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Private sector organisations unite to plead for solution to Thai political crisis
Publication Date : 03-12-2013
As protests begin to be marred by violence, representatives of the private sector have united to voice concerns on the negative consequences on the nation and the economy from political conflicts.
Seven business organisations yesterday issued a joint statement calling for all parties to seek peaceful and democratic solutions, fearing that violence could deepen social divisions and have long-term impacts on the economy. Moody's Investors Service also issued a statement yesterday, warning against negative impacts on the 2014 economic outlook.
A number of business events were postponed as protests continued in many parts of Bangkok.
Though closing 3.13 points higher to 1,374.26 points, the Stock Exchange of Thailand has been under pressure from foreigners selling stocks. Foreigners' sells yesterday outpaced purchases by 6.38 billion baht (US$198 million), boosting the year-to-date net-sell figure to 159.7 billion baht ($5 billion).
Because of foreign-capital outflows, the baht continued its slump, which has been aggravated by local political developments, depreciating past 32 per US dollar.
Isara Vongkusolkit, chairman of the Thai Chamber of Commerce and the Board of Trade of Thailand, making up one of the seven business organisations present at yesterday's meeting, said the political conflict was beginning to take a toll on the economy.
"There will be an election, but before that all conflicts must be addressed to prevent a recurrence of political mishaps and allow the country to move forward," he said.
Also convening yesterday were the Federation of Thai Industries, the Thai Bankers Association, the Tourism Council of Thailand, the Federation of Capital Market Organisations, the SET and the Listed Companies Association.
They jointly demanded that the conflicts be solved through negotiation and that no party should resort to violence or any illegal or undemocratic action. They also promised support for all parties that initiate a negotiation process. They vowed to take part in the process for the sake of the nation to find a lawful and righteous solution, in cooperation with other parties such as educational institutes, the media and all respectable individuals.
The most prominent effect of the chaos can be seen in the major decrease in investor confidence, which in turn led to a decrease in demand and investment from other countries. Orders have been postponed to next year, and investors who had planned to hold business meetings here have gone elsewhere. Purchasing power of industries has also declined, along with the amount of materials needed for production. "The fourth quarter should be a good time for business, but no new contracts are signed and some buyers shift focus to manufacturers in other countries to ensure that their orders would be completed and delivered," said FTI chairman Payungsak Chartsutipol. "Without trust, this could spell disaster for the first quarter."
Paiboon Narintarangkul, chairman of the Federation of Thai Capital Market Organisations, said foreign investors' confidence in Thailand had declined, and this could worsen. "Now we don't have a budget to spend because we are fighting one another and nobody want to invest with us," he said. Bangkok Bank senior executive vice president Charnsak Fuangfu said falling economic growth as a result of political conflicts would affect loan demand. He has already noticed a drop in lending growth in the current quarter.
In its statement, Moody's warned that the protests would likely undermine investor confidence and detract from an already fragile economic growth outlook for 2014. Although protests have mostly been peaceful, prolonged or escalating demonstrations will adversely affect foreign investment and tourism, and exacerbate delays in public infrastructure investment, which will weigh on Thailand's growth next year and beyond.
Thailand's growth momentum is also slowing: Third-quarter real growth in gross domestic policy declined to 2.7 per cent year on year from 5.4 per cent in the first quarter. This contrasts with South Korea, Malaysia and Singapore, which all reported stronger third-quarter annualised growth rates.
"Although slowing growth also reflects the strong base effects of a growth rebound in first-half 2012, as a result of post-flood reconstruction and government stimulus measures, we also see indications of underlying structural weaknesses, with weak export growth in key manufacturing sectors, such as automotive, electronics, and agro-manufacturing," Moody's said.
"Overall, export growth for the 10 months through October was stagnant and momentum lags that of other open economies in the region."