Featured Topic: Thailand

The PTT Pcl has big plans. The firm – Thailand’s largest energy firm and third largest oil and gas company according to market value – has plans for investments of $100bn in the next decade.  According to the company’s Chief Executive Prasert Bunsumpun, at the end of this, it is anticipated that annual group revenue will reach $200bn.  The company controls over “30 petroleum, gas exploration, petrochemical and refinery businesses.”

Spending Plans

So, the next question is, how would the money be allocated?  Around 50 percent of it would go towards foreign investment; the remaining half to petroleum exploration and production.  First though, the plans need to get through the board.  So by the end of this month the five-year plan is being put to the board.

According to an article in BusinessWeek, with the plan, the expectation is that the PTT will invest approximately 300bn baht. Over 400bn baht is due to go to PTT Exploration and Production Pcl (PTTEP) and over 200bn baht to the refinery and petrochemical areas in which it works.

Coal Boosts

In addition, as Bansumpun pointed out, the PTT plans to “boost its coal output to 30-40 million tons in 2015 and to 70 million tonnes in 2020 from 10 million tons now.”  It plans to do this once it has acquired Straits Resources Ltd., (Australian coal miner).

Border Clashes Negatively Impact Trade

There’s going to be trouble with the Asian economy, and a lot of it. That’s if the situation between Thailand and Cambodia continues. Currently the border clashes there are so detrimental to good sentiments between the two countries, that even though trade is developing, without an end to these clashes, the market share of Thailand goods in Cambodia will be reduced.

According to Kasikorn Research Center (KRC), what will happen is that Thai exporters and potential business investors will lose confidence in placing their businesses in Cambodia. In addition, other countries will start putting pressure on them to take business elsewhere, especially Vietnam.

Good Trading Between Thailand and Cambodia

But it would be a real shame if things went sour. Investment between Thailand and Cambodia has been increasing continuously over the last few years from $1.4bn in 2007 to $2.5bn in 2010. Thailand has been benefitting from this vis-à-vis trade. In addition, trade between the two countries accounts for at least 70 percent of overall trade – that is a huge amount that would be devastating for both places if it things stopped going well.

It’s not all been great news though. In March 2011 there was only a slight increase in export volume. Also, due to border clashes, there was a drop from 34.9 percent in 2008 to 29.9 percent in 2009. There was a large plummet of Thai investment in Cambodia from the 2008 figure of $30.7m to the 2010 figure of $1m.

Vietnam-Cambodia Trade Figures

Consequently there was additional merchandise from Vietnam to the Cambodian market with an increase of 19.5 percent in 2008 to 23.7 percent in 2009. But Vietnamese exports to Cambodia also increased in 2010 by a significant 35.3 percent, culminating in $1.5bn. But anyway Vietnam ranks as Cambodia’s largest investor with “an accumulated investment value of around $49.5m. Thailand comes in second at $47.2m, and Singapore in third place at $24.9m.

So there is work to be done. It would clearly be a huge economic shame if the political situation between Thailand and Cambodia wasn’t resolved – and fast.

Malaysia: Major Asia Asset

Just two days ago a $3.7bn investment announcement came from Malaysia, set to “to jumpstart foreign interest in its economy even as other Asian countries try to stem speculative inflows in search of higher-yielding markets.” The country’s Prime Minister (Najib Razak) intends to try and get $444bn worth of investments resulting in Malaysia becoming a “developed country by 2020,” including $165m by Asia Media to create digital media infrastructure as well as the establishment of a state-owned energy development agency to be able to attract $106m worth of investments this year. This is all part of the country’s “Economic Transformation Programme,” a project that is due to be put into practice over the next decade.

Other Asian Countries Less Successful

Malaysia has been doing pretty well recently vis-à-vis investments. Indeed it has already attracted around $5bn in pledges from Exxon Mobil and Royal Dutch Shell Pic as well as other (smaller) projects. For example Indonesia, the Philippines and Thailand are having quite a few issues attracting investments anything near to the success of neighboring Malaysia.

But this hasn’t deterred Najib who is determined to ensure Malaysia stays one step ahead, “transforming [it] into a high-income economy within 10 years by generating new growth areas and restructuring the economy to lure investors.” Yet this goal is not as easy as it may seem. Investment blueprints from the past aren’t showing such great results. As well, in general the economy has been suffering from a less-than-skilled workforce to enable it to develop into the “financial services hub” it wants to. Yet it is past the stage of being a low-end manufacturing center,” as countries such as Vietnam now have that role.

Notorious Najib

Still, given all these efforts made by the country’s premier, the public is remaining loyal to Najib. Although one has only to look at the facts on the ground to see where the country really is, given that the exchange was down more than 5 percent from where it was just four years ago. While there is now more opportunity for competition, in general, investors are expecting the government to “take more aggressive steps to reduce its fiscal deficit and overhaul an affirmative action policy they say hinders competition.”

Malaysia PJ: Malaysia Post Japan’s Trauma

It might not have been a surprise if any parts of Asia – including Malaysia – would have been negatively impacted by Japan’s trauma. But in fact this hasn’t been the case, according to Datuk Donald Lim Siang Chai, the country’s Deputy Finance Minister. He claimed that it will “have little impact on the Malaysian economy in 2011.” Vis-à-vis the country’s exports to Japan he said that actually some areas (like plywood and liquid natural gas) would actually probably “increase during the second quarter of this year as Japan increases its reconstruction work of earthquake-damaged areas.”

As well, Malaysia probably won’t be affected by Mid-East and North African troubles either since trade between those countries is anyway only at around 2 percent.

So all in all things are looking good right now for Malaysia. The country has developed a strong enough economy and excellent relations with regions with which to continue exporting to see it through any troubled times Asia may be encountering.

Asia’s economy is a bit of a mess.  Actually it's a  big mess.  And it doesn’t look like this situation is about to improve any time soon either.  Inflation looks set to continue; capital flows are extremely volatile.  But the fact that China has been trying to liberalize its currency exchange rate could be good news for economies in the region, enabling them to move away from trade settlement within the current global economic climate.  It’s a shame Pridiyathorn Devakula is somewhat removed from the political scene these days though.  Thailand’s previous Deputy Prime Minister is quite well-to-do these days.  His wife has a staggering Bt258 million to enjoy while their daughter isn’t too badly off either at Bt7 million.  Perhaps if the family shares some of its wealth it can pull the region out of its financial hole.

Yuan Goes International

But even if the Devakula family decides to keep their wealth to themselves (giving them near-billionaire status), the yuan need not suffer.  It seems like the government of China is moving toward the possibility of internationalizing this currency alongside the Euro and the dollar.  As well, plans are set for Hong Kong to become the traing center for yuan-denominated assets enabling foreign companies to “issue yuan-denominated assets in Hong Kong” which will also mean the Bank of China NY branch will be able to open yuan deposits.  The hope is that investment abroad will increase too.  As well, if they adopt Devakula’s idea of “co-operation among regional economies” to establish a benchmark currency, then the region’s economy could potentially peak.

After the Thai economy’s impressive performance this year, which is forecast to have expanded by between 7 and 7.5 percent, next year is forecast to be much more difficult.

According to many research houses Thailand’s economic growth next year id forecast to be about 4 to 5 percent. This is largely due to a reduction in exports resulting from a debt hangover in Europe and the weakening recovery in America.

The Thailand government hopes that investment and domestic consumption will make up for the export deceleration. It plans budget deficits for the current fiscal year ending in September 2011, and the next fiscal year.

Conrad Theerachai Secretary-General of the Securities and Exchange Commission (SEC) said that foreign investment flows to the Thai bond market. And the stock market surpassed the 900 point of talking to foreign securities companies were foreign investors that Thailand’s equity investment. Because the rate of economic growth has been high the credit rating has been organized well. And improved management of government listed companies. The SEC continues to monitor continuously and believes that once Thai shares rose to another level and price incentives would not be diluted by market forces.

The bond market showed rapid growth. The value of the bond market increased from 11,000 million dollars. Representing 11 percent of gross domestic product (GDP) is U.S. $ 193,000 million. Representing 70 percent of GDP after the crisis in Thailand in 2540 through the bond market. Of capital inflows reached U.S. $ 3,000 million during the past eight months.