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source: Bkk Post
For months, most businessmen believed that the Dec 23 election would restore
optimism about the country's longer-term economic outlook, which had been
severely damaged by the 2006 coup.
But the new military-drafted constitution, which favours weak coalition
governments, could complicate the hope for consistency in the new economic
policy framework.
Business and consumer confidence took a beating after the September 2006 coup,
with private investment and consumption both grinding to a halt in the first
half of 2007.
According to a November survey conducted by the Federation of Thai Industries,
business confidence picked up in the last quarter in light of the election. But
firms became more concerned about shortcomings in the continuity of economic
policies, rising oil prices and the worsening US sub-prime problems.
Amara Sriphayak, senior director for the Domestic Economy Department at the Bank
of Thailand, said domestic demand was helped by economic policies that focused
on grassroots spending.
''Domestic demand declined since 2005 partly because of the cyclical factor _ it
had been accelerated earlier by both fiscal and monetary policies. But in 2007,
the problem was sentiment,'' she said.
Investment activities turned around in the second half of the year in line with
improved confidence in anticipation of the year-end election. Sustained high
capacity utilisation suggested firms were ready to invest.
Dr Amara said investment in certain projects not related to public spending
could improve right after the elected government is formed.
Business that can support the overall industrial sector such as petrochemicals,
as well as automobiles and electronics, could start investments after the new
government takes shape.
Projects in the public-sector pipeline, including about 100 billion baht worth
of investment along the Eastern Seaboard, would help improve momentum for
private investment, she said.
Prasarn Manoleehakul, the president of Kasikorn Research Center, said public
spending efficiency would play a key role in boosting private investment in
2008.
''Businesses want to be confident that there is demand to serve their
investment. The size of 2008 fiscal expenditure budget is sufficient, but the
problem as usual in the past is the speed of disbursement,'' he said.
Phatra Securities expects private investment to become a key economic engine,
with 6.1% year-on-year growth in 2008 and 9.2% year-on-year growth in 2009. The
growth will help offset a decline in exports due to the US sub-prime debt crisis
in 2008.
Supavud Saicheua, managing director of Phatra, said that accelerated state
enterprise spending and investment in tourism-related sectors could begin right
after the new government is formed.
Certain projects that need clearer government policies could recover in the
second half of the year. Assuming clear policies
are set regarding the Foreign Business Act, foreign land ownership and the 30%
reserve requirement.
Board of Investment records for submitted and approved projects for investment
promotion reflected significant projects in the backlog.
''But we are at the point where we must decide which direction we want our
investment to go and what investment suits our fundamentals,'' Dr Supavud said.
For instance, the economy should utilise the Japan-Thailand free trade agreement
to benefit the local automotive industry, given tight competition from countries
such as India. The country should also think about whether it wants to focus on
heavy industries such as steel to boost the automotive sector.
It's important for the government to clarify its stance on alternative energy,
he added.
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