Elections : welcome to the institutionalized instability

PPP wins. But fails short of a majority. Democrats are following. Like always. And small parties are back to where they belong : fiction.

Here is a quick summary of the general elections.

A few comments :

-exactly like many people predicted : the general elections solved basically nothing. The country remains deeply divided.

-thanks to a twisted Constitution and electorals laws, it’s back to the future with an institutionalized instability. PPP will probably form a government, but the road will be very bumpy. The military will watch carefully each of the new government’s steps.

-One Coup d’Etat and 15 months of Junta… for that ? To see Thaksin coming back? What a huge lost of face for the generals in their tight and shiny uniform. It’s a disgrace.

-The Junta and its leader Sonthi are in a corner : they can’t launch a second coup. They are caught in their own rethorical trap.
They promised free and fair elections to “restore democracy”… well thai people listened to them ! We are back TO SQUARE ONE.

-The responsability of the Junta is huge : during their 15 months of governement, they did… nothing. I mean nothing new. Nothing real for the people. Instead, they followed a very conservative agenda and pursued some stupid and childish obsessions. I won’t go into details : just read mypast posts…

Even if I never had a lot of illusions, I feel today bitter.

The country is facing obviously a dark future.

And unfortunatly, if I may say, this website ThaiCrisis is likely to continue… for a long time.

Anyway. It’s time now for a few hollidays. I’ll be back to work on january 2.

Oil Fund : debt repaid, but tax remains

First the good news : “The Energy Ministry announced on Friday that the Oil Fund will on Saturday clear all the debts of Bt92 billion incurred during January 2004 and July 2005.” (Nation)

Prime Minister Thaksin decided in january 2004 to subsidize gasoline… Leading to a huge debt. After that, the Oil Fund was created, with a tax for every liter sold, in order to pay back the debt.

Now the bad news : “Following the final payment, the Oil Fund would maintain compulsory contributions from oil retailers“.

The target of the government is clear : to save 10 billions THB by december 2008 “for emergency cases and for promotion of alternative fuels.”

But a small % of the contribution (50 satang per liter) will be “channeled to the Energy Conservation Fund to finance rail network construction.”

So it means that retail prices of gasoline are not going to decrease in Thailand anytime soon.

Unless the new government decides otherwise…  😉

Elections, astrology : “Mars will empower 6 planets in orbit”

“Mars, which represents the military, will come to strengthen the full moon on the post-election day, empowering six planets in orbit, meaning a coalition of five to six parties,” said a famous thai astrolog.

Damn it ! I knew it !  😉

One day before the elections, here is a delightful piece published by the International Herald Tribune.

Vote of Internal Security Bill : a second coup d’etat

They did it.

Without any shame, any restraint (general elections in only 3 days !)… the National Legislative Assembly (appointed by the Junta) has voted (last night) the infamous and controversial Internal Security Bill.

It’s nothing less than a second coup d’etat.

“The controversial Internal Security Bill was overwhelmingly endorsed by the National Legislative Assembly yesterday with no lawmaker opposing it during two hours of deliberation.

The assembly voted 105-8 in favour, with two abstentions.” (Nation)

Well done gentlemen. This is pure thai “democracy” at work.

This bill “grants the ISOC, headed by the prime minister as director with the Army chief as deputy head, the authority to order curfews, restrict citizens’ freedom of movement and access to and use of any electronic equipment, place anyone under house arrest, stop vehicles and close down roads or transportation routes, and order any government official to carry out or stop carrying out any duty.”

For more details on this very dangerous law, read here and here (english translation)

Currency “management” : BOT lost 228 billions THB since 2006, and has a debt of 2 trillions

The BOT lost 170 billions THB in 2006 due to the “management of the foreign currency exchange”. And the central bank could loose 58 billions more in 2007.

This is the bomb released within the report “One Year of the 30 Per Cent Reserve Requirement” published by the BOT (read here).

“The Bank of Thailand is expected to suffer losses of more than Bt58 billion from its management of the baht volatility this year, according to Assistant Government Spokesman Chotichai Suwanaporn.

The central bank had experienced losses and debts from its efforts to cope with the baht appreciation through the capital control measure and interventions in the currency movement.” (TNA)

At current exchange rate, that would make a total of 6,7 billions USD.

Quick reminder : since 2006, the BOT is manipulating (sorry, “managing“…) the currency market in order to curb the appreciation of THB vis-a-vis the USD. This policy (that consists grossly to buy USD and sell THB) has of course a high cost, when the global trend of the USD is clearly downward.

But there is something even more disturbing.

“As for debts incurred from the intervention in the baht’s movement in the past one to two years, he said, the bank had already borrowed Bt1.5 trillion onshore through issuing bonds and the repurchase market to intervene in the baht. The bank had also planned to issue additional bonds of Bt500 billion if needed.

So, the bank is likely to incur total debts of Bt2 trillion or 20 per cent of Thailand’s gross domestic product (GDP).

Given the fact that the US dollar tends to continue weakening and that outstanding debts of over Bt1.2 trillion incurred by the Financial Institution Development Fund from the economic crisis in 1997 remains unsettled, the central bank is in a difficult position to service debts in the next 15 years.“

This process is called “sterilization” : when the BOT is buying the USD of thai exporters, and exchange them against THB, that creates liquidities on the market. By issuing bonds (debts), the BOT is able to take back part of those of THB, and “sterilize” them (otherwise that could trigger inflationary pressures).

So to summarize :
-the BOT accumulates USD (foreign currency reserves, growing every month, read here)
-and issues bonds (in local currency) with interests to be paid (in local currency)

We could think : no problem the foreign currency reserves could offset in a way the debt and interests to be paid in the future… But what if the value of USD continues to decrease vis-a-vis the THB ? Cisor effect.

Therefore, the BOT is making a dangerous bet on the future. In order to save exports now, the BOT is playing with the future.

Elections, first rule : don’t talk about the alliances you’ll make after

Thai political parties have a strong tradition, like a rule of the Fight Club :

-you don’t speak before the elections about the alliances you will make after the elections

😉

So, it allows the voters to stay in total darkness. It’s very convenient… And much more sanook.

“Banharn Silpa-archa has thanked Democrat party leader Abhisit Vejjajiva for reaffirming his political alliance with Chart Thai party if the Democrat won the election. The Chart Thai party leader described it as “a kind gesture” but failed to elaborate what his merger plans are.

“Let’s wait until after the election,” he said, “I get headaches when I talk about this now.”

Speculation is rife that Chart Thai party is preparing to form a three-party coalition with the People Power party (PPP) and Puea Pandin parties. It was only recently that deputy Chart Thai leader Somsak Prisananantakul was said to have met with Surakiart Sathirathai, former coordinator of Puea Pandin party to discuss merger plans. “ (Bangkok Post)

Chart : new business registrations, comparison 2006-2007

Following this news, here is the chart with the figures until november 2007.

“Due to the economic slowdown, new registered business in the country has dropped consecutively by 12.73 per cent in the first 11 months this year” (source DBD)

Car industry : sales drop 5,14 % year-on-year

Carmakers witnessed a drop in vehicle sales of 5.14 per cent year on year in the first 11 months, with only 566,095 units sold, Tri Petch Isuzu Sales research shows.

Remarkably, data show that last month’s sales were not much better than October’s, with a 0.24percent drop in terms of volume (Nation).

For a chart of sales of passenger cars per quarter, click here. The BOT will release the datas for november by the end of this month. I will update the chart with monthly figures, and with the sales of commercial cars as well.

Currency : the BOT “eases” capital controls

One year after the “day of infamy”… the BOT wants apparently to make low profile. And entertain us a little bit.

Quick reminder.

On december 18 2006, in total panic mode, the BOT announces a set of capital controls. All the money coming into Thailand shall be hit by a “30 % reserve” rule (for 1 year and without remuneration).
The stock market plunges immediatly. By 15 %. 24 hours after, confronted to a total PR disaster, the authorities announce some “exemptions” to the newly born rule (and break by the way the thai record of U-turn speed…).

It was the first big mistake of the Junta. At least, on the economy level. 😉

One year after, it’s good to remember the causes (official) of this policy : the THB was appreciating quickly vis-a-vis the USD. Too quickly for the BOT. A level inferior to 1 USD = 35 THB was considered at that time as a lethal danger for the exporters.

Again one year after, it’s ironic to see that 1 USD = 33,60 THB and apparently the thai exporters are doing very well thank you.

So, how to celebrate with dignity this anniversary ? The BOT founds a way : by announcing further “easing“. I won’t go into details, because it’s worthless (read Nation).

However, it’s interesting to note the statement : “Assistant Governor Suchada Kirakul said the BOT would revoke the measure only on condition of domestic-demand recovery, balance of capital flows, lowering of risk from the amount of capital inflows incurred by the US dollar’s depreciation and further measures to manage the baht and liquidity.

“If the new government introduces good and clear policies, the economy would pick up rapidly. At that time, we could remove the measure,” she said.”

I translate for you : you can talk to the hand if you expect a quick cancelation of the 30 % reserve rule. 😉

Unless of course, if we have a totally new government after the elections sunday, that would decide to scrap the system (for instance, Democrat Party said it would do it).

But then again, I really believe you can… still talk to the hand. 😉

Joke of the day : Miss Leena has 2 faces

With the elections straight ahead… it’s time to ease our zygomatic muscles.

Here is a snapshot of the campaign in Bangkok, so… thai if I may say. 😉

Ladies and gentlemen, here is Miss Leena Jang !

Do you prefer her “severe” look ? Of the more “glamorous” version ? 😉

I think it could be the alpha and omega of political marketing : a face for every group of voters.

The baseline of her posters is : “A woman who fight for poor people“.

Go Leena, go ! 😉

FBA, Retail Act : Commerce Minister admits defeat

At last, a good news !

Commerce Minister Krirk-krai Jirapaet admitted yesterday that amendments to the Foreign Business Act and the new Retail and Wholesale Business Act would not be approved by the current government.

”The [National Legislative Assembly] only has two meetings left, and previous meetings were adjourned due to the lack of a quorum,” he said.

Mr Krirk-krai said he was personally willing to push ahead with the two controversial bills, but said efforts to move the legislation forward had been undermined by various special interests. (Bangkok Post)

“The drafts drew huge opposition and it will be the next government’s responsibility to support the bills as both the Retail Business Bill and the FBA’s amendment are essential for the country,” said Commerce Minister Krirk-krai Jirapaet. (Nation)

Krirk-Krai was the designer of the FBA 2 draft… Result of this ? More than one year of uncertainty for investors. Congratulations mister Minister. 😉

Now, let’s see what will do the next governement…