by John Berthelsen / Asia Sentinel
8 June 2007
Economic signs in Bangkok are mixed, as the junta’s policies chip away at investor confidence.
The first tangible signs are starting to emerge that, as expected, policies put in place after Thailand’s military coup last year are having a negative effect on the country’s economy, with both domestic and foreign investment declining and growth in consumer spending falling to 1.3 percent annually.
Although the economy expanded faster than expected, at 4.3 percent in the first quarter against a forecast 3.7 percent, the rise in gross domestic product was built largely on exports, which comprise 60 percent of the economy, and government spending.
The junta, which ousted former Prime Minister Thaksin Shinawatra in September 2006, has made a series of ill-considered economic moves, including halting the longstanding practice of using nominee firms to bypass the 49 percent foreign ownership restriction. The military-appointed government also instituted measures aimed at stemming speculative short-term capital inflows. The rules were designed to force overseas investors to deposit 30 percent of non-trade-related baht purchases worth more than US$20,000 with the central bank, interest-free for one year. If the money is withdrawn before 12 months, the Bank of Thailand keeps a third of it, which effectively raises transaction costs 10 percent. Read the rest of this entry »