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Foreign investors highly concerned over Thailand's political tension
Publication Date : 10-08-2013
The Pheu Thai-led government pushed the controversial amnesty bill through its first reading in the House of Representatives on Thursday, raising the spectre of a renewed political confrontation between government supporters and their opponents inside Parliament and possibly on the streets.
Nandor von der Luehe, chairman of the Joint Foreign Chambers of Commerce in Thailand, said: "Political tension is always negative [for business and industry]. We had the Internal Security Act in the South [as well as in three districts of Bangkok from August 1-10]. All these are negative news going out from Thailand.
"Travel advisories from embassies are out. When you go to the American Embassy's website, there is a warning on Thailand that again we have political tension and that American citizens should be careful [while in Thailand].
"If something [worse] happens, it will affect foreign investors' confidence in Thailand. They may not come here any more but will move to other countries in the Asean Economic Community.
"These foreign direct investments are rather different from stock and portfolio investors who can move their funds in or out of the country relatively quickly. FDIs [such as setting up factories in Thailand] are much more long-term, so political stability is much more important.
"At this stage, it's too early to say if the latest round of political tension will have any impact on FDIs yet, but we have to monitor the situation closely and see if it will get out of hand.
"The moment that we see some clashes and people are fighting on the streets, that will be very negative.
"Companies which are already in Thailand may know how to handle the political upheaval better than those who are new investors, which are more like those in the small and medium size. They are probably more cautious and Thailand may lose out."
Ben Montgomery, executive member of Thailand's Tourism Council, said: "The political tension [resulting from the ruling party's attempt to pass the controversial amnesty bill into law] has not hit the hotel and tourism industries in terms of booking cancellation yet.
"However, we have to ensure that the tension does not escalate and get out of control. If foreign governments issue travel advisories for their citizens, that will impact visitors coming to Thailand. When there are travel warnings, it means insurance companies will pay not compensation" if there are claims from policyholders while travelling.
"When there is no insurance coverage, travel agencies will not book for their clients.
"The tourism and related sectors wish the country's political situation continues to be stable as in the first half of this year when foreign tourist arrivals rose 17 per cent year on year. We hope the whole-year arrivals will top 22 million. Tourism and related businesses now generate over 4 per cent of Thailand's GDP.
"We want the government to ensure that there is no violence on the streets and the situation is under control. These days, tourists and other visitors make decisions relatively quickly whether they will come here or not due to the speed of information.
"In the older days, people planned their travel three to six months in advance, but today it usually takes only two or three weeks [to plan] a trip.
On the other hand, cancellations are also relatively easy, especially when there is news and information on potential unrest."
Paul Gambles, managing partner of financial services MBMG Group, said: "We've seen net foreign fund outflows during the course of this year, but that has more to do with what's happening in the global economy and in the region and the US policy," not the political situation in Thailand.
"Thailand's capital flows have not behaved differently from most of the countries in the region."