can the thais see the obvious

[gaijin]

two interesting articles appear in today's bangkok post. to farangs they state the obvious, but will thais not see this until vietnam streaks past them and malaysia matures into a 1st world economy? No strong modern economy has the xenophobic barriers that thailand is imposing. Is Thailand going to be the first country in the world to prove the negative of this proposition? I think not.

REAL ESTATE / RESORT PROPERTY

Big-ticket sales dwindle
Scandinavian niche developer seeing impact of uncertainty over FBA changes

NINA SUEBSUKCHAROEN



At SeaRidge in Hua Hin, condominiums starting at a roomy 112 square metres and costing four million baht are expected to draw plenty of interest, but the developers acknowledge that the villas on the site might be a tougher sell.
Attempts to amend the Foreign Business Act this year have led to foreign investment in the Thai real estate market plunging, says Lars Lang, a partner of Thai Estate Scandinavian Company, a niche developer.


Scandinavians in recent years have been active investors in Thai property, but lately the big players have become very hesitant about large-scale commitments, says Mr Lang. Individual Scandinavians are still buying but are shying away from anything costing more than seven to eight million baht.


Mr Lang himself said he recently failed to secure an investment from a Scandinavian who is now looking at the Vietnamese and Malaysian markets which are perceived to be more open and friendly to foreigners.


''So of course I hope [the government changes] something and I only look at it from the real estate point of view.''


The FBA amendment process is currently stalemated, following the adoption by the National Legislative Assembly on Aug 8 of a version that was even stricter than the military-backed government's original draft. The NLA favours using management control as a criterion of ''foreign'' status, which would bring thousands more business activities under the scope of the law.
Lang: Legal interpretations "confusing"





The two sides are now attempting to find some common ground. However, with the country moving into election mode, the chances of any meaningful legislation being passed for the rest of the year are slim. Whether the next government takes up FBA reform again is anyone's guess.


Even the current rules related to foreign investment are very confusing, according to Mr Lang, who says the same law is being interpreted differently in different areas such as Samui, Phuket, Hua Hin and Pattaya.


''That is very confusing. Of course, you have a government law but even the lawyers and the people around the area don't say the same thing.''


For this reason he hopes that any FBA amendments will be easy to understand. He singles out leasehold terms as a prime example.


''I don't have a solution but if there is leasehold, just make it 90 years so that people don't have to get 30 years and then maybe an extra 30 years, and people have to set up a company.''


The issue is whether the government wants foreign money because there are other countries vying for it _ Malaysia and Vietnam being prime examples that Mr Lang warned could overtake Thailand in a decade. ''I have people from Malaysia who want me to start a company there.''


The Danish entrepreneur, who also sits on his country's chamber of commerce locally, says Scandinavian businesspeople in Thailand are talking about focusing more on Vietnam where things are cheap, access is easy and the people are friendly.


''In the business network people talk in different ways and I know a lot of businesspeople here who say that we should actually look another way.''


While this may be so, Thai Estate Scandinavian Company is already heavily involved in Thai resorts with as many as five projects in Hua Hin, Phuket, Samui and Pattaya on hand.


The project in Hua Hin is the SeaRidge condominium and villa development with the smallest unit being 112 square metres and costing four million baht. Villas are in the range of 4.5 million baht but Mr Lang admitted it is not easy to sell this type of property right now.


There are two projects in Phuket. Scandinavian Lagoon Resort, on Chalong beach, is ''a very special project'' with a Swedish doctor in residence and a school. The price of 66-square-metre condominium with 21-square-metre terrace starts at four million baht.


The company is also starting a large project with a Danish investor at Kamala Beach called Kamala Falls. The smallest condominium unit is a 67-square-metre one-bedroom pad with a 15-square-metre terrace costing 5.5 million baht.


In Samui, Thai Estate Scandinavian has tied up with a Danish and a Norwegian investor for a designer villa project. Each unit will be custom-designed and will have its own name. One 700- square-metre villa with aquarium walls has been named Nemo by the buyer.


In Pattaya the company is marketing the Ocean's Edge luxury condominium on Krating Bay.


The flow of Scandinavian property investment in Thailand started from Sweden and later spread to Denmark and Norway. Earlier people of these countries generally bought resort properties in Spain and France but over the past three to four years, aside from Thailand, they have snapped up real estate in Turkey and Bulgaria but investment to the former has now dropped off.


''If you look right now there are quite a lot of Scandinavians _ it's not going to stop, this is only the beginning,'' says Mr Lang.


However, he noted that Thai-developed projects might not fly with Scandinavian buyers given differences in cultures and tastes. ''The problem, if we can say so, is that Thai people cannot sell to Scandinavian people and Thai people don't understand the way Scandinavian people think _ we don't want big walls, we don't want a project that looks like a prison.''


To help Thai developers reach the lucrative Scandinavian market better, Mr Lang has been working as a consultant for Thai businesses. ''I've just been down to the north of Khao Lak and I've been in Krabi to meet some people. It's not being rude or anything but there is a difference between Thailand and Scandinavia and maybe we Scandinavians cannot build what Thai people want.''


Our fragile economy


Thailand's economy, encumbered by political uncertainties and falling domestic demand, puts the nation among "the most vulnerable countries in Asia" to a decline in global economic growth, Fitch Ratings warned on Monday.

"The growth of domestic demand is extremely low, and net trade is largely responsible for headline GDP growth. In this context, Thailand is among the most vulnerable countries in Asia to a reduction in global economic growth," said James McCormack, head of Asia Sovereigns for Fitch Ratings, an international rating agency.

Thailand's economy has been driven by strong exports this year, which surged more than 18 per cent during the first six months, but started to slow in July.

McCormack, addressing a conference in Bangkok on the Thai economy's prospects organized by Fitch Ratings (Thailand), added that Thailand's sovereign creditworthiness remained sound, and there are no immediate pressure on its sovereign ratings.

Visit Tantisunthorn, secretary general of the Government Pension Fund, said "growth should pick up in 2008 once there is greater clarity on the political front."

Thailand has suffered unprecedented political uncertainties since early last year when the Bangkok-based elite and middle-class started street protests calling for the resignation of elected premier Thaksin Shinawatra and his populist Thai Rak Thai (Thais Love Thais) Party.

The discontent culminated with a military coup on September 19, 2006, that toppled Thaksin and ushered in an appointed interim government. A general election scheduled on December 23 is expected to return power to civilians and restore some semblance of normalcy.

The political turmoil comes at a time when regional economies, stock markets and banks are being threatened by the US's subprime mortgage crisis.

According to Fitch Rating's recent survey of Asian banks, the largest exposure to the subprime mortgage sector "relative to the investing bank's own equity capital" was at BankThai with 21 per cent of its own equity, followed by the Bank of China with 17 per cent.

"Our conclusion that the direct impact of investments in the US subprime mortgage sector on Asian banks should be limited. However, Fitch is concerned that there may be indirect effects from providing liquidity to conduits, from losses to investors in banks' asset management arms, and from having to take valuation losses on marking to market non-subprime-related CDOs and other structured securities whose underlying assets remain sound but whose market value has fallen due to market illiquidity," said David Marshall, Head of Financial Institutions, Asia Pacific at Fitch Ratings.

Bank of China's exposure to the subprime mortgage sector was estimated at 10 billion dollars compared with the much smaller BankThai's 50 million dollars, according to the Fitch survey. (dpa)