Thailand to turn tragedy
around By David Fullbrook
Thailand's economy is likely to shrug off the
deadly Andaman Sea tsunami, despite tourism and fishing
hit hard along the southwest coast. Indeed the tsunami's
destruction offers a chance, which the government says
it will seize, to rebuild a new tourism that preserves
the environment's beauty and bounty for generations to
come.
Though the tsunami was undeniably an
immense human tragedy, the effects it will have on
Thailand's diverse economy are negligible. Even tourism,
12 million visitors in 2004 accounting for 6% of the
economy, which vies with agriculture as Thailand's
biggest industry, may not suffer as much as some fear.
"It would be quite localized. I don't think it's
going to scare tourists away. Even Bali came back after
a couple of years, and that [the 2002 terrorist bombing
that killed 202 people] wasn't a once-in-a-century
natural event," said David Cohen, Action Economics'
Asian economic forecasting director.
Many
tourists, especially those familiar with the country or
confident traveling overseas, are moving to the Gulf of
Thailand's Samui and Chang islands or heading for the
northern mountains. Ironically the disaster could be
just what Chang's promoters need.
Mountainous
Chang remains relatively unspoiled and thickly forested.
Thailand's second-largest island, lying in an
archipelago next to Cambodia, has seen resorts
proliferate since Prime Minister Thaksin Shinawatra's
government "discovered it", heralding it as a "second
Phuket" and leaving environmentalists aghast.
Hotels on Samui and in Bangkok and Chiang Mai in
the north are booked solid. Airline seats or train
tickets are hard to come by on northern services. Of
course, that is partly attributable to the New Year's
break.
"Anecdotally, some travel agencies
suggest the cancellations are much less than believed.
People are switching out of plans to visit Phuket to [go
to] other places. The potential impact on tourism could
more modest," said Lian Chia-Liang, JP Morgan's Thailand
economist.
Though many hoteliers and travel
merchants are glum, predicting rack and ruin, they are,
whether by ignorance or design, overstating the
situation. This is no Bali bombing nor an outbreak of
severe acute respiratory syndrome (SARS) with long-term
consequences, but a freak one-off.
It should be
no surprise if some play up their woes, hoping to draw
government compensation or access to the US$750 million
soft-loan package the Finance Ministry is putting
together for Thai-owned businesses in the six Andaman
coastal provinces - Phuket, Phang Nga, Krabi, Ranong,
Trang and Satun.
During the late 1990s financial
depression, it was not uncommon for profitable
businesses or their wealthy owners to cease paying
loans, claiming hard times. These strategic
non-performing loans compounded local banks' bad-loan
portfolios.
A bigger problem comes from
competing destinations such as Bali and Vietnam stepping
up promotions that target tourists who were booked for
Thailand but have been scared off by television coverage
of corpse-strewn beaches and warnings of disease.
And so the wheel turns. Ironically, it is
Thailand's safe image that has lured many visitors over
the last few years, as terrorism, political upheaval and
typhoon damage tarnished neighbors Indonesia and the
Philippines.
Of course, the view from
the beaches lining the Andaman Sea differs starkly.
Pundits forecast a 10 billion baht ($256 million) hole
in tourism receipts over the coming months. Tourism is
a big earner for the local economies, pulling in almost
80 billion baht ($2 billion) in 2003, around 1.2% of
gross domestic product. This is not about to evaporate,
much will simply shift elsewhere in Thailand.
A
significant slice of that money flows straight into the
hands of Bangkok tycoons and their foreign partners,
bypassing the local economy. Nevertheless, thousands of
maids, receptionists, masseuses and guides, many of them
migrants from poorer provinces, face tough times ahead
with hundreds of hotels and resorts ruined.
Hotels and guest houses lie smashed along
Phuket's Patong beach, on the hard-hit west coast. The
same is true in overdeveloped Phi Phi Island, where the
Tourism Authority of Thailand claims 4,000 rooms are a
wreck. Worst of all is up-and-coming Khao Lak beach on
Phang Nga's rugged and isolated coast, favored by the
wealthy as an escape from Phuket's hoi polloi, with
6,000-10,000 rooms, some only just completed - now
ravaged.
One source, driving along the coast
from Phuket to Khao Lak, reports utter devastation.
Still, with at least some if not many hotels in these
sought-after locations encroaching on national parks,
the opportunity presents itself to roll-back such
ill-suited development. That could be a long-term plus.
Despite the pictures of devastated hotels, more
escaped unscathed, only to suffer cancellations. That
situation is likely to change quickly. "It's a very
resilient economy. Even for the tourism business I would
not be surprised if the rebound comes earlier than
expected. The fears over tourism could be overdone,"
said Lian, JP Morgan's Thailand economist.
Green
shoots are already sprouting. Not all tourists have
fled, more are still arriving. Sunbathers, swimmers and
hawkers are out once again on Phuket's relatively
unscathed beaches.
Divers, foreigners anyway,
are still coming, with operators sticking to their dive
trip schedules. Thais are more wary, no doubt shaken by
devastation to their homeland, plus a little
superstitious about the death and bad karma they believe
to be lingering in the area.
Of more serious
concern is the pollution to the sea caused by the
flooding of streets and buildings up to 300 meters
inland. With sewage plants knocked out, fouled water is
flowing from Patong's sewers into the sea.
Phuket's booming holiday home and villa market
may pause for a quick breath as buyers take a harder
look at new locations. They will see however that few -
in fact only those with million-dollar plus price tags -
are right on the beach. Otherwise, housing developments
are usually a little inland or up on hillsides.
Some borrowers are in dire straits, while a few
will plead disaster, hoping for easier terms, which
could see some loans turn sour. Commercial banks have
lent about 70 billion baht in affected provinces, though
it is hard to gauge just how much of this is to
businesses along the coast.
Government lenders
have another 10 billion or so outstanding, including a
significant amount against fishing vessels. Hundreds
have sunk, many with crews aboard, and 3,500 have been
damaged, the Agriculture Ministry has reported.
Still, given the unsustainable plundering of the
seas, a respite enforced by the tsunami will give fish
stocks a chance to replenish, if their breeding grounds,
often found in coral reefs, survived. Preliminary
inspection by government scientists suggests most reefs
did survive. However, further surveys may reveal
extensive damage. Marine biologists know much about the
damage caused to fragile reefs by typhoons, tempests
loosely equivalent to tsunamis, but little about the
effects of rare tsunami sea surges. It will take decades
to recover from heavy damage.
Some farmers will
face ruin as salty sea water taints fields and fresh
water. However, the impact on Thailand's agricultural
output will be minor, as the stricken coastal areas
contribute little compared to the intensively farmed
Chao Phraya plain or northeastern plateau and northern
mountains.
Economic pain, however, is
not entirely limited to the Andaman coast.
Vehicle production may drop 12% in 2005 to around a million
units, reckons the Federation of Thai Industries.
Consumers in the affected provinces may have to spend
money on rebuilding their homes or businesses, not on
buying vehicles.
But given that these provinces
represent only a small part in the economy and they do
not account for 12% of vehicle demand, this forecast
looks suspect. In any case, destroyed vehicles need
replacing. In the southern provinces, stricken by the
tsunami, sales of pick-up trucks are rising.
Such are disaster economics. Come the second
quarter, the picture will look a lot rosier. Much of the
$750 million government emergency operations and
clean-up budget will have flown into the economy. Repair
and rebuilding spending by the government, business and
individuals will be climbing too.
"Reconstruction will start to kick in around
[the second quarter], giving a lift. Natural disasters
have a strong impact in the short term, but over the
long term less so," said Lian of JP Morgan.
Cohen, the Asian forecasting director of Action
Economics, said: "There will be reconstruction spending
that will bring employment."
Government
economists expect a 0.3% dent in 2005 growth due to the
tsunami, not much more than a statistical error. JP
Morgan cut its 2005 forecast by 0.4% to 4.6%, one of the
more conservative growth estimates around.
A
stronger, sustainable economy, especially tourism, may
result if the fine words from ministers and bureaucrats
translate into action. Such policy acrobatics often
require big leaps in Thailand, not without benefit
accruing to one favored or well-placed clique in this
society where patronage is an insidious trump card
squeezing public funds for pay-offs.
There is
talk of tsunami zoning along the coasts, which may aid
environmental officials in their battles to oust farming
and hotel encroachers from fragile national parks and
other public lands.
"Our work could be made
easier. Why not turn the crisis into an opportunity,"
Suwit Khunkitti, Natural Resources and Environment
minister, told the Thai press.
"We have never
had appropriate coastal planning," added Maitree
Duangsawasdi, director general of the Marine and Coastal
Resources Department.
Of course, that much of
the encroachment has been possible due to bureaucrats'
overlapping jurisdictions, opaque laws and greased palms
dims the prospects for common sense and goodwill to
prevail.
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