Thailand is in limbo after an unclear election result, although few see the country’s junta government relinquishing the reins any time soon. Somewhat surprisingly, such uncertainty appears to be having less impact on the markets than one might anticipate.

 

Exacerbated by drought and the illegal burning of forestland, the smog became so thick in the northern city of Chiang Rai, where Thailand recently hosted the Association of South East Asian Nations’ (ASEAN) Finance Ministers and Central Bank Governors’ meeting, that the government was spurred into issuing out millions of face masks to residents in the area. 

 

As a metaphor for the outcome of national elections held on 24th March, Thailand’s bout of poor visibility certainly seems apposite. A surprisingly liberal swing by the incumbent and hitherto highly conservative junta in the run-up to election day – including moves to legalise medical marijuana and allow same-sex unions – failed to sway enough voters for the clear-cut victory that Prime Minister Prayuth Chan-ocha had been banking on. 

 

Initial results suggested that opposition party Pheu Thai, to which former PM Thaksin Shinawatra (who was ousted by the junta five years ago and has been in self-imposed exile for the past two years) is today linked, won more seats than any other party –137 of the 500 in the lower house. Nonetheless, that was a much smaller share than in previous elections, with the military generals applying the system of proportional representation in a bid to damage Pheu Thai’s chances – this in tandem with alleged harassment of opposition activists, the banning of an allied party, implementation of rules that made it difficult to campaign on social media and the banning of all but the smallest of political gatherings prior to December. 

 

An inconclusive result leaves the incumbent military junta running the country for the time being, at least. The country’s Election Commission has until 9th May to certify the final results, although few commentators see a deviation from the status quo as a likely outcome. 

 

Business as usual

 

It is perhaps due to the slim prospect of regime change that investor sentiment in Thailand – South East Asia’s second largest economy – continues to appear quite positive, with expectations that Prayuth Chan-ocha’s junta government would continue to push through economic policies that have already proved favourable to a number of industrial segments.

 

“Domestic sectors such as retail and tourism, as well as ones related to foreign direct investment such as industrial properties, would gain due to continuity of key policies,” advised Chanpen Sirithanarattanakul, head of research at bank DBS Vickers Thailand, who went on to note that local companies set to benefit include CP All, the retail group that operates Seven Eleven convenience stores in the country, as well as Amata Corp., which operates industrial complexes.

 

Eastern promise

 

At the core of its industrial transformation policies lies the Eastern Seaboard, which for the past three decades has been the centrepiece of the Thai economy, linking trade and investment with the rest of the world. One of the country’s major industrial areas, the region serves as a hugely popular base for multinational carmakers and electronics manufacturers, and their gateway to ASEAN’s 600-million-strong consumer base. 

 

The establishment of two enormous capacity tyre plants – one commissioned at the start of April (Continental Tyre’s e250m state-of-the-art greenfield tyre plant in Rayong) and one that has just broken ground (Chinese firm Prinx Chengshan Tire Co. Ltd’s US$300m car and truck tire plant, slated to start operations in 2020) provide a snapshot of the kind of industrial investment that has become typical up and down the value chain of the auto industry. Meanwhile, Sony’s recent announcement that it will be closing its smartphone plant in Beijing and shifting production to Thailand is further validation of the attractiveness of the latter country as a base for the electronics sector.

  

Elsewhere, Thailand’s food and beverage sector is positively thriving, with investments over the past four years totalling over US$1.6 billion (THB 52.2bn), according to Thailand’s Board of Investment. The recently established Food Innopolis at Thailand Science Park in the central province of Changwat has already proved a draw for multinationals and has been touted as a global innovation hub and the gateway to the ASEAN. 

 

Corridor of commerce

 

Supporting such sectors, the incumbent government devised the ‘Thailand 4.0’ initiative, which includes development of the much-vaunted Eastern Economic Corridor (EEC) development. Set to cover 13,285 square kilometres and straddle three eastern provinces – Chonburi, Rayong, and Chachoengsao – the EEC will be focused on four core areas, according to the government: (1) increased and improved infrastructure; (2) business, industrial clusters, and innovation hubs; (3) tourism, and (4) the creation of new cities through smart urban planning. The government hopes to complete the EEC by 2021, turning those provinces into a hub for technological manufacturing and services (and creating 100,000 jobs in so doing), with strong connectivity to its ASEAN neighbours by land, sea and air. 

 

Priority infrastructure projects selected by the government to initiate the EEC development include a major expansion of U-Tapao airport in Rayong province, to boost annual passenger throughput capacity from 800,000 to three million. The project will be key for supporting the flourishing tourism sector, with Thailand hosting some 38 million visitors last year alone.

 

The government will also expand Chonburi province’s Laem Chabang seaport – already the country’s biggest – with the goal of transforming it into a marine hub of South East Asia. Container handling capacity will be more than doubled to 18 million TEUs per annum, while annual capacity to handle car exports will triple to three million units as part of the port’s dramatic transformation. To support such developments and more, high-speed and double-track railways will be key to creating faster, more comprehensive routes between airports, ports, industrial clusters, and urban centres, the government has stated. 

 

Additionally, the government is planning to build a digital park in Si Racha located on the coast of Chonburi with the aim of developing an Eastern Economic Corridor of innovation (EECi) – a complementary project which will provide digital connectivity.  

 

Incentivising investors

 

Present political uncertainty notwithstanding, Thailand is undoubtedly becoming an attractive place for businesses to set up. Alongside the ambitious projects underway and planned for the future, the federal Thai government has also implemented numerous less headline-grabbing but nonetheless tempting tax incentives alongside a more convenient visa framework in order to encourage further foreign investment and lure in expats. Tweaks to the country’s smart visa (for highly skilled professionals) means that the minimum monthly income requirement for holders has been reduced from THB 200,000 (US$6,293) to just THB 100,000 (US$3,147) – although for senior execs the minimum remains at 200k – while they also now benefit from a fast-track process through the country’s international airports. According to Chokedee Kaewsang, Deputy Secretary General of Thailand’s BOI, such perks are designed to “increase the country’s competitiveness and ability to attract more specialists.”

 

The government is hoping to secure much of the funding for the EEC – which has an estimated total price tag of US$43 billion – through PPPs and FDI. Clearly, offering attractive incentives for both foreign investments and foreign presences in the EEC will be essential in realising the EEC’s development. Yet it is the continuity of major projects such as EEC that would also help to bring in investments, asserts Suphan Mongkolsuthree, chairman of the Federation of Thai Industries – and the return of Prayuth as PM would assure that constancy. 

 

Much therefore hinges on the Election Commission’s decision on 9th May to certify the final results of Thailand’s recent national ballot. Still, most commentators anticipate an outcome that will deliver more of the same politically and therefore stability for the business community, even if the South East Asian nation’s ineptly orchestrated election is invariably found to fall short on its promise of democracy.