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Thailand's struggle to protect image,
lure FDI
By Jeffrey Robertson
CANBERRA - There is a direct relationship
between political stability and foreign direct
investment (FDI). This fact has been long acknowledged
in Southeast Asia. Successive governments across the
region have battled to achieve and maintain an ideal
destination for FDI. Today, with increasing competition
from alternative FDI locales, this battle is becoming
intense - so intense that even Southeast Asia's onetime
oasis of stability, Thailand, is feeling the heat.
An increased threat from secessionist movements
in the southern provinces has challenged the Western
image of a secure Thailand. Is Thailand facing a threat
of fragmentation? Or, more important, is the threat
enough to discourage lucrative and much-needed FDI?
Attracting FDI is now more than ever before a
competitive game. According to the United Nations World
Investment Report 2002, the number of annual regulatory
changes to attract FDI has more than doubled in the past
decade. Nations are falling over themselves in a global
race to attract FDI. The situation has given rise to
what can only be described as a "buyer's market" in FDI
location choice. FDI location has been traditionally
decided on by assessing the three core elements of risk:
political stability, domestic regulation, and economic
conditions. The aim was to gain an understanding of how
risk factors ranging from regulatory transparency to
population demographics would affect future business
operations. But in the current "buyers market", both
domestic regulatory and economic uncertainty have been
greatly reduced. It has been recognized by all nations
that investor-friendly domestic regulations and economic
conditions are essential in order to gain the finance,
technology and market access available through FDI.
With this reduction in domestic regulatory and
economic uncertainty there is an increased focus on the
final external and enduring risk: political stability.
For all nations in Southeast Asia this risk is
increasingly being associated with the threat of
fragmentation in what were once stable, albeit
autocratic, regimes.
The "theory of
fragmentation" began as an academic explanation of the
global geo-strategic situation after the end of the Cold
War. It was based upon the idea that the sovereign
nation-state that had formed the basis of international
relations since the Treaty of Westphalia in 1648 was in
uncontrollable decline. The theory seemed to be proved
by both the disintegration of the Balkans and the steady
dismantling of national sovereignty by international
institutions such as the United Nations, the World Bank
and the World Trade Organization. Like an uncontrollable
forest fire, it spread to Southeast Asia, sparking the
tinder box of East Timor and threatening to conflagrate
the entire region.
A very real threat of
fragmentation exists in Thailand's neighbors. Both
Indonesia and the Philippines face strong secessionist
movements. In Borneo (Kalimantan), the Malukus, West
Papua (formerly Irian Jaya) and Aceh, the threat of
Indonesian fragmentation is played out daily with the
raising of secessionist flags, the recruitment of
independence fighters and the brutal repression by
security forces.
In the Philippines, the
long-standing threat of fragmentation in the Islamic
south and its recent bloody resurgence engenders a sense
of foreboding as Thailand considers its own problems in
the south. The apparent inability of the Philippine
government to stop the tide of kidnapping, bombings and
guerrilla attacks has long since devastated investor and
trade confidence in the region. The Philippine
Department of Trade and Industry recently announced a
12.8 percent decline in trade for the Mindanao region.
What was once a promising location for tourism and
export-oriented investment now breeds a revived
secessionist movement fed by poverty and missed
opportunity. To the Western media, the image of
Southeast Asia is increasingly centering not on the
vibrancy of its "little tiger" economies, but on the
fragmentary nature of its fledgling democracies.
Inevitably the contagion has also spread to
Thailand. Recent Western media reports have seized upon
the spate of violence in the southern province of
Pattani. Western nations have issued travel alerts
warning their nationals to exercise caution and even to
defer non-essential travel. There is a growing school of
thought that links Thailand to the swath of
disintegrating states in an arc of instability that
stretches from Laos to Papua New Guinea.
Is
Thailand really at risk of fragmentation? The answer
would have to be an emphatic no. In more common-sense
reports, such as the Economist Intelligence Unit
Viewswire publication, the risk associated with
secessionist elements in the south are assessed to be
"low-level", with damage to Thailand's stable image
representing a greater risk than actual secessionist
threats. The US ambassador to Thailand, Darryl Johnson,
went further, telling the British Broadcasting Corp
Thai-language radio service that he has "no concern
about traveling anywhere in Thailand".
In
southern Thailand itself, it is recognized that the
Pattani independence movement is as much based on
banditry and drug dealing as on desire for an Islamic
state. That is not to say that a genuine secessionist
movement does not exist. Muslim populations in the
provinces of Pattani, Yala, Satun and Narathiwat share a
strong historical affinity with their Malay cousins
south of the Thai-Malaysian border. Islam and a common
heritage from the once-great kingdom of Pattani
Darussalam have ensured the continuation of a strong
ethno-religious identity despite attempts to "Siamize"
the population since its integration into the Kingdom of
Siam in the 1700s.
In the current global
security environment, southern Thailand and secessionist
groups such as the Pattani United Liberation
Organization (PULO) and the Gerakan Mujahadeen Islam
Pattani (GMIP) have gained greater international
attention. Indeed, southern Thailand was recently
highlighted by the Asian Wall Street Journal as the
preferred meeting place of shadowy figures such as
Southeast Asia's answer to Osama bin Laden, the
secretive Riduan Islamuddin, better known as Hambali,
the operating chief of the Southeast Asian terror group
allegedly responsible for the Bali bombings - Jemaah
Islamiyah.
Yet despite the sensation, southern
Thailand has seen only school arsons, cop killings and
the occasional gasoline bombing - in other words a
regular Friday night in any large US city. Fragmentation
of southern Thailand is as likely as the independent
state of "Harlem" being set up in New York.
However, Thailand currently faces a menace just
as dangerous as any committed secessionist movement -
the perceived threat of fragmentation. It is after all
the perception of threat that presents the greatest risk
to FDI in Thailand. The threat of Islamic separatism,
added to the recurring threats from the Thailand-Myanmar
border and social fragmentation make a powerful and
sensational tale in the Western media. The long-term
nature of FDI makes it extremely susceptible to
perceived political risk. Where portfolio investment can
still turn a profit in periods of political instability,
decision-making on FDI location is captive to even the
slightest hint of political or social upheaval. The
threat of fragmentation alone is enough to damage the
reputation of Thailand as an ideal location for FDI.
Ironically, it is greater investment that
promises the best chance to ensure the failure of any
secessionist movement in southern Thailand and Southeast
Asia in general. By addressing the socio-economic
imbalance between the southern provinces and their
northern counterparts, the very roots of fragmentation
could successfully be treated. A concentrated effort in
Bangkok could yet ensure that southern Thailand remains
clear of the terrorism headlines - and FDI continues to
flow to Southeast Asia's oasis of stability.
(©2003 Asia Times Online Co, Ltd. All rights
reserved. Please contact content@atimes.com
for information on our sales and syndication policies.)
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