Page 2 of 2 ASIA
HAND Thailand hoists a protectionist
flag By Shawn W Crispin
flustered foreign investors and
finger-wagging sovereign analysts warn that a
lurch toward protectionism will adversely and
severely affect the country's growth prospects.
Until now, Thailand boasted one of Asia's
most open economies, a policy posture that
throughout the 1980s and 1990s lured in big
foreign manufacturing investments, including big
outlays in plants and equipment from nearly all
the world's leading automobile
makers. Foreign capital
transformed Thailand's tropical backwater into an
export-driven showcase of globalization's upside.
However, that same openness was blamed for the
economic chaos wrought when foreign capital rushed
for the exits in the wake of the 1997-98 Asian
financial crisis.
At the height of that
crisis, King Bhumibol delivered in late 1997 his
landmark "sufficiency economy" speech, in which he
called on the Thai population to reduce its
reliance on exports and shift toward a more
localized economic system, where at least 25% of
the local production was geared for individual
needs. The then Democrat Party-led government paid
lip service to the respected monarch's idea, but
in the main pursued policies for economic recovery
as prescribed by the International Monetary Fund,
which, to the contrary, called for more, not less,
economic and financial openness.
Thai
policymakers had in the intervening years grappled
for ways to stem the volatility of short-term
capital flows while maintaining an open door to
long-term, export-oriented foreign direct
investments in manufacturing. Thailand's
outward-oriented economy has performed well in
recent years, restoring economic fundamentals and
boosting foreign reserves to new record highs.
Thailand has also strongly emerged in recent years
as a regional destination of choice for foreign
investors looking to hedge their exposure to
China.
Now, with the military in charge
and Thailand in a position of economic strength
rather than weakness, King Bhumibol's ideas about
economics are getting a strong second hearing. On
taking office, Prime Minister Surayud Chulanont
indicated that his interim government's economics
would be guided by the monarch's Buddhist-tinged
philosophy, which contrary to Western neo-liberal
economics stresses moderation over maximization.
Then, perplexing foreign investors, he signaled a
turn toward more protectionism when he vowed to
pursue "gross national happiness" over "gross
national product" (see In Thailand, a return to
sufficiency, Asia Times Online, October
5, 2006).
Recent policies aimed at curbing
rather than encouraging certain types of foreign
investment are consistent with King Bhumibol's
concept - though there is no evidence that any of
the anti-foreign moves have been orchestrated from
above. Politically, the protectionist policies
also respond to simmering resentments among the
Bangkok elite about growing foreign penetration in
the local economy. And the new restrictions will
also serve to allay middle-class concerns about
the property market, where new condominium and
housing projects are increasingly being priced
more for global investors than for Thai
wage-earners.
Many foreign investors, on
the other hand, have threatened to shut down their
Thailand-based operations and relocate elsewhere
because of the new restrictions on foreign
ownership and management control. Even from a
position of relative economic strength, Thailand,
unlike Japan and China, is not yet big enough to
turn its back on foreign capital without paying an
economic price. But toward the end of achieving
King Bhumibol's "sufficiency economy" concept,
it's a price Thailand's royalist government seems
willing to pay.
Shawn W Crispin
is Asia Times Online's Southeast Asia editor.
(Copyright 2007 Asia Times Online Ltd. All
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