• Sat
  • Jul 26, 2014
  • Updated: 6:05am

Thai firms feel the squeeze from constitutional crisis, seek solution through mediation

Political upheaval in Thailand is having a profoundly negative influence on the economy and business have tried, and failed, to mediate

PUBLISHED : Wednesday, 29 January, 2014, 4:48pm
UPDATED : Wednesday, 29 January, 2014, 4:48pm

Hotel occupancy rates in central Bangkok have plunged. Conventions have been cancelled. Business deals have been postponed. Tourist bookings for coming months are way down.

The latest spasm in Thailand’s near decade of political upheaval is taking an economic toll as anti-government protesters barricade Bangkok’s major intersections and confrontations between protesters and supporters of Prime Minister Yingluck Shinawatra periodically flare into deadly clashes.

Since a 2006 coup ousted Yingluck’s brother Thaksin Shinawatra as prime minister, Thailand’s economy has bounced back from several episodes of violent political conflict. However, the underlying failure to resolve deep divisions in Thai society has diminished its reputation as a reliable country for foreign business and raised the prospect of ever increasing instability.

Southeast Asia’s second-biggest economy could wallow below 3 per cent growth this year, if the anti-government protests continue into the second quarter, the University of the Thai Chamber of Commerce projected. That is far below potential for Thailand, one of the world’s top tourist destinations and a base for global companies in industries from autos to hard drives. As recently as 2012 the economy grew 6.5 per cent and growth of nearly 4 per cent will be reported for last year when official figures are released.

“It’s terrible. It’s worse than ever. We can’t see an end to it,” said Virat Jaturaphutphitak, vice-president of the Association of Thai Travel Agents. Reservations from European and North American travellers to Bangkok through April are down 70 per cent. Bookings from Asia are down 30 per cent. “If this situation continues, we will have to close many businesses.”

Corporate leaders fret that foreign investors planning new factories and business ventures will turn to neighbours such as Malaysia, Vietnam and Singapore if the conflict drags on.

Worries of a violent showdown increased after Yingluck’s government said it will press ahead with elections this Sunday, overriding objections from the Election Commission.

Demonstrators are expected to block voting centres and the opposition Democrat Party is boycotting the election. Since the end of November, 10 people have died and more than 570 have been injured in the conflict. Protest leaders want Yingluck’s elected government replaced with a “people’s council” that would implement reforms such as rooting out corruption.

Yingluck, supported by the country’s poor rural majority in its north and northeast, has proposed some reforms but insisted that any changes must come after elections.

“The perception from foreign clients is pretty bad. They don’t want to come. Business stops and is put on hold,” said Thinawat Bukhamana, a managing partner at law firm Baker & McKenzie in Bangkok. He said some corporate financing deals his firm is involved in have been put off.

Tourism and Sports Minister Somsak Phureesrisak said hotels near the protest sites in Bangkok, as well as in nearby provinces that cater to foreign tourists, have suffered dramatic falls in occupancy rates to about 30 per cent, far below normal for this time of year, considered Thailand’s high season.

Political stability is a factor in whether Toyota invests further in Thailand, the automaker’s Thailand chief Kyoichi Tanada said at a press conference earlier this month.

Thailand is a production and export base for the Japanese automaker, whose four factories in the country churned out nearly 800,000 vehicles last year. Tanada hoped production could reach 1 million in three to four years, a goal that would probably require another US$455-US$610 million of investment, he estimated.

Seven businesses organisations including the stock exchange and tourism council have banded together since December to play a mediating role between Yingluck and protesters, but have been unable to get the two camps together.

“It’s very difficult because each side seems like they cannot pull back even one step,” said Vichate Tantiwanich, senior vice-president of Thai Beverage PCL, maker of Chang beer.

The coalition has tried to serve as a “middle ground,” said Kalin Sarasin, secretary-general of the Thai Chamber of Commerce. “At the moment, they don’t talk.”

Lack of success at mediation might not be surprising. Business leaders are perceived to be more sympathetic to the protesters, so some experts question whether they can be a neutral mediator.



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