Tag Archives: Thai economy

Thai politics

Economic Deja-vu

Giles Ji Ungpakorn

A recent analysis of the state of the Thai economy from the research department of Phatra Capital indicated two important structural problems. Firstly, continuing economic inequality means that any GDP growth at the present rates does not translate into increased well-being for the majority of the population. Secondly, Thai rates of productivity are too low to compete on the world market which is still growing slowly due to the long recession since 2008. A big factor here is that most industrial companies are still relying on cheap labour rather than trying to invest in modern technology and a higher skilled labour force. The cheap labour today comes from migrant workers from neighbouring countries. In rural areas productivity among small agricultural producers remains too low to raise people out of poverty. Where agriculture has a higher productivity it is among the agribusiness conglomerates.

This is exactly the same problem which faced the Thai economy just before the 1997 economic crisis. For this reason Taksin Shinawat and his newly formed Thai Rak Thai party set out to modernise Thailand, develop a higher skilled work force, increase productivity and raise the general standard of living of most working people, both in rural areas and in the city.

Thai Rak Thai called this a “dual track” policy, mixing grass-roots Keynesian state investment with promotion of the free-market at a national level. Among the policies initiated by Taksin’s government were universal health care for all, job creation at village level through cheap loans, measures to reduce farmers’ debt and increased investment in education and the promotion of digital skills. The Yingluck government’s rice price subsidy scheme was part of this kind of policy.

Taksin’s policies did not wipe out poverty or bring in economic equality. He denied that he wanted to build a welfare state, which would have been a vast improvement, and he was totally opposed to raising taxes on the rich. However, the policies did raise the living standards of most citizens and gave them hope for the future. This is why millions voted for his parties in elections without Taksin having to spend millions in buying votes like political parties in the past.

Yet the conservatives and neo-liberals derided these policies. The Democrat Party, the conservative bureaucrats, the right-wing academics and the middle classes called it “Populism”. Some foreign academics have gone along with this kind of right-wing discourse. For all these people, supporting the poor and the majority of the population was “bad for the country”. They wanted to return to the bad old days when the poor knew their place, state spending was concentrated on the military and the elites and elections were nothing to do with real policies.

In the end the conservatives and neo-liberals got their way with military and judicial coups. They are now ensuring that in any future elections, governments will not be allowed to support the poor, bring about modernisation or lower inequality.

In terms of the structural problems in the Thai economy, we are back to Square One.

But if we look at Taksin’s side, he and his party were reluctant in mobilising the mass of the population against the military and the conservatives. They have deliberately destroyed the pro-democracy red shirt movement. This is because they feared the results of any future mass uprising more than they feared the continued dominance of the military and the conservatives. We could even say that Taksin’s attempts to drag Thai society into the modern world and solve the problems of inequality were just half-hearted.

This reminds me of Leon Trotsky and Karl Marx’s theories of Permanent Revolution. The theory of Permanent Revolution argues that in less developed countries the modern capitalists and the conservative monarchists will seek compromise with each other and real progress towards a modern and equal society will need to be led by the working class and a working class based revolutionary party. This holds true for Thailand today. Taksin’s capitalist party attempted to carry out half-hearted modernisation, while always seeking to find ways to compromise with the conservatives and hold back the mass movement, and this has ended in the destruction of democracy and the fossilisation of society.

Thai politics

Junta’s lies about unemployment levels

Giles Ji Ungpakorn

The Thai economy is being hit by the global recession and the impact of the political crisis and military rule. Thailand’s main export areas: the United States, the European Union and Japan, are either in crisis or experiencing sluggish growth. The Chinese economy is now experiencing a significant downturn. Thai seafood products are being boycotted because of the scandal of slave labour which the junta has no real will to solve. Trade agreements are being delayed because of a lack of democracy and tourism from the West is down because of a number of unsolved crimes against tourists and because of the general political climate. This decrease in Western tourists has been partly offset by an increase in Chinese tourists, another facet of the junta’s turn to China while being shunned by Western democratic countries.

The economic difficulties are having an impact on employment. The number of workers claiming unemployment benefit in February increased by 26% compared to the previous year. There has been a steady trickle of sackings. In January this year the electronics industry experienced a year on year increase in redundancies of 150%, a trend continuing from last year. Last October also saw a yearly increase in redundancies in the automotive industry of 143%. In the same month redundancies in the electrical goods industry and the jewellery industry increased by 68% and 43%, respectively.

Despite this situation, the spokesman for the Ministry of Labour, a junta lick-spittle, has claimed that Thailand’s level of unemployment is the “lowest in the world”. Teerapon Kunmuang, who works under the military general who runs the Ministry, proudly proclaimed that the unemployment figures for Thailand were “under 1%”, compared to 10.4% for France, 7.4% for the United States 5.3% for Germany, 4% for Japan, 6.8% for Indonesia and 2.8% for Singapore. This, he believed, was “proof” that the far-sighted and wise leadership of His Excellency Generalissimo Prayut had resulted in Thailand having the “highest level of economic happiness in the world”!!

This twaddle was repeated, word for word, by junta spokesman General Sansurn Keawpon. No doubt they were reading from the same script. Sansurn went on to say that His Excellency Prayut would like the people to know that the junta was doing everything it could to make people happy.

The fact of the matter is that Thai so-called unemployment figures cannot be compared to those quoted in most industrialised countries. Most industrialised countries compile figures from those claiming unemployment benefit. Yet the Thai figures are only for those claiming benefits from the national insurance scheme which covers a minority of workers. Thailand has no real welfare benefits and people who are sacked are forced to rely on poorly paid and insecure jobs. In fact, large numbers of workers, both in urban and rural areas, face a decline in the quality of employment when there are economic problems. Such declines in the quality of work are not reflected in unemployment figures. This is what happened in the 1996 economic crisis. It is the quality of employment and standards of living that are the real indicators of employment in Thailand, not some fictitious unemployment figures.

In addition to this, economist Pichit Likitkijsomboon has pointed out that Thailand’s terrible definition of those in work covers anyone aged 15 years up who has in the last 7 days performed at least 1 hour of paid employment or 1 hour of unpaid employment in their family’s business.

Given that the junta is extremist in its free-market dogma, which includes the king’s sufficiency economy ideology, it comes as no surprise that it opposes raising the minimum wage or using state money to help rice farmers, both of which might help to bring some relief and stimulate the internal economy in the short term.

What is worse is that in an effort to attract foreign investment, the junta has used its dictatorial powers to make Environmental Impact Assessments on large scale projects completely meaningless. Ironically this has disappointed some environmental NGOs which were supportive of the coup and military rule.

Thai politics

Why is the Thai economy slowing down? Is it the fault of the junta?

Giles Ji Ungpakorn

There is no doubt about it; the Thai economy is seriously slowing down. GDP growth in 2014 fell to 0.7%, down from 6.5% in 2012 and 2.9% in 2013. Annual GDP growth at the end of the first quarter of 2015 was 3%, but will it fall off again or recover?

According to Bloomberg, Thai GDP growth is already below that of its neighbours: Malaysia, Philippines and Indonesia.

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Investment, a key indicator of economic confidence, shrank by 2% in 2013 and another 2.8% in 2014. Manufacturing output fell by 4.6 % and retail fell by 6.1% in 2014. In May 2015, manufacturing production fell 7.6% over the same month last year, caused by decreasing output in the manufacturing of electronics and cars.

Over 1,300 workers at the Samsung factory in Korat have been sacked. Workers in many auto, auto parts and electronics factories face an uncertain future with redundancies occurring. Sports-wear factories and other textile manufacturers have also been hit.

Domestic sales of small to medium sized motorcars dropped, while sales of luxury Mercedes-Benz cars increased. The rich throughout the world have always increased their wealth during economic down-turns as well as during periods of economic growth.

Inflation fell to 0.1% last year, which is another sign of economic depression. For the first year since 2010 exports fell by 0.5% and imports fell by 8.6%. Thailand is very reliant on exports for economic growth, contributing to 60% of GDP, and the drop in imports reflects the fall in investment for future production.

So is it all the fault of the military junta and the enraged and backward middle-classes who have wrecked democracy and political stability? The drop in tourism is certainly related to this, not to mention the crisis in Thailand’s aviation industry.

The Economist reports that some academics estimate that military coups shave off between 1-2% in annual GDP growth. Added to this factor is the long running political crisis since 2006, caused by the refusal to respect democratic elections by the elites and the middle classes. Despite the fact that pro-military Thai economists ignore the problem of having a military junta and political instability, the World Bank and other economic establishments predict that Thai economic growth will continue to be problematic.

But the main reason why exports have fallen is the fact that Thailand relies on markets in China, Europe and the USA. All these markets have yet to properly recover from the economic recession which started in 2008 and the Chinese economy is getting into deeper trouble. Given the cut-throat competition that arises in these circumstances, Thailand has yet to emerge from a low wage, low investment, export model and cannot therefore compete with neighbouring countries in the region where wages are lower. This was already a problem back in 1997 when the Asian economic crisis broke. Taksin’s government, which won the elections after that crisis, made attempts to modernise the economy, upgrade technology and productivity, and increase domestic spending power. However, this was cut short by the conservative elites who staged 2 military coups against his political parties.

In the agricultural sector, falls in world prices due to global stagnation, have recently been over-shadowed by the Thai drought, leading to some predictions that year on year GDP for agriculture will drop by 3.4%, the sharpest drop in 36 years. The previous Yingluk government had tried to help rice farmers but was severely attacked by the elites and the middle-classes for doing this.

Given the dire global situation, the only other option for the government to expand the economy would be to increase state investment in modernisation and increase the spending power of citizens. But this is an anathema to the reactionary neo-liberals who are now running the show under the military junta. They are violently opposed to large state spending on infrastructure and agricultural price intervention, which they dismiss as just “Taksin-style populism”. They are also against raising the minimum wage by any significant amount; Prayut claiming that it will negatively affect exports.

The junta may decide to ride out all the problems by using military power to further postpone elections. It may also be forced to adopt measures previously used by Thai Rak Thai or Pua Thai governments. Already they have invited ex-Thai Rak Thai economic minister Somkit Jatusipituk to join the dictatorship. But the longer the egotistical buffoons in uniform cling to political power, the more they will further tarnish their reputation among the population.

Further reading:

The emerging market crisis returns