozen Food Association, said that so long as local producers could satisfy overseas demand, exports should gradually grow no matter what happened domestically.

Apisak Tantivorawong, president of Krung Thai Bank, said both foreign and local investors were concerned with political tension but were still confident about Thailand’s economic fundamentals.

“Foreign investors are quite surprised to see that Thailand has such a problem, but there are no signs that they’re losing confidence,” he said.

Apisak said foreign investors were still positive on the country’s economic outlook. Several overseas research houses still project growth of no less than 5 per cent for the year.

However, short-term impacts are anticipated, especially from foreign investors who are not sure if political change will occur in a democratic framework.

On the other hand, Tienchai Mahasiri, president of the Thai Garment Association, said the political turmoil had brought a lot of tension to many businesses.

“Political uncertainties will slow down economic growth, because investors lose confidence during tough situations,” he said. Tienchai said that overall the economy was going quite well but if there were any political change it might slow down and “break”, as it was uncertain if the government’s policies would proceed as planned in the event of political turmoil.

Reflecting investors’ preference for political continuity, public pressure to oust Prime Minister Thaksin Shinawatra resulted in a big swing in stock investment last week, when the SET index opened on Tuesday at 727.91 points and ended the week at 739.35 points. The day the Constitution Court turned down the senators’ petition, the index jumped. Though Thaksin, through the Bt73.3-billion deal with Temasek Holdings, stirred questions about his political ethics, the business community still wants him in office to continue with the government’s programmes, especially the mega-projects.

Last week the terms of reference for mass-transit development were delayed due to the political situation. Kasikorn Research Centre also revised down its 2006 economic forecast from 4.5-5 per cent to 4-5 per cent, below the Bank of Thailand’s 4.75-5.75 per cent. Contributing to the lower growth forecast was possible delay in the mega-projects.

Apisak of Krung Thai Bank said local investors wanted the problem settled quickly. Any delay in mega-project investment is high on the list of concerns.

“All business people hope the problem can be cleared quickly, as unstable politics would affect the economy in all sectors,” said Jitti Tangsitshpakdi, president of the Gold Traders’ Association.

Boonchoo Direksathapon, managing director of Ratchaburi Electricity Generating Holding Plc, said the current political instability had led to investors adopting a wait-and-see attitude, not favourable for those who needed to plot long-term investments, which certainly included power companies.

“To businessmen political stability is important so that we can plot an investment plan. If the prime minister has to go, for whatever cause, it will affect gross domestic product and then power demand. That means we will have to revise our investment plans,” he noted.

Plengsakdi Prakaspesat, vice chairman of the Federation of Thai Industries, agreed.

“The industrial and agricultural sectors are performing well at the moment, but the intensifying tension could dent confidence, and that might lead to economic vulnerability,” he noted.

He urged the government to urgently find a way to settle the tension with civic groups through compromise so that economic development was not disrupted.

Business Desk

The Nation