Thai economy suffers from political crisis
Updated
The political uncertainty in Thailand is already damaging the economy, with fears of worse to come. Governments have issued travel warnings and tourism is suffering. Despite pleas from business leaders for restraint, trade unions linked to the People's Alliance for Democracy are planning to go ahead with widespread strikes today.
Presenter: Karon Snowdon
Speakers: John Koldowski, director of the Strategic Intelligence Centre for the Pacific Asia Travel Association in Bangkok; Tom Byrne, a Senior Vice President for Asia and the Middle East at Moody's Rating Agency
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SNOWDON: Thailand's media is reporting that 43 trade unions are loyal to the PAD and will strike on Wednesday. Essential services could be cut, electricity, water, banking and transport, raising questions about how the army will respond. On that score the army chief says he won't use force against the protestors, and soldiers will be unarmed. Everyone still hopes for a peaceful resolution to the crisis despite the aggressive rhetoric of some of the protest leaders.
But foreign governments aren't taking any chances, with several including Australia urging higher caution or some warning against travel altogether to Thailand. Some travellers are cancelling their holidays to this popular tourist destination, says John Koldowski, the Director of the Strategic Intelligence Centre for the Pacific Asia Travel Association in Bangkok.
KOLDOWSKI: Having an effect certainly, we're starting to see some cancellations being reported by operators.
SNOWDON: Some strikes and disruptions like the storming of regional airports late last week have already had an impact. Thai Airways reports a ten percent fall in flight bookings in the last two days. Now hotels are making additional contingency plans.
KOLDOWSKI: Well they're preparing to take contingency measures obviously, certainly in the hotel sector making sure that they had adequate supplies of water, back-up generators are working and so forth. So they're preparing but they're certainly hoping that there's no need to bring those into play.
SNOWDON: It's no surprise the currency, the baht, is under pressure. It's two years since the military coup which toppled the government of Thaksin Shinawatra. The Thai economy proved reasonably resilient to that upheaval. But as the threat of military action grows, so does the potential for economic turmoil, says Tom Byrne, a Senior Vice President at Moody's rating agency. Investor confidence has been the economy's weak spot since the coup.
BYRNE: The investor sentiment really took a downturn after the September 2006 coup. I'm not just talking about foreign investor confidence, I'm talking about domestic investment in Thailand, and it hasn't come back. And last year, I'm talking long-term 0 the more stable investment, there was something like almost $US10 billion in foreign direct investment in Thailand, which is pretty good actually. Now if there's a lot of political uncertainty that will dry up right away, and then on top of that you'll probably get say companies that were thinking of moving in newly or acquiring operations in Thailand will put those on hold. We're already seeing a drop in stock prices, probably foreigners are selling.
SNOWDON: Tom Byrne says the biggest threat comes from a national strike and a national reputation for instability if political polarisation continues into the longer term.
BYRNE: But it's not just the investors, it also lingers in policy formulation, in the integrity of a country's institutions, I mean that's where the instability arises from and that's where it's hardest to get rid of it. The surprising thing now is that the countries that have had a history of political instability, Indonesia and the Philippines, are faring relatively fairly well, but all of a sudden countries that once were stable have become unstable. So it raises the issue of really how durable are these countries' institutions in Southeast Asia in general.
