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Baht Exchange Controls an expensive and long term mistake? |
Author: flying high
Date:
20 Dec 2549 17:13
Surely the draconian exchange controls imposed by the BOT, and marginally amended today are an expensive long term mistake for investment in Thailand. Not only will potential investors be wary of putting money in the stock market, which relies on a free flow of funds to function effectively, but surely in other investments as well, especially the property market? Whereas the current, (for how long?) rules affect only investments less than 1 year, it's the sentiment that has been knocked very hard, when the credibility of the financial authority has been severely called into question. I think Pridiyathorn Devakula should resign. How could such a decision be made without thinking through the consequences? |
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| Reply # 47 | |
Author: Author 44
Date: 2 Jan 2550 01:19
Unfortunately it looks as if my prediction is coming true sooner than I predicted. The explosions will cause the baht and the SET to crater much more surely than Pridyathorn's bungled capital controls. The combination of the explosions, capital controls and the insane version of the Alien Business Law on the way could cause a terrible slump in 2007. Watcher's predictions of a rejig of capital controls to try to stem flight capital may well become reality. |
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| Reply # 46 | |
Author: a watcher
Date: 31 Dec 2549 13:01
What I am worried most seriously is, the new chapter of Foreigners' Business Laws, soon to come out.
In this conservative atmosphere of Thai politics (junta government, massive old timers to have joined many executive organizations). the new laws would not come out in friendly mode to aliens and foreign business.
Most of Thai old generations do not understand the philosophy of sufficiency economy and they easily resort to the concept of 'Thai Only first" and "Self-Supply Self-consumption". This is dangerous inspiration.
The utmost problem is, most of multinational corporates who own businesses in Thailand, will not bend to the new nationalistic laws
and they will pack out in mass.
It is good if BOT stand by huge green bag reserves like 60 billions dollars whenever those are leaving and want to change into hard currency, they should be readily and friendly to allow exchange-out.
In that situation to occur, BOT will however, embargo exchange like a corpoarate can exchange only 10,000 dollars for a day and so on. Many of african and latin american nations did same in the past.
Should all situations take place like above, Thailand will have permanent junta government and go back to the dark age of 1960s and 1970s. The recovery will take another 20 years.
Everyone must keep on eyes on "New Alien Business Law".
This BOT's clumsy currency curbing is not so serious matter than this law.
Thailand is facing the most serious transition era whether go better or whether go worse. |
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| Reply # 45 | |
Author: SO
Date: 31 Dec 2549 03:34
There are lots of good discussions on this topic.
There are short term, long term effect and indirect longer term effect parties with the control measure.
Short term effect: A few short term investors, and very short term effect - most people invest to make money. Can Thai government fault people fore that? Both Thai and Foreigners are a like in this. Again principal of going into business or investing is to make money. DO not invest money in Thailand because the government does not want you to make money - that is the message sending out.
Longer term effect: As mention above, going to business to make money, to build factories, longer term investment. With the signal like that fom the current goevrnment, the CEO would not be making decision on opening factories in hailand. Their job and profits are depending on this. Well when there are no factories, people will not find a job, employers can pay less to get people to work, then less income tax collected by the government, the government has to raise tax. Most of Thais don't pay tax anyway so the middle class Thais will have to bare the burdant of revenue for the country. This can go on and on.
I do not think 2007 will be a good year for Thai people. |
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| Reply # 44 | |
Author:
Date: 29 Dec 2549 13:26
For all those ignorant nationalistic fans of the BoT and Mahathir, you should be looking at a much more powerful example. When China was facing overheating of the economy and rampant inflation, partly caused by incipient foreign direct investment in 1989, what did they do? They murdered hundreds of students in Tianamen Square. It did the trick beautifully. Foreign investment slowed to a trickle, inflation was no longer problem but the foreigners, who said at the time they would leave for ever, came back again when China wanted them. This will probably be the end game for Thailand, given the inept interim government and Thaksin just waiting in the wings. With blood on the streets only Templeton will be investing here, according to Sir John's famous maxim, and the baht may be at 45 to 50. The Bot will be ecstatic. |
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| Reply # 43 | |
Author: Kula Buer
Date: 29 Dec 2549 02:38
I like "Watcher's" comments. He seems to know what he's talking about, versus the diatribe that's flowing from others, many nonsensical.
Re 1997 crisis, don't forget that the Finance Minister at the time Thanong Bidaya Lamyai was a close business ally of Thaksin (he was on SHIN's original board before becoming TMB chief).
Keep your comments coming Watcher! |
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| Reply # 42 | |
Author: Allen
Date: 29 Dec 2549 02:02
It is always a pleasure to read open debate on economics. I am just a visitor here, so my opinion doesn't account for much. After 10 years of glorious growth, as a democracy, LOS is now in the iron hands of a few people. My study of formal economics proved to me that a completely open market doesn't work. The USA dollar, the most economically stable currancy in the world,is controlled by a rigid interest control. It works the best of all, since it has proven itself for about 60 years. The last Thai bank interest I was quoted was 20%. In the USA, 5% is the norm, and a 1/4 change either way, effects trade, in large manner. When the coup occurred, the Baht should have went to 45 or 50 to one dollar, it didn't. Why? The banks control the availibility of the Baht, and the government works with the banks for an acceptable exchange rates. You figure it out. The Thai banks made billions on the Baht exchange raise, especailly if they knew it was coming. It is the most profitable to keep it there, for them. Who does it hurt? Anyone in LOS who buys a foreign product, that includes basic material, like iron. It effectively kills any exports, because Thai products become too high. So, the banks, and the government that aids them, reap tons of money, while the poor people suffer. In a democracy, you simply vote out such people. In a dictatorship, you just suffer. Up to you. Look at Burma for a fine example. |
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| Reply # 41 | |
Author: a watcher
Date: 27 Dec 2549 14:11
Outsider,
Thaksin too had chosen Khun Pridiyathorn as the BOT chief that had too managed well the national coffer.
It is not deadly wrong if outer money comes in and staked with BOT.
The problem is, most of recent surging influx of the money is not for investment money for Thai substantial economy which gererates pure wealth, but ill-intended virual money to corrode Thai economy. Any nation must curb this dubious money.
Although Thaksin come back it would be no way better than the way incumbent BOT team could do.
The question is much of this ill-gotten money is owned by Thai politicians and businessmen, themselves and taxing them is the best cure as if now they do over the wealth of Thaksin's.
American, English or Japanese speculators would not aim at such shabby profit taking in Thai stock, currency or condominium.
Thai BOT must introduce new orchestrated currency management system in which goodwill investors shall be protected and encouraged with fast convinient banking formalities.
Then who ? |
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| Reply # 40 | |
Author: Outsider
Date: 24 Dec 2549 16:41
Betting my head on it that The Greatest Prime Minister of Thailand, DoctorThaksin Shinawattra again will save Thailand Economy within 2-3 years due to the second wave of financial crisis. Moreover,Thaksinomic II will also reemerge, as well as all of his minister posts who is well educated, atleast doctoral degree with fluent and articulated English speaking. |
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| Reply # 39 | |
Author: a watcher
Date: 24 Dec 2549 09:39
Let me continue some more,
Thaksin had accumulated 2 billion dollars outside of Thailand so far.
Temasek money is another and generally is believed staying in Thailand.
The 2 bln dollars was accumulated by address commission (buyer taking returning commission) from own purchase of capital goods such as mobile handsets, mobile network hardware machinerey, more big things are to have purchased the comsat machinery from USA "H" company.
A large part of that money came from stock market manipulation of SET and his capital gains by selling little by little by inflating stock numbers.
The known agent (who involved in Chiang main tobacco factory construction) helped Thaksin to embark the money in China through various investment including huge real estate including the largest golf club of the world.
The part of money came back through his sons and daughters name under corporate names of paper company registered in like cayman islands and bought small but various shares in Thai corporate such as banks, media, transport, oil and gas petrochemical and transport.
Too much so BOT is unable to dig up all such evils.
I will speak on behalf of you BOT guys. Dont be worried. |
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| Reply # 38 | |
Author: a watcher
Date: 24 Dec 2549 09:29
This morning, Khun Pridiyatorn made a reserved but proper speech, that "Yuan' should be revaluated".
These 4 vocables explain the whole situation of Thai economy.
While Japaneses keep honest investment for building hard core, substance economy and become main forces to earn and feed the people from outer, global market, China and Chinese having chinese ancestry, overseas Chinese nations (Taiwan, Singapore) and Chinese expatriates keep the wealth being transported into China mainland from Indonesia, Philippines and Thailand.
Malaysia successfully capped such vicious money moverment, then Vietnam and later Indonesia. When Indonesian was in currency crisis in 1997, it was watchered openly how the chineses indonesians massively evacuted their USA currency saving into mainland China.
Why Thaksin stay at Beijing ?.
Khun Pridiyathorn is the one who bravely explain about this ?
Why Damri of CP group have not returned the embarked huge money in Hong Kong account, the money he siphoned from Thailand just before the black day of July 2 1997 ?.
He prepared with many China bounding investment projects and just before the day he quickly siphoned in name of the capital injection into the pending investment projects, legally and through hands of the premier and vice premiers helps.
Later CP cancelled almost all investment projects and at the severe critisam they announced they would bring the money back but not a single dollar so far and they announced they returned the money and kept it at Hong Kong.
There are hundreds big Chinese related families who did exactly same things since last '15 years'.
Japaneses worked hard to build hard core economy in Thailand but their Thai ID card holding Chinese Thais transported all the wealth into China or overseas accounts.
This is the speech of mine that many of BOT officials want to confess honestly.
I will be the spokeman on behalf of them, Do not worry. I will speak for you.
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| Reply # 37 | |
Author: micheal
Date: 23 Dec 2549 19:18
wat a rare species! guess only thais from top officials to cabbies to street vendors r capable of such "brilliant" ideas. no wonder theres a pop group here call "silly fools". |
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| Reply # 36 | |
Author: joker
Date: 23 Dec 2549 19:08
What a stupid joke!
Thais like to take advantage of anyone weaker than them. The elites and educated is making everyone suffer. Its goes down the culture. Like a shop owner trying to charge extra to foreigners or a weaker/poorerThai.
Monkey see Monkey do?
What a shame! And What joke around the world. Haha!
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| Reply # 35 | |
Author: a watcher
Date: 23 Dec 2549 15:52
Let me continue some more,
If Thai keep 'Alien Business act' that discriminate aliens, the stock and currency exchange act is deemed to discriminate aliens.
Here we must look to the point that Thai economy "needs protection". It is infancy, unimmunized against alien virus.
What is the sufficiency economy ?. While economic immunization is strengthened, they must carefully pursue the growth and competition in global market.
While currency and stock are raped, how can they consolidate substance economy and people's balanced domestic economy (household economy).
Liberalization and Maginal management are different as far as stock, currency management are concerned. While superficially look liberal, by preparing the medicine to cure when wrong, it is good management skill. Shock therapy is also one way, like what BOT did this time. This sends good signal that Thailand also has immergency program.
USA do not control own currency and stock ? Who can say Not ?.
Here through my 3-4 posts, I tried to tell people what the BOT chief and deputy PM wanted to say. It is taboo to say openly. They must say over dinner table among family or among secret get along in top leaders. |
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| Reply # 34 | |
Author: a watcher
Date: 23 Dec 2549 15:27
#30,
I said this,
The fundamental problem is that a part of alien capital is owned by Thai people themselves who rampantly speculate by themselves intervening national currency management (in the past by CP group, Shin group and many China realted business firms and individuals). Capital moves in large main trunk between Thailand and China through brokery of Singapore.
and, I dont change my word because EVIDENCES must be well kept by Bank of Thailand.
Why BOT does not open which China related, Thai companies and individuals were the major currency speculators in 1997 incident ?
Why this time, not seel them off ? Dont they want to open new diplomatic problem with Singapore ?.
I dont have any racial discrination in the name of "China" but unfortunately most of Thai financial misery have in majority, been caused by the offshore fund owned by international or expatriated chinese or china cultured nations' fund managing corporates.
This fund must be induced, cultivated into the virtual substance industry or technology development business, not gambling-like speculation.
Why do they do this ?. That is my fundamental question. |
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| Reply # 33 | |
Author: emiliano zapata
Date: 23 Dec 2549 14:34
It's seems that we a have a lot of economy experts on this forum... but no political expert: in a capitalist economy, liberal and globalized market, no body gives a dam s... about what happen to medium class, not to say about the poor. In fact, no capitalist cares about others: just keep this fact somewhere in you brain and you will understand everything easiyer.
It reminds me this black thursday when the Central Bank rose the interest rate after pushing credit all around the US during years, and after incitating the medium class to invest in the stock market. So everyone rushed to sell its shares to pay back the interest of their consumers loan (buying cars and households: the american way of life). Then the stock market collapsed... you know the rest and you know that 50 million people perished in WW2. This was the main cause of the war.
Of course they will not tell the story this way... This damn global capitalist system does not work, or should I say, it does not work for the huge majority of people who has no liquidity. Simple.
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| Reply # 32 | |
Author: Fairminded
Date: 23 Dec 2549 09:51
To Sakowduen (#24), Watsamon (#23), and Preecha (#22),
The BOT governor and the Minister of Finance did mention the adoption of taxing hot money one week before the crucial evening of Dec. 18 when the exchange rate was falling near to 35 baht, the psychological threshold. A notice was also given to the press that Pridiyathorn would announce the corrective measures at 16.30 on Dec. 18. The notice prompted this writer to liquidate half of the stock portfolios and took plenty of short-sale contracts in the future market.
No, both officials did give a fair warning of what is to come and full of transparency for the first time in the financial history of Thailand.
I suspect the three messages were all written by one individual. As for the message #22 in calling the lady a bitch, it did show your low mentality. She may be right and may be wrong, at least she has decided to take action to stop the continued strengthening of the baht unnaturally. You may disagree with her, but to low down calling a person name, then you must be short of any available rationales in arguing. |
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| Reply # 31 | |
Author: Author # 14
Date: 23 Dec 2549 09:26
To #21 Portman,
What a drivel showing your scattered memory of irrelevant facts to the issue now. You just have a hang up idea against the measures which is outside your expectation and possibly hurtful to your pocket.
Please read the message of "#26 knock-out punch" which was beautifully written, short and to the point.
The BOT has immediately succeeded in stopping the bleeding, now we are all talking of the exchange of 38 baht, (a stable rate), a long way from 35, (a manipulative rate).
The shock is painful for those who have their ways for many months and now will receive less dollars for any liquidation of the assets. Since the exchange of baht is climbing up, the quicker the liquidation, the better in recognising lesser losses. That is the main reason for the tumbling of the stock index which is temporary. Only the lion-heart will gain from this situation, which the stock market has now become emotional and irrational, a temporary and expected result. |
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| Reply # 30 | |
Author: Strategist
Date: 23 Dec 2549 02:22
‘Thailand's problem was massive external debt whereas Malaysia had relatively little external debt but Malaysian companies had excessive domestic debt. … Left to market forces the situation would have corrected itself as the balance of payments would have shrunk due to reduced competitiveness in exports and tourism. … Some one has to pay the bill’, Portman (#12).
Who caused that continued massive external debt? I do not think that this government has time to start a mega project yet. Which business (the stock market, export business and tourism) will give more tax to the government in order to pay the debt? Which sector hires more people? The export businesses are 60% of our GDP. You should have known that who would pay the past bills.
‘The problem is caused by Thai people themselves always.’, a watcher (#17).
Your comments are right and thoughtful except this last one, which contradicts ‘by CP group, Shin group and many China related business firms and individuals’. Even some were born in Thailand, how much is their Thai blood? I know that you will do a research on this. (I guess you are not a Thai.) |
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| Reply # 29 | |
Author: its ok
Date: 22 Dec 2549 22:26
On the other side of the picture, the controls were excellent.
The Baht was Rising. Property prices rising. Stock market rising.
Who profit? The Speculators, The Rich, The Blood Suckers. These people r making more $ at the expense of the poor public.
Who suffers? The poor public. Property unaffordable, Stocks too expensive, exports not competitive. Might lead to job loses. Income Gap increases! No good for economy.
Why BOT reverse the restrictions so soon?! Cool things down first, then provide other incentives and confidence for funds to roll in again in the future. Reversing the restrictions so fast is such a joke. The 15 percent fall in SET was indeed dramatic, then again... does it affect the population at large? What efffect it has on 80% of population who r street vendors, office workers. etc? Thats was only a small bite on the wealthy. |
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| Reply # 27 | |
Author: Classact
Date: 22 Dec 2549 17:55
hahahah that was so funny were they experimenting to see what would happen? another nail in Thailand's international coffin of respect... |
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| Reply # 26 | |
Author: knock-out punch
Date: 22 Dec 2549 17:05
I agree with reply#1, a designed outside the box action is the
way for those "offshore capital fund",which Sigapore played
a major role. You have to save the real economy rather than
pockets of those rich "investors". Let them say what they
like, memories are short.
Malaysia survived, even with heavy condemnations. It takes
time , important is do'nt let them destroy the country |
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| Reply # 25 | |
Author: Joseph
Date: 22 Dec 2549 16:27
Seems to me the reason the SEC fell so far and fast is precisely the reason the rules were set in place. It is the speculators that are driving the baht and they will pull their money out as soon as they make all the profit they can but not before damaging Thailand's export market. The only one to benefit from a super strong baht is China. A lot of exporters are going to go out of business because the market will buy the cheapest goods everytime. |
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| Reply # 24 | |
Author: Sakowduen
Date: 22 Dec 2549 15:13
Bank of Thailand Governor Tarisa Watanagase, for weeks, u being telling the press that bahts appreciation is normal and no action is needed by the BOT and u even refused to consider action to stem baht from raising so fast.
Now suddenly u using a sledgehammer to slam on a tiny ant.
Be a Lady and resign to take responsibility for your stupidity. |
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| Reply # 23 | |
Author: Watsamon
Date: 22 Dec 2549 15:10
Go through all your pervious reports on Comment make by Bank of Thailand Governor Tarisa Watanagase, and compare with the action she is taking now.
She should resign and take responsibility. |
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| Reply # 21 | |
Author: Portman
Date: 22 Dec 2549 12:22
To Author #14
"Thailand's financial havoc in 1997 was a result of sticking to textbook remedies while Malaysia used the physical control on foreign hot money, an unpopular but effective method. Yes, Thailand lost because of thinking in the Western ways in remedying its ills while Malaysia survived very well with no request for IMF support. The Bank of Thailand has now learnt the 1997 lessons and no longer plays the footsy game with the hedge funds and those foreigners who now have to think twice in playing the baht. This is a new ballgame. Thank you Mahathir for leading the way."
You don't get it. Malaysia was only able to do this because it didn't have a lot of foreign debt whereas Thai corporates and banks had borrowed a mountain of foreign currency debt believing the fixed exchange rate could last forever. The Bank of Thailand was asleep at the switch in the 90s watching the foreign debt mountain accumulate for use in real estate and unviable investment projects in steel and petrochemicals without doing anything to stem the flow. Then when it was far too late to achieve anything they secretly frittered away nearly all of the country's international reserves in the forward fx market trying to stop the inevitable collapse of the baht. The BoT's 2006 intervention is definitely going to increase cost of foreign borrowings and equity capital for Thai companies for some time and dent private investment and consumption. It is not at all clear whether it will help exporters but, if it does, the price to be paid by other sectors will be excessively high. The BoT and the Finance Ministry have shot themselves in the footl and ost credibility. Many Thais will suffer as a result but they refuse to take responsibility for what they have done. I can't understand how you see this as a victory.
The Malaysian Bank Negara lost US$4bn of their international reserves speculating unsuccessfully on the long side of the pound in 1992 when the UK was forced out of the ERM exchange rate mechanism. The same year Soros read the situation correctly and made US$1bn shorting the pound. Later on your hero Mahathir started drivelling about jewish conspiracies to bring down Asian currencies. But it was somehow OK for him to approve speculation on developed countries' currencies by his incompetent traders at Bank Negara. |
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