Guest Posted March 23, 2003 Report Share Posted March 23, 2003 Cutting through all of the rhetoric, Gadfly does raise a very interesting question which no one has been able to answer: what will fuel Thailand's growth in the future now that the consumer credit and government spending spree has ended? I haven't had a business trip here in ages; I here on r & r now (right when the U.S. decides to invade Iraq), which gives you a hint about my judgment on timing. In other words, no predictions from me on the timing of any currency changes. But the fact that I haven't been able to find a business excuse to make my way over here does say something about the investment climate here. Or my business acumen. Gadfly has raised a perfectly good question, and one we in the invesetment community all ponder over in Hong Kong. The current government started off strongly and visibly anti-foreign investment, and that has not been forgotten. Policies are perceived to have changed in an anti-foreign fashion. I have seen plenty of interest in China, but since the regime change in Thailand of about two years ago, I haven't seen any serious interest in Thailand. Gummigut raises a good point about the possibility of problems in China making Thailand more attractive again. No comments on timing from me, but I personally see China as a big bubble that will burst in the not so distant future. But short of that, Thailand's future is a big question mark. A note to Gadfly and gummigut on the "security" and "securitization" argument. First, Gadfly, I bet 99% of the people here don't know or care to know the difference. You are right; they are totally different things, and it is embarassing for a financial expert to make that kind of mistake - perhaps that is why gummigut is responding to your other, more relevant points, in the way he is. Loss of face. gummigut, let it drop. Remember, 99% of the people here don't know the difference, but you are losing credibility with the 1 % who do. Even experts make mistakes; no big deal - just move on. Who knows what will happen in the future, but Thailand does seem to have painted itself into a corner. Perhaps there will be a pro investor policy change - who knows? - but the question about where the growth will come from is the right one. Link to comment Share on other sites More sharing options...
Guest Posted March 23, 2003 Report Share Posted March 23, 2003 OK, I will stop picking on gummigut for confusing security with securitization (we all make mistakes), and I will go one step further and compliment him on identifying something that had not occurred to me: China. What happens when the China bubble bursts? When you look at the current growth projections and the measures used last year to stimulate growth (consumer credit and government stimulus spending), and then consider the current government?s anti foreign investment stance, it makes perfect sense to ask serious questions about Thailand?s economic future in the near term. It is not like asking about you'll have for lunch a year from now. And the predicted growth figures are not impressive for a developing country. For a developed country such as the U.S. those would be impressive numbers, but for a country at Thailand's level of development the growth figures are anemic. Some here have tried to suggest that 3-4% growth figures paint a rosy picture for Thailand, but when an economist says a country like Thailand can expect growth in that range, he is not saying the economy is in fine shape - just the opposite. This is pretty basic stuff. Dismissing this question the altogether with the lottery analogy and then throwing in an Ad Hominem attack (?Chances are you probably know, but you can hit the lottery. If you bothered to do some thinking??) begs the question and confuses the issue. I won?t raise to the bait on the Ad Hominem slight (?if you bothered to do some thinking?) because that will only confuse matters further and divert attention from a more interesting aspect of gummigut?s ?but you can hit the lottery? comment. It mirrors a solution that was - and this is truly incredible - actually put forward a few years back: remember the incident when a Thai senator supposedly found gold and old U.S. bonds in the hills of Kanchanburi and the government seriously claimed that this found treasure was the solution to Thailand?s economic future. The lottery approach to economic development. Amazing Thailand. I love it. Well I ?bothered to do some thinking? about the quality of discussion when I see comments like ?you can hit the lottery? in response to my question about the future of Thailand?s economy. And seeing that it has reached that level, I think I will take William Ginzer?s suggestion and just move on? Link to comment Share on other sites More sharing options...
Guest Posted March 23, 2003 Report Share Posted March 23, 2003 Hi Gadfly: If I may butt in again... > "certain economic policies of the Thai government ... likely lead to an increase in the > supply of baht," they are also likely to lead to a decrease in demand for Baht. Can you be more specific? I?m trying to teach myself some macroeconomics here and I get very confused. Can you draw me a link between specific government policies and they lead to these currency supply/demand changes? > By implementing policies that are, at best ambivalent, and, at worst, hostile to foreign investment, the Thai government discourages foreign investment in Thailand. That?s true. Which policies do you mean? > To put it in concrete terms, if a foreign investors intends to build a factory here, he?ll need to buy Baht to pay for the concrete Good one, that?s funny! ?concrete terms? and ?pay for concrete? 555! > But if foreign investment is dampened because of policies designed ?to prevent foreigners from taking over the country? Definitely ? but which policies are these? > where is the economic growth for Thailand going to come from in the future? I gave you one ?official? answer in my last post to you. Since you missed it, here it is again: ?As for where growth will come from, the NESDB's Chairman, "Mr Chakramon said the 4-5% growth forecast this year was based on an upward trend in private consumption, expansion of export volumes in the first two months of this year, and an increase in farm product prices" Further, "investment in the construction sector is still expanding strongly, due to low interest rates and the increase in government housing projects." and "Mr Chakramon said positive factors for the Thai economy included low interest rates which would help spur private consumption and investment." (BK Post) Whether you believe it or not, that's another story, but there?s your answer. > We have been distracted from that question Not me. See above. > pause for a moment and think about that question: where is the growth here going to come from in the future? OK. >pause< see above. > Do you see an answer to that question anywhere above? Yes. See above. > Many of you live here, and you know how ambivalent the current attitude is about foreign investment I live here, and I don?t know that. The PM gets crap for spending too much time wooing foreign businesses; Somkid just got back from a global road show touting Thailand as an ivnestmetn destination. Sompong, the Sec Gen of the BOI, has increased his targets for FDI. You need quotes on this stuff? Do search under ?foreign investment? in the BKPost or Nation sites. You may or may not believe the rhetoric, but if you don?t I?d like to see your rationale. > - an alien business law that prohibits foreigners from owning many types of businesses That?s not ?current?, that law?s decades old. Didn?t seem to hurt the steady stream of FDI over the past 30 years or so. > proposed additional restrictions on work permits I?m sorry, what are the ?additional? restrictions? > an outright prohibition on foreign ownership of land Also very old; what?s ?current? about this? > do you really believe increased foreign investment is a plausible source of future growth? Japan?s external trade office, JETRO, surveyed 300 Japanese companies in 2001 (remember Japan is the largest investor in Thailand), and Thailand was the #3 destination for investment for companies planning to make investments in the next 8 years. The World Bank?s Multilateral Investment Guaranty Division (MIGA) which insures foreign investment does an annual survey of global investors; in 2002, Thailand placed 17th in global attractiveness, with over 20% of companies with near-term expansion plans placing Thailand as a possiblity. So, overall, yeah, I?d say foreign investment is a plausible source of future growth. > the U.S. is opent door - it has an average tariff rate in the 2-3% range while Thailand?s average rate is around 17% and rising. Thailand has a shitty tarriff system, that?s for sure, but I wouldn?t go holding up the US as a prime example; we?ve got pork aplenty doled out to farmers, steel mills, and all sorts of others. All that needs to change. > Are they going to allow the opening up that is necessary to increase foreign investment? Sorry, what exactly do you want ?them? to do again? > Again, because it cannot be repeated enough: where is the growth here in Thailand going to come from in the future? Anyone have a plausible answer? Ummm?yeah. See above. Cheers, Link to comment Share on other sites More sharing options...
Guest Posted March 23, 2003 Report Share Posted March 23, 2003 Hi William: Hope you don't mind my 2 satang here... > The current government started off strongly and visibly anti-foreign investment, and that has not been forgotten. Policies are perceived to have changed in an anti-foreign fashion. That?s not entirely accurate. Deputy Minister (and ex-Finance Minister) Somkid?s road show in Europe and the US was warmly received. The new sovereign debt issue is getting good ratings and a low yield. Every international i-bank, multilateral organization, and other financial instution I know is calling for increased growth. By and large, investors are putting Thaksin?s nationalistic bombast through a ?Mahathir filter? ? scream and shout about the evil foreigners to the home crowd, but be nice to them because you know you need them. With one of the highest performing stockmarkets in the world, it?s hard for outsiders not to take an interest, especially when investors are getting hammered just about everywhere else. > I have seen plenty of interest in China, but since the regime change in Thailand of about two years ago, I haven't seen any serious interest in Thailand. IFC and Calpers set up a fund a few years ago; so did Cerebus. FDI took a drop last year, but that?s true for most of the world. Thai investments are often too small for big international PE funds; the market is too small for i-banks to put dedicated analysts on it ? information is scarce so even if there was interest, there?s not that much you can do about it. But recently, with the growth and stock appreciation over the last 2 years, people are paying more attention. This time, they?re much more cautious, and then you get into the market size and information deficit problem again. Personally, I think there?s a business to be made here in finding good solid Thai companies and hooking them up with international investors looking for a good deal but unable to do all the research; that?s basically what I do, so I?m putting my money where my mouth is ? if I?m right I?ll make money, if not, I?ll go bust; we?ll see in a few years! > I personally see China as a big bubble that will burst in the not so distant future. Me too ? but realistically, that could be in 10 or 20 years. Big equity investments don?t usually have those kind of lifespans, espcially in developing markets. > But short of that, Thailand's future is a big question mark. Sure, a question mark ? but certainly not a write-off! Cheers, Link to comment Share on other sites More sharing options...
gummigut Posted March 23, 2003 Report Share Posted March 23, 2003 "and it is embarassing for a financial expert to make that kind of mistake - perhaps that is why gummigut is responding to your other, more relevant points" Okay, color me stupid, cause I would like someone to please point out where I confused the issue. Oh, and number two, I have repeatedly said I'm financially stupid. I just said it again. Gadfly assumed I used securitization as an argument against his assertion that there is no personal security law thus you can't do things like mortgage accounts receivables. Wrong. I used securitization in the fact that you CAN get money for your accounts receivables. I used the word in direct reply to Gadfly's assertion that "nothing remotely similar is possible" like you "can mortgage accounts receivables". In post dated, "16/03/2003." "99% of the people here don't know the difference, but you are losing credibility with the 1 % who do. Even experts make mistakes; no big deal." I admit my mistake when I make them eventhough I'm not an expert (lol). I've even apologized when appropriate. Quite frankly, you guys haven't pointed out to me where I made the mistake whereas I pointed out how I've used the word, and in what context, several times now. Considering the fact that I haven't made a mistake, how can I be losing credibility. Regards to other points: "But the fact that I haven't been able to find a business excuse to make my way over here does say something about the investment climate here." Or it says something about the business climate about where you are: Hong Kong. They've got a bigger fight on their hands against the Chinese and their policies. Sure the HK investor would look to Thailand if it can help them in their current situation, but I'd figure that bridging China's cheap labor costs and growth market with the rest of the world would be more appropriate than trying to leverage higher labor costs in Thailand. I don't envy the HK investment community at all as the Chinese are not setting a level playing ground for the HK people. "I haven't seen any serious interest in Thailand" Okay, what about two companies raising about a half a billion US for investment in Thailand? Or Honda (and I forgot the other dang japanese company) consolidating or boosting certain motorcycle plants? While I don't doubt that in the investor community you run in, there hasn't been serious interest, but if it's in Hong Kong, they probably have other better opportunities closer to home across the water. Think more information is needed to really make your argument that there is no serious investor interest in Thailand. Gadfly, no one has ever suggested that 3-4% growth figures paint a rosy picture for Thailand. That's you ASSuMEing. You are the one who is saying there is going to be a major FX swing in 2003 because, all things being equal, there is no economic growth. 3-4% growth is not great, but what's the world's GDP growth? All things being equal, the world's GDP growth would have to be leaps and bounds higher than Thailand's to effect a major FX swing as you predict. Using your words, "This is pretty basic stuff." "Well I ?bothered to do some thinking? " I'd actually argue against this. You are still parroting others. This whole argument has grown out of one of timing. Which you still haven't adequately defenced. You then morphed it into, "it makes perfect sense to ask serious questions about Thailand?s economic future in the near term" when you couldn't adequately defend my points. This would be a good question but you demonstrate your lack of familiarity with the topic by staying stuff like like the "current attitude is about foreign investment" 1) "an alien business law that prohibits foreigners from owning many types of businesses" 2) "proposed additional restrictions on work permits" 3) "an outright prohibition on foreign ownership of land" You then wrap it all up with, "do you really believe increased foreign investment is a plausible source of future growth?" This stuff about foreign investment AIN'T CURRENT. Thailand has seen foreign investment AS a source of growth in the past given these "current" attitude points you make.. You are parroting others. Sounds smart but looks stupid when you actually examine the issue. Living here you either begin to believe all this parroting or you learn to discern the good pieces of information from the crap and you get depressed. Given the fact that your whole argument is based on a fallacy of "current conditions" (which I'll grant you as valid if you can tell me how these "current" conditions are different than the previous couple of decades) I'd have to side on the fact that you are not thinking at all. It's not an ad hominum (sp?) attack, but just a logical conclusion as you continue to base your question on false assertions. <<burp>> Link to comment Share on other sites More sharing options...
Guest Posted March 23, 2003 Report Share Posted March 23, 2003 That?s not entirely accurate. Deputy Minister (and ex-Finance Minister) Somkid?s road show in Europe and the US was warmly received. Is that what they are saying in Thailand? Interesting. I was in the audience during one of his talks in the U.S., and although the reception was polite (it always is), the audience was extremely skeptical. It wasn't a success. With one of the highest performing stockmarkets in the world, it?s hard for outsiders not to take an interest, Huh??? The SET was at 363.22 as of Friday and down; a few years ago everyone was getting excited at the prospect of it possibly remaining above 400. It hasn't. When I lived in Thailand before the crash it was around 1500 and higher. By comparison the NASDAQ and Dow are up. Am I missing something here? FDI took a drop last year, but that?s true for most of the world. ... But recently, with the growth and stock appreciation over the last 2 years, people are paying more attention. The Wall Street Journal reports that FDI in Thailand last year was at its lowest since 1970. Sure FDI is down generally, but Thailand seems to be setting records. Personally, I think there?s a business to be made here in finding good solid Thai companies and hooking them up with international investors looking for a good deal but unable to do all the research; that?s basically what I do, so I?m putting my money where my mouth is ? if I?m right I?ll make money, if not, I?ll go bust; we?ll see in a few years! Good for you for disclosing your self interest in the matter; I can understand why you would want to see things in a positive light. I wish I could too, but I don't, and I know the rest of the investment community here shares that view. But things could change. I spoke with a lawyer friend of mine here who stayed after the crash (I went back to Hong Kong.) He says that it is now nearly impossible to get a license to operate any business restricted under the Alien Business Law (why does Thailand even have such a law if it wants foreign investment?), that the companies grandfathered in before the new law with Alien Business Law licenses are facing new "regulations" on minimum capitalization requirements that are making it difficult for them to continue to operate (they are getting squeezed out) and that although there is alot of spin on being friendly to foriegn investors (they call it dual track), the opposite has been true since TRT came into government. On the positive side, he said that he has seen signs of things loosening up over the last 12 months. He thinks the shock over the unprecedented decrease in FDI has caused a major rethink in policies, but he thinks there are groups within the government that don't care about economics - for them it is a simplistic issue of national pride and they just don't want foreign investment no matter the cost (we see that in the U.S too - Pat Buchanan, but he is not in power.) And the there is the corruption problem, which does not seem to have improved and according to Transparency International got slightly worse. I was also at a small American Chamber of Commerce function recently, and everyone there said the same thing. I guess, on balance, there have been a few positive signs over the past 12 months, but the overall picture seems a bit grim to me. Anyway, I hope you are right and I am wrong. I want to see Thailand prosper and I want an excuse to start coming back here on business. Link to comment Share on other sites More sharing options...
Guest Posted March 23, 2003 Report Share Posted March 23, 2003 gummigut, I don't want to jump into your security vs. securitization argument with Gadfly, but I think you are missing a fundamental point. I used securitization in the fact that you CAN get money for your accounts receivables. I used the word in direct reply to Gadfly's assertion that "nothing remotely similar is possible" like you "can mortgage accounts receivables". Securitization occurs when you transfer assets to a bankruptcy remote vehicle, and then issue equity in that vehicle. In effect, you are turning an asset into a security. And by "security", I don't mean a mortgage; I mean a form of equity. In other words, security (a mortgage) and securitization are two different things. Now if I am understanding you correctly, you are saying that even if they are two entirely different things, security and securitization are practically the same thing because they provide the same practical benefit. That is certainly a unique position. Further, on the practical level, I have seen no real securitization of assets in Thailand, but I will take your word for it that occurs with a few of the big companies (I think you said that above.) But that is the problem if you are claiming they are practical equivalents. Personal property security or mortgages (UCC-1s) are the primairy means of financing for small to medium size businesses. They primarily benefit small to medium size businesses. Although blue chips can use them, they rarely do. A UCC-1 allows a small to medium size businesses to mortgage receivables, inventory and equipment. I don't think there is anything like that in Thailand (is there?), and I think that is the point you missed. Your points about the perspective of someone from Hong Kong are well taken, but we do pay attention to Thailand. I have no idea what the f/x market is going to do this year, but I still see a big question mark over Thailand's prospects, and to me at least, that is the more interesting issue. Link to comment Share on other sites More sharing options...
JJsushi Posted March 23, 2003 Report Share Posted March 23, 2003 I am no financial expert but I am a paid professional in the financial field so I feel a litte qualified to comment on some terms. Security: 1. collateral offered by a debtor to a lender 2. instrument that denotes ownership, rights of ownership or a creditor relationship with a corporation, organization or governing body. Securitization: 1. packaging, combining or pooling like instruments into a negotiable security. I really cannot comment much on the whole Thai growth or baht value thingy and I don't put much faith in what analysts and economists write or say. You see everybody interprets data differently so economists opinions will vary across the board even though they view the same data. I have been around long enough to know that you take what economists say with a serious grain of salt. They usually are wrong regardless of which big bank they work for. The better well known ones are not gurus but usually good self promoters or promoted well by their employer or they predicted something correctly against the general consensus which instantly made them a star. I also don't give much credence to those that go around quoting and parrotng some large organizations' analyst or economist as if these guys cannot be wrong because they work at Goldman or HSBC. Many forget I think how these guys get paid. They don't get paid to be right about predicting a 5% growth in 4th quarter GNP, they get paid because they have influential networks of peers who work in governmental bodies and other market influential rganizations or they get paid to complemet revenue generation by fostering good relationships with asset managers who will listen to their opinions as as a result throw business to the bank in hard or soft dollars. I usually do my own analysis and you didn't have to be financially savvy to realize Thailand was going to crack in the mid-90's. I knew little about the country but I did see empty commercial buildings, unfinished construction and a plethora of brand new cars driving around Bangkok; a sure sign IMO of a fast money economy that will see it's recessionary cycle soon. I knew the American stock market was going to bust when a taxi cab driver in San Fran gave me stock tips in 1999, I started buying AA preferreds yielding 8.50%. You also have to remember the nonsense about valuing companies based on "mouse ckicks", "new economy" nonsense and "bricks and mortar" companies eventually being put out of business by virtual companies run by twenty-something year olds. Bottom line is to take the data provided, listen to a wide range of opinions from various people, do some of your own research and formulate your own opinion. To answer the age old question of "future growth" who in the hell knows where it will come from for any country? Sometimes it is spontaneous(internet fever), sometimes it is self fulfilling(if every Western corporation invests in China then China must be the place to invest in) and sometimes it is calculated(lower taxes, cut interest rates, etc). IMO Thailand will never rise above it's 1980-90's growth heyday until it decides to seriously invest in human capital by creating a world class educational system to the benefit of all of its citizens. Once a country is past the cheap labor stage in it's development, growth has to come from an educated populace that can create the growth with their minds. Link to comment Share on other sites More sharing options...
JJsushi Posted March 23, 2003 Report Share Posted March 23, 2003 Economists still suck in case anyone has forgotten my point! Outside of the FED I think Kaufman was the last econmomist that the markets listened to and actually made money from his predictions. Link to comment Share on other sites More sharing options...
Guest Posted March 23, 2003 Report Share Posted March 23, 2003 > Is that what they are saying in Thailand? From the Nation, 30 Jan 2003: ?Finance Minister Somkid Jatusripitak should be pleased with the success of his recently concluded trade mission to London and New York.? You may disagree, but that is indeed what they?re saying. > When I lived in Thailand before the crash it was around 1500 and higher. By comparison the NASDAQ and Dow are up. Am I missing something here? NASDAQ and Dow may be up this year, but with the amount of volatility they?ve shown, I don?t think people are making much of 1Q2003 results just yet. Results from Jan 2002-Feb2003: SET up 27%, S&P down 26%, FTSE down 20%, Dax down 36%, Hang Seng down 20% - the bad news goes on and on. Furthermore, consensus growth estimates for Thailand are hovering in the 4-5% range, with the most recent CLSA estimate up at 6.8%. That?s far more than anyone is predicting from anyG-7 economy any time soon. > The Wall Street Journal reports that FDI in Thailand last year was at its lowest > since 1970. Sure FDI is down generally, but Thailand seems to be setting records. I haven?t seen Thai declines vs. general declines so I can?t comment intelligently on the particulars. There are a number of issues going on here, such as FDI shifting to less capital intensive areas such as service sectors; but yes, there is concern that there might be something related to fundamental competitiveness going on. At the same time, exports are increasing and there is still spare capacity; personally I think there are problems on the horizon, but I don?t think they?ll really start hitting in a big way for another couple of years. > I can understand why you would want to see things in a positive light. I wish I could too, but I don't, and I know the rest of the investment community here shares that view. It?s hard to talk about the ?investment community? as a monolith. As I?ve posted, most major i-banks are projecting strong growth for Thailand in the near future. The problem is that it?s hard to find good deals here to capitalize on that, given the size of the market, plus the regular transparency and governance issues. We?ve had good discussions with a fair number of international funds that are keen to invest here, but need to find the right opportunities; we?re hoping to fill that gap. As for my being positive or negative ? honestly, I think it all depends on your time horizon. I would not put Thailand on a long-term buy and hold recommendation, particularly for reasons of political stability which we should not discuss on a board like this. OTOH, there are companies where which could really be solid with a little management change, and these are excellent investments, IMHO. I definitely wouldn?t put my money in the SET, or in the current crop of big caps in the SET; but there are gems here, if you know where to look and how to talk to people! > He says that it is now nearly impossible to get a license to operate any business restricted under the Alien Business Law Well ? they?re restricted businesses! There?s not that many of them actually; perhaps your lawyer friend is peeved because law is one of them? > (why does Thailand even have such a law if it wants foreign investment?) Because the law is about balancing competing interests, not just economic growth! > new "regulations" on minimum capitalization requirements I haven?t seen any min cap reqs that were particularly onerous to any serious business. My own company is tiny (10 employees) and has next to no capital; but we got registered just fine. > signs of things loosening up over the last 12 months. I?ll be honest with you, I?m not fan of the TRT; but they do appear to be interested in FDI, despite their populist nationalist bombast; see Mahathir for a role model here. > there are groups within the government that don't care about economics Maybe, but there aren?t many that don?t care about money! > And the there is the corruption problem That?s perennial, and it IS a major problem; but I see that as a long-term issue, not a short-term one; it?s been there before and hasn?t seemed to deter a lot of people. Is the world changing to one where people pay more attention? I sure hope so. I?d be interested to read any worrying reports re: Thailand; the GDP projections and stuff coming out of the i-banks (e.g. ?There is growing evidence that the baton of growth is being passed successfully from the consumer to the corporate sector in Thailand; this in turn provides further momentum for the consumer cycle? ? Goldman Sachs, Feb 2003) seem pretty positive to me. I?d like to know what you?re reading, as I?m frankly kind of worried too. Cheers, Link to comment Share on other sites More sharing options...
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