There is growing concern among foreign investors about local politics now than in the past few years, said Supavud Saicheau, managing director of Phatra Securities Plc.

Political factors such as the sale of Shin Corporation, which is tied to Prime Minister Thaksin Shinawatra’s family, are among the top issues foreigners are closely monitoring, he said.

Their perceptions could easily affect their decisions to invest here, he said.

Supavud, who also heads Phatra’s research division, said his company believed that the Shin Corp sale to Singapore’s Temasek Holdings was a defensive move by Thaksin.

At the same time, it might also indicate that Thaksin intends to stay at the forefront of local politics over the long term.

Signs of weakness in the government could prompt factions in the ruling coalition to demand concessions from Thai Rak Thai Party, he said.

This could trigger a Cabinet reshuffle soon, Supavud said.

Unrest in the South remains a challenge for government and poses a risk factor for investors.

Although violence continues, the problem appears contained. At the same time, relations with Malaysia appear to have improved. Forging a Thai-Malaysian tie-up is seen as beneficial in the fight against the insurgency. Foreign investors see a few issues as hindering some economic policies which may be postponed, Supavud said.

Today, public opinion about the government includes concerns about charges of corruption, lack of transparency and cronyism, he said.

He said many overseas investors were likely to return to the Thai market after a marked exodus following the 1997 financial crisis.

According to Supavud, net private capital inflows during 1994-1996 were logged at US$51.1 billion (Bt1,998) – representing 10.3 per cent of GDP.

The figure shrank to negative $36.6 billion, or 10.1 per cent of GDP during the 1997-1999 period, before recording a negative-$28.4-billion (4.2 per cent of GDP) between 2000 and 2004.

He said Thai economic growth this year will be driven by state and private investments.

He said private investment would grow 10.5 per cent year-on-year, while state investment was likely to grow by 15 per cent.

Consumption and exports are likely to contribute to a GDP-growth of 4.5 per cent this year.

The Bank of Thailand is expected to raise its policy rate between January and April this year. It already did once this month. This should increase the 14-day repurchase rate from the current 4.25 per cent to at least 4.75 per cent, he said.

Somruedi Banchongduang
The Nation