Foreign investors, skittish of political unrest, need to be lured back to ensure Thailand can progress
The international community is closely watching political and economic trends in Thailand, a country governed by the National Council for Peace and Order-backed government of Prime Minister Prayut Chan-o-cha for the past four years.
Prayut yesterday presented his fifth annual budget proposal, worth Bt3 trillion, to the National Legislative Assembly for the 2019 fiscal year beginning on October 1. Budget-wise, the outlook remains reasonable, with a deficit of Bt450 billion to be covered by state borrowings since tax and other revenues will fall short of the expenditure bill.
Economically, a major challenge has long been a relatively small budget for investment, as nearly 80 per cent of the Bt3 trillion is earmarked for fixed expenditures such as salaries of government employees, leaving a meagre amount for state investment to drive economic growth.
However, the government has been dependent on the private sector – both domestic and international investors – to play the leading role, especially in the Eastern Economic Corridor (EEC) mega-infrastructure and investment programme.
The EEC, which covers parts of Chon Buri, Rayong and Chachoengsao, is designed to propel the country’s economic growth over the next several decades, with a focus on a new generation of industries and enterprises that use digital and other technologies.
Overall, the EEC programme is expected to attract a massive investment – around Bt1.7 trillion – the majority of which coming from private investors. Among the key components of this programme are a high-speed railway linking Suvarnabhumi, Don Mueang and U-tapao international airports, as well as the expansion of Laem Chabang and Map Ta Phut seaports.
Hence, the role of private investors is crucial to the success of this programme, which is also aimed at positioning Thailand as a transportation, industrial and business hub of mainland Southeast Asia, covering Myanmar, Laos, Cambodia and Vietnam.
The timing is good for foreigners to ponder new investment schemes in this country after more than a decade of insufficient private interest due to political upheaval and other unfavourable factors.
According to the National Economic and Social Development Board, the Thai economy has been on a solid recovery path in the past four years since the political chaos was choked off by the coup. This is evidenced by GDP growth in the first quarter of 2018 of a strong 4.8 per cent, beating most analysts’ forecast of just 4-per-cent growth.
In other words, strong export earnings, tourist arrivals, domestic demand and fiscal activities have contributed to better growth performance, even though the distribution of wealth remains uneven. Consumer confidence has increased, as reflected by higher spending on durable products, while private investments also rebounded with an increase in capital goods and machinery imports. In terms of capital flow, the outlook is manageable, with some outflow of funds due to sales of Thai bonds and stocks.
Politically, it is more challenging. On May 22, the Prayut government completed its fourth year in office. Major Western countries initially broke off engagement with Thailand in the wake of the 2014 coup. The international community is now closely watching the country’s efforts to return to the democratic path in a general election. Organic laws on MP election have been approved and other preparatory work is underway, so there is cautious optimism that the polls will take place early next year.
Any further delay in the election schedule would bode ill for the country. It would be seen as a downside risk by international investors, whose confidence is crucial to the Thai economy.