What's Happening to Thailand?

Thailand is going through an upheaval now that is causing a lot of confusion. It may help to put things in perspective if we look back in time to see what has influenced decisions being made today. Rather than looking at just the property market in this assessment, I offer some insights into what will happen in the future if we don’t all make some hard decisions today.

Let’s start way back in 1963 when I first came to Thailand. Back then I was lucky enough to be invited to an International Boy Scout Jamboree. My troop (I was a Queen’s Scout) traveled up by train from Butterworth in Malaysia. The trip took us through many small villages surrounded by rice fields or rubber plantations that soon merged into the jungle. There was a lot of jungle around way back then, with plenty of tigers and crocs too.

As we arrived in Bangkok we crossed the steel bridge over the river, through more rice paddies almost all the way to Hua Lamphong. The Friendship Highway to Esarn had not been built yet, and Thailand was covered in verdant jungle everywhere.

Politics in those days weren’t much different to today’s unfortunate situation. The army generals ruled the day, and the 26-family elite ensured that Thai ‘culture’ was upheld to maintain their traditions and way of life.

My next trip here was in 1967 as a guest of the Thai government with the Royal Australian Air Force to fight the Commies from Ubon Ratchathani during the Viet Nam war. You can read about what we faced here: http://searchwarp.com/swa77414.htm. This is when the rot set in and Thailand really started to change. It was gradual at first, but it accelerated as time went on.

Ubon Ratchathani city in those days was that couple of blocks you drive through after you cross the bridge over the Moon River. The open market is still there today, and the old shop houses are the same. That was it, plus the huge air base of course, which is now the Ubon airport. Back then there was a wide swathe of denuded countryside surrounding the air base to give us a clear field of fire in case Thai or Lao Cong attacked us. Today, that area is covered in houses. You would never know we fought a war there.

We couldn’t go too far from the air base back then, but we did manage to arrange a trip up to Roi Et for one weekend. All the way up there we traveled on a laterite road full of potholes and hemmed in by thick jungle. The rape of the forests hadn’t started yet, and Esarn was only sparsely populated. By the way, Roi Et back then was a charming little town, and well worth visiting, but that’s another story.

By the time I came back to Thailand for the third and (so far) final time in 1978 I saw huge changes. Bangkok consisted of Sathorn, Silom and Suriwong roads, Patpong was flourishing, and if you went any further north than Petchburi road you were out in the rice fields again. Despite this, Bangkok was thriving and choked with cars. Traffic jams were far worse than anything you see today. It would take at least 3 hours to drive from Silom road out to Don Muang airport. Even then, plans were being discussed to build a new airport. It took them a while, but they finally did it last year. The road to Pattaya was a 2-lane blacktop and it took at least 3 hours to get there. And Pattaya only boasted a couple of hotels, restaurants and bars. The main attraction was the beach. How things have changed!

When I arrived, General Kriangsak was Prime Minister, and he was the one who really kick started Thailand’s leap into the 20^th Century. Under him new laws made Thailand an attractive investment target and foreign companies started pouring in. The textile industry employed thousands of workers, car and other manufacturing facilities started up, and the economy started to boom. By the time Prime Minister Prem Tinsulanonda came to power Thailand was on the road to riches.

Of course, it wasn’t all good times. Nava Finance collapsed in the mid-1980’s dragging down a bunch of other finance companies with it. Property prices didn’t tumble, but they did level off and sales virtually stopped. The emerging middle class felt the pinch, but only for a couple of years. However, the Nava collapse brought about a major revamp of the financial sector, strengthening the economy and paving the way for the huge spurt of growth up to 1997.

Unnoticed by the Thai authorities was the plight of the poor farmers, most of them up in Esarn. Despite the industrialization of the country, the farmers still carried the load, often working for a pittance in return. The Chinese rice merchants got rich as the farmers fell into debt buying chemicals to increase their yields, or to buy seed for the next crop. Rice exports boomed, as more land was cleared. The jungle disappeared so fast no one realized it until it was too late. Many wild animals were wiped out along the way. The only way you see tigers up in Esarn today is at a few zoos.

The cost in other terms was drastic too, and it continues today. Many farmers lost their land because they couldn’t repay their debts. They drifted to Bangkok to drive taxis, or to labor on the many construction projects for a pittance. Their lot didn’t improve. They just changed location to be exploited in a new place. The government approved a couple of dam projects that flooded whole communities. Opposition to the dams was strong, but the government didn’t do anything about it. After all, who cares about a few poor farmers, right? Of course, whole species of fish were wiped out too, because they couldn’t reach their traditional breeding grounds. But again, who cares about some fish?

By 1997 the country was ripe for collapse, Property prices in Bangkok had risen to unprecedented levels. Pattaya, Samui and Phuket followed, although somewhat slower. Foreigners were flooding in to buy their piece of paradise, and the Thais were right there to help them do it. There is a law barring foreigners from buying land? No problem, we’ll just ‘bend’ the law and let the foreigners set up Thai nominee companies.

Corruption was helping the slide as the elite took their profits and said to hell with the country. Of course, they didn’t care because they had the foreigners to blame if anything went wrong, right? But they forgot that Thailand is their country. The foreigners have no power. Never have.

No problem, the mantra Thais always chant whenever there is a problem. It doesn’t make the problem go away, although the Thais seem to think it does. But eventually, someone has to pay, as we’ll see.

Meanwhile, Mr Thaksin came along after the economic collapse and tried to right some of the wrongs that afflicted the country. The OTOP scheme, the 30 Baht medical scheme, debt relief for farmers, all endeared him to the people upcountry. Unfortunately, he suffered from the same disease that has afflicted Thailand from its earliest history: Corruption.

Now, I’m not going to get moralistic here. Corruption is a fact of life everywhere in the world, even in the West where the rich and upper echelons of government practice it and therefore it rarely comes to light. But Thaksin was not only corrupt, he was greedy and that was his downfall. He thought he was bulletproof, but as he learned no one is safe when they overstep accepted behavior norms. We all knew there was corruption, but when he flaunted it so blatantly using his position to avoid paying taxes his days were numbered.

So, we had yet another coup, dragging Thailand back to the bad old days once again. Despite this, I defended the coup because I looked at the immediate benefits, and because it was peaceful. Silly me. I didn’t look at the effect it would have on the future. It didn’t take long to see what we had got ourselves into.

Thaksin may not have been the best Prime Minister, but he was elected by a large majority of the people. Now, the people have lost power and we are ruled by men who only understand authoritarian rule. I’m not going to comment on their actions since taking power. They should be obvious to anyone who cares to look.

But where is all this going to lead us? Will Thailand survive?

Whether the Thais like it or not, their country is inextricably tied into the international market. They have bound themselves with trade agreements, imported technology and machinery, set up factories, and ‘modernized’ their country. They have allowed thousands of business people to come in to help them run the businesses, and to transfer technology. But when there is a problem with their financial system it reverberates around the world. We’ve already seen evidence of this twice in the last 10 years, first in 1997. And then most recently in December 2006 when the government announced new foreign exchange controls that saw over 800 billion Baht flee the country in a single day. We are still reeling from that blow, and the effects are likely to continue to affect the country negatively for at least two more years.

The problem is, foreign investor confidence has been severely damaged. Western investors in particular are no longer rushing to bring money here. How can they when they can’t be sure what the government is going to do next? First they announce they will enforce the law to stop foreigners setting up Thai nominee companies. Then they change the visa laws. Once again confidence is eroded as we all start wondering what new changes to the visa laws the Thais will enact in the future. Every time we go to the immigration office we are faced with changes. Stability would encourage confidence.

The recent announcement requiring investors bringing in foreign exchange to deposit an additional 30% into a government account that pays no interest for 12 months is just one more nail in the coffin. Of course, this only applies to money brought in that is not for business or to buy a condo, but the law has already affected the home purchase market.

The government has effectively stopped all foreigners buying homes in Thailand, unless they accept a 30-year leasehold; a very unpalatable alternative that most will reject. So the Thai government has effectively cut off all that money from filtering into the Thai economy and providing jobs for thousands of Thais.

Have they considered that most of the foreigners buying homes are also marrying Thai women who will inherit the house when their older husbands die? Who loses in this deal? Certainly not the Thai nation.

This brings us to the future. The current economy is linked to oil, and that oil is running out. It may take 20, 50, or even 100 years. No one knows. But one thing is for sure. It will run out.

Meanwhile, burning all these fossil fuels is raising the temperature of the earth, and this is melting the polar ice caps and raising the ocean levels. Recently, a huge chunk of ice broke off from the Arctic. It is currently iced in off Ellesmere island, but as soon as the thaw comes all that ice will start floating around. It will be a huge danger to shipping, but even worse, as it melts water into the ocean the sea level will rise. How big is this chunk of ice? It’s a 55-million-square-foot free-floating island of ice the size of a small country.

How will this affect Thailand? It probably won’t have much impact…yet. But if this trend continues and the ocean levels keep rising the whole rice bowl area of central Thailand will be flooded. Bangkok will be completely under water. The ocean will be lapping a new shoreline hundreds of kilometers north, east, and west instead.

This is not going to happen overnight, but we need to start thinking about it now if Thailand is going to survive. The current petty political infighting pales into insignificance when you start thinking globally. Is the government giving any thought to this scenario yet? Of course not. They are too busy trying to figure out their immediate concerns. But Thailand needs a new government that will look far into the future and make plans to ensure the country’s survival when the oil runs out. We can’t continue the same policies that have led us this far.

One place they could look for ideas is Cuba. Before I go on, let me qualify this statement. Cuba is still suffering under Communist rule and as with many other Communist countries time has stood still. Despite this, they have tried to implement some policies that could work for other countries if done properly. My sources tell me that while the intent was good in Cuba, ultimately their policies still failed. But this doesn’t mean that all the ideas were bad.

Cuba has already passed the ‘peak oil’ crisis and more or less survived. They did it by reverting to natural farming methods, and encouraging their people to become self-sufficient.

After the Soviet Union collapsed, Cuba no longer had access to unlimited oil supplies, no food supplies to rely on, and they had no money to buy much-needed oil. So instead, they had to look inwards. Cuba’s Ministry of Agriculture suggested that the low-input, organic methods they had been experimenting with for years be introduced on a broad scale and that agricultural output be directed toward local consumption. Over the years, people all over the country dug their own gardens and started producing enough food to feed the nation. Today, they do not rely on imported fertilizers or other chemicals. Instead, they use natural fertilizers allowing them to conserve valuable foreign exchange for things they can’t produce themselves.

There are very few cars on the island; all of them very old, so they don’t need super highways or the infrastructure to support the car. As a result, they don’t have pollution problems, and they don’t need to import much oil. Instead, they have a homegrown public transport system, somewhat similar to the Baht bus system in Pattaya.

Because the Cuban military realized the country could be blockaded any time and they would lose access to imported pharmaceuticals, they set up a special laboratory to develop natural herbal remedies instead. Today, their herbal products are used to treat illnesses. Again, I can’t vouch for how effective this program is, but at least it is a step in the right direction. We already see the bad side effects of using Western antibiotics. Sure, they are better than anything else, but used wrongly they become ineffective.

Cuba was forced to a new economy by outside forces. Thai leaders need to consider this too, as the country is in an even more precarious position than Cuba ever was. All the oil we use is imported. We rely on a huge manufacturing and export base for all foreign currency. It will not take long for the economy to collapse if the oil runs out, or if there is another serious interruption to the global economy. For example, the US is currently in trillions of dollars of debt. As they no longer peg the value of the dollar to gold they are printing as many notes as they need to fuel the economy. But that paper is worthless if there is no value to back it up. Already, many countries, currency traders, and investors are switching their US dollars to Euros or other currencies that have a more secure backing.

China, for example, is just one country that holds billions of US dollars in their coffers. All they have to do is start calling in their debts and the US could be in serious trouble. If that happens, the whole world economy will totter, if not collapse. The consequences don’t bear thinking about.

There is no point in sticking our heads in the sand and saying, “Aw, that could never happen.” It can and it will. It’s only a matter of when, not if.

So, what can the Thai people do to avoid catastrophe? The first step is to overcome the political upheaval currently besetting the country. These things take time of course, but it needn’t take the 12 months the military leaders have mandated. The handover to a democratically elected government needs to be done as quickly as possible.

The first step is to draft a constitution that will protect us for future generations. Perhaps one clause that could be written into the constitution is that the military will never again conduct another coup, for any reason. The military should be subordinate to the government and the people, no matter how bad the elected government is. Coups are bad for business. We have already seen billions of dollars foreign investment flee. Can we afford to keep scaring foreign investors from coming here to bolster the economy?

A new government should review their current investment criteria and seek to encourage investors in alternative energy. We have unlimited sunshine here. Why aren’t we using it, instead of relying on oil to generate our power and run our industry?

In today’s global economy, it doesn’t make sense to penalize foreigners who are willing to come here to live. Foreigners are willing to integrate, marry Thais, raise Thai children, and build businesses that employ Thais. We are good for the country. Instead of penalizing us with xenophobic attitudes the government should be seeking ways to make us feel wanted and valued. Too many people I know are leaving Thailand right now because they fear the next move by a government that seems to feel we are a problem. These fleeing foreigners are taking with them their money-generating skills; money that could be invested into the country.

Thai farmers need to be encouraged. If they are in debt the government should seek ways to relieve them of their debts, instead of letting them go bankrupt or selling their land to rich groups who won’t husband the land. The Thai farmer is still the backbone of this country, and in a future without oil he will be the salvation of this country. We need to help him profit from his labor.

Socially, the country needs to assess how beneficial some of its institutions are. For example, decent health care is only available to those with money. The Thaksin 30 Baht healthcare scheme was a step in the right direction. If Thailand were to develop its indigenous natural and herbal remedies, we could save billions on imported pharmaceuticals that often cause more problems than they cure.

Quality education is vital for any country to produce generations of intelligent people able to contribute to the country’s wealth and welfare. The hi-so’s who run Thai society do not need educated masses. They need docile sheep that will work hard for the hi-so’s who pay them to buy the stuff they sell them. They need docile sheep addicted to mindless soap operas on TV, or who read stupid comics so they will not get interested in politics. We keep hearing talk of education reform, but I see very little evidence of improvement. Keeping the general populace barely educated will perpetuate the current situation, and Thailand will never have an opportunity to gain its rightful place in the world.

But more than anything, we need forward-thinking politicians and technocrats who are not afraid of making hard decisions that will benefit the country in the future, instead of seeking to line their own pockets at the expense of their fellow Thais. It’s your country Thailand. Do you want it to continue as a third world country forever? Or are you willing to make the sacrifices to make your country the paradise it has the potential to be? It’s up to you.