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Political turmoil affecting Thailand's global position

Publication Date : 14-12-2013

 

The Federation of Thai Industries (FTI) has expressed concern over a possible reduction of purchase orders from the manufacturing sector because of the prolonged political protests, expecting impacts to be seen in the second quarter of 2014.

Meanwhile PTT Production and Exploration (PTTEP) has suggested that the private sector fortify itself against political fluctuations and uncertainty, partly by expanding outside the country and capitalising on growth elsewhere.

Speaking at a seminar on "2014: Thailand's Direction in the World", FTI chairman Payungsak Chartsutipol said he was concerned about the political situation, for which there was still no certain resolution in sight, as Thailand was highly connected with the global economy.

Exports contribute about 60-70 per cent of the country's gross domestic product. If foreign customers view Thailand as being in constant turmoil, their confidence will lessen, fearing that manufacturers here will not be able to produce products as ordered.

The political situation is expected to affect the Thai economy adversely from now through the second quarter of 2014 despite brighter prospects for the global economy, Payungsak said. The World Bank has raised its estimate for global GDP growth next year on the back of signs of a US recovery and China's estimate for its growth at 7.3 per cent.

If Thailand manages to stabilise its political situation, its GDP is expected to expand by 5 per cent next year, around the same as neighbouring countries.

Tevin Vongvanich, PTTEP's president and chief executive officer, said that despite signs of a global economic recovery in 2014, there remained several uncertainties. The Thai private sector needed to be ready for a possible delay in public investments due to political risks, which would likely slow the economy.

Still, given the likelihood of a healthier global economy, Thai companies could expand their investment in foreign countries where business is likely to see high growth, he said.

Private corporations may take this opportunity to strengthen their competitiveness by developing their human resources and information technology, improving internal organisational transparency, and paying more attention to stakeholders through marketing and corporate-social-responsibility activities.

Meanwhile, the European Asean Business Centre (EABC) lamented the dissolution of Parliament, saying this would disrupt negotiations on a free-trade agreement between Thailand and the European Union.

"The timing of the dissolution of Parliament is not ideal for Thailand, as the Thai-EU Free Trade Agreement is currently being negotiated," the EABC said in a statement. "Considering the economic situation in Thailand, with low growth, it would be extremely beneficial for the Thai economy if this FTA could be concluded quickly, since this will benefit Thailand greatly and jump-start the economy.

"Thailand is losing precious time and may even fall behind [its] Asean peers, some of which are also in FTA negotiations with the EU," the statement said.

Noting that European corporations have considerable investments in this country, the EABC wished to see Thailand grow stronger and take opportunities to become an economic hub within Asean.

"This may be at stake with the ongoing demonstrations and the call for an appointed government," it said.

It added that while those companies that had operated in Thailand for a long time might understand the underlying political factors, outsiders viewing media coverage of the conflict on a daily basis would certainly be discouraged about investing in this country, or would at least postpone their investment projects. Therefore, the political crisis comes at an inopportune time.

 

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