Chambers anxious

Economy May 12, 2014 00:00

By Erich Parpart

The Nation

4,208 Viewed

Foreign chambers and business associations are afraid that a failure to form a fully-functioning government by the end of the year will lead to missed opportunities and a drought of new investment, but most still believe in the country's potential.

Stanley Kang, chairman of the Joint Foreign Chambers of Commerce in Thailand, said last week that existing foreign businesses and investors will continue to be active without any significant hiccup, but plans for new investment and expansion would be put on the shelf until a permanent government is installed.

"The absence of a functioning government will create uncertainty for new investment, as investors cannot see the government’s vision and plans for the future," he said.

Rolf-Dieter Daniel, president of the European Asean Business Centre, said the latest development on the political scene is nothing new and there would be no changes in the short term, as there is no escalation of violence.

However, business sentiment could have been more buoyant if there were stimulus from a functioning government.

"The development is as expected and there is nothing new. In the short term, there are no changes but in the middle to long term, Thailand is likely to fall behind its main competitors if the situation continues to be prolonged, especially in terms of signing the new free trade agreement (FTA) with the European Union," he said.

Vietnam and Indonesia are pushing hard for an FTA and Thailand is at risk of missing out on the action. The new government should push for the FTA deal as soon as it can if the country does not want to lag behind its competitors in this aspect, he said.

Darren Buckley, president of the American Chamber of Commerce, said the prolonged absence of a permanent government is a negative for business sentiment and investment, as it creates uncertainty.

If the situation continues to the end of the year, the country will face the risk of being marginalised by its competitors.

"It will be a significant loss of opportunity for the country if the political uncertainty continues to marginalise Thailand’s competitiveness because both local and foreign investors need to have confidence when doing business," he said.

Thailand’s chances of being overlooked by investors can harm the long-term prospects of the country because foreign investors will begin to look elsewhere in the region where there is more stability if there is no end in sight to the current political impasse.

Kang also said the lack of a permanent government is bad for Thai businesses as manifested by the decline in applications for Board of Investment privileges, which was relatively high before the start of the political turmoil.

However, the economy is still resilient and its basic financial structure is sound. Foreign investors will not go anywhere any time soon, as Thailand’s long-term potential is apparent.

The best way to bring investment opportunities back is for a new election to take place as soon as possible so that a new government can be inducted in the near future.

All sides should search for a peaceful solution to the conflict. It is the job of politicians to negotiate and find a solution that will serve the best interests of the country.

"Foreign investors understand what is going on in Thailand and they know that each side has its own rationale, but negotiation is the best way to end the current political impasse, not confrontation," he said.

Uli Kaiser, president of Thai-European Business Association, said that despite the political situation and the absence of a permanent government in the past six months, European business sentiment, investment and production in the Kingdom have continued and are even increasing in some industries, such as Volkswagen’s commitment to participate in phase II of the eco-car programme.

The latest development did not necessarily heighten any tension on the political front and overall investment trends have not come to a stop, as important non-political functions such as the BOI are prepared to continue supporting foreign direct investment through the approval of new projects.

"I am confident in the positive business sentiment of Europeans, as many investors who come are looking to invest in the private sector, not in the government’s mega-projects that are currently ‘on hold’," he said.

A renewed and working government will provide additional support for the investment environment through public spending. However, in the meantime, Thailand’s private sector is still offering significant opportunity for the midterm. The fundamentals haven’t changed.

There is no doubt that the country will continue to be fully functioning in terms of private investment and manufacturing. Foreign investors will continue to have a keen interest in Thailand’s business potential, especially in the automobile, oil and gas, information and communications technology, and construction industries, which continue to be unfazed by the political situation, he added.