[Tlc] T-politics

[justinm at ucr.edu]

Forwarded from Al Valentine.
Thanks,
justin

This article brings up a very good point. 

For those of us who've spent time in the RP, we don't want to see Thailand follow that model.

Al

http://www.bangkokpost.com/business/economics/14840/political-chaos-to-mar-thai-growth
Political chaos to mar Thai growth

Future could echo '70sand '80s Philippines
    Published: 10/04/2009 at 12:00 AM
    Newspaper section: Business

Political instability could take a significant toll on Thailand's medium-term economic growth prospects, warns James McCormack, head of Asia-Pacific sovereign ratings for Fitch Ratings.
‘‘I don’t believe that we have had a resolution of the underlying problems. And when we think about the future, lots of bad scenarios come to mind James McCormack Fitch Ratings
While the Abhisit Vejjajiva government has stabilised the country to some extent, the underlying political tensions that have divided Thailand over recent years remain.
"I don't believe that we have had a resolution of the underlying problems. And when we think about the future, lots of bad scenarios come to mind," Mr McCormack said.
Fitch currently assigns Thailand a BBB+ sovereign credit rating. The kingdom's ratings outlook was revised down to negative last December, after protesters from the People's Alliance for Democracy closed Bangkok's international airport in a bid to oust the Somchai Wongsawat administration.
Currently, Thailand is one of eight Asian countries with a negative ratings outlook, an unprecedented number for Fitch, which reflects the impact the global economic crisis has had on the region. But Mr McCormack suggested that Thailand's biggest risk factor was politics and social strife, not economic fundamentals.
"Thailand's credit fundamentals remain strong. But it's probably a place where country risk and credit risk are quite different. Thailand's country risk is certainly a bigger issue than whether the sovereign can repay its debt in time," he said.
Only five months after the PAD rallies Bangkok's streets are once again filled with protesters. This time it is the red shirted supporters of former premier Thaksin Shinawatra, who are demanding the resignation of the Abhisit government, and new elections under the 1997 constitution.
Mr McCormack said that while Thailand's political landscape had been messy for the past three years, the risk was that the ongoing turmoil would leave lasting scars on the country's economy and foreign-investor sentiment.
"Certainly the political disruption has affected the economy in recent years, in the form of weak domestic investment and consumption," he said.
"The major concern is that Thailand will slip into a lower growth trajectory, with particularly lower foreign domestic investment, weaker exports and even weaker public finance."
While Thailand's economic fundamentals remain sound - with low public debt, a healthy external balance, and a solid financial system - the growing concern was that the political paralysis could undermine policymaking and implementation to the detriment of future growth.
This could push Thailand into a scenario akin to the Philippines during the Ferdinand Marcos regime of the 1970s and 1980s, when growth was stunted due to short-sighted policymaking and weak investment.
"If you look at the Philippines, low private investment has had the consequence of the country having the lowest per capita income growth in Asia," Mr McCormack said.
"Part of it came from a lack of public investment, leading to a lack of private investment. And what is Thailand facing today? A lack of public investment."
Thai policymakers recognise the importance of increasing investment, not only to help stimulate the flagging economy today but also pave the way for future growth. The government has announced plans to invest over 1.5 trillion baht over the next several years in basic infrastructure projects to develop mass transit, logistics, energy and water management programmes.
But Mr McCormack cautioned that while Thailand's fiscal and monetary policies had responded appropriately to the current global crisis, the likelihood that implementation would fall short of targets remained a risk.
Thailand and other Asian economies faced a similar predicament, he said.
"Exports are struggling here as elsewhere. But I'm sceptical of the ability to implement these megaprojects for Thailand and the region to push forward with fiscal stimulus," he said.
"Across Asia, you see small governments and large export sectors. It's difficult to implement large stimulus programmes. You are doing the right thing [to spend] to mitigate the downturn, but you cannot turn it around."
Fitch currently projects a 3.8% contraction for the Thai economy this year, slightly more pessimistic than the 3% decline forecast by the Finance Ministry.
Mr McCormack said other open, Asian economies would face similar declines in output as the global crisis has affected demand for exports.
"The lesson of the 1997 Asian crisis was the danger of overdependence on external demand," he said.
"But now, if you look at the components of GDP for the region, and compare pre-1997 and 2008, Asia now depends more, not less, on exports."


______________
Dr. Justin McDaniel
Dept. of Religious Studies
3046 INTN
University of California, Riverside
Riverside, CA 92521
951-827-4530
justinm at ucr.edu