Although recent riots have crippled tourism, Thailand depends largely on manufacturing and exports for growth, which is expected to hit 6 percent this year
Here's a conundrum: While Thailand's famous tourist industry is flat on its back, the economy is headed for 6 percent growth this year, according to analysts at Forecast in Singapore. The stock market is up 11 percent, an achievement when most of the world's bourses are sharply down. And the baht, Thailand's currency, has crept up almost 3 percent since the start of the year.
You wouldn't suspect such resilience if you strolled through downtown Bangkok. There the sprawling CentralWorld shopping center lies partially in ruins, torched by antigovernment protesters on May 19. A memorial of life-size plaster figures of people holding hands stands close by, with greetings left by would-be shoppers. "I ? CW," writes one. "Please come back soon, hopefully with a skating rink again."
The protests left at least 89 people dead. There's been "a huge decline in forward bookings," says William E. Heinecke, chief executive officer of Minor International, a Bangkok-based company that operates 16 Thai hotels. Minor shut its Four Seasons hotel in Bangkok for more than a month because of the protests, and occupancy rates at the reopened facility are now between 20 percent and 30 percent. Priscilla Andre, CEO of Pavilions Resorts, rents out 25 luxury villas on the island resort of Phuket. About half of her villas are occupied, she says, compared with about 70 percent a year ago. Radhika Rao, an economist at Forecast in Singapore, figures the dropoff of tourism will shave as much as a full point off Thailand's growth, and travel executives fear the protests could resume at election time early in 2011. The Thai government, meanwhile, says tourist arrivals could still edge out last year's number.
Yet even with the industry in shambles, Rao expects the economy to expand at a healthy clip in 2010. Although tourism is the most visible prop to the Thai economy, it makes up only 6 percent of gross domestic product. Exports of farm products and manufactured goods comprise two-thirds of GDP. The advantages for Thai exporters are many, says Peter John van Haren, whose company, Wiik & Hoeglund, ships drainage pipes from Thailand to customers around the region. "All the infrastructure is built up," says Van Haren, "the shipping companies, the ports, customs."
U.S. and Japanese automakers in particular are ramping up operations in Thailand, which has positioned itself as a manufacturing hub for Southeast Asia. On June 24, Ford Motor (F) announced a $450 million plan to produce its Focus car in Rayong province 165 miles south of Bangkok. On June 30, Nissan said it will assemble its compact, the March, in Thailand. Toyota Motor (TM) and General Motors will probably expand Thai production as well. "We remain optimistic," says Ray G. Young, GM's president of international operations. "Our business and expansion plans will continue in Thailand without delay."
Thai exports are likely to grow 25 percent to 30 percent this year, according to Rao. "Manufacturers are fully aware Thailand is prone to such political unrest," she adds, "and most of them are O.K. with it." Not counting the recent riots, there have been 10 coups in Thailand since 1971. The big exporters like GM and Ford survived those, too.
The bottom line: The bloody riots that paralyzed Bangkok have ruined tourism for this year, but manufacturing and exports are booming.