Perspective >> 2011 Thai General Election

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Perspective >> 2011 Thai General Election

  1. 1. Perspective >>2011 Thai General Election Foundation Consulting Bangkok ▪ Hong Kong ▪ Stamford
  2. 2. DisclaimersThe information contained in this document is the proprietary and exclusive property ofFoundation Consulting except as otherwise indicated. No part of this document, in whole orin part, may be reproduced, stored, transmitted, or used for design purposes without theprior written permission.This document is provided for informational purposes only. Foundation Consulting makesno representation or warranties with respect to the contents or use of this document, andspecifically disclaims any expressed or implied warranties or usefulness for any particularpurpose of this publication. Foundation Consulting reserves the right to change or revise thisdocument at any time.Privacy InformationThis document may contain information of a sensitive nature. This information should notbe given to persons other than those who are involved in TH-158 or who will becomeinvolved during its lifecycle.TrademarksCopyright 2011 Foundation ConsultingAll rights reserved.Foundation Consulting, its logo, and Grow Sales, Grow Profits, Grow People as well as WeLove Challenges! We Love What We Do! We Deliver Results! are trademarks of FoundationConsulting.The contents of this document are the exclusive property of Foundation Consulting and areprotected by international copyright laws. No part of this document may be reproduced,photocopied, stored on a retrieval system, or transmitted without the prior written consentof Foundation Consulting.This document may reference trademarks owned by others. The use of such trademarks isnot an assertion of ownership of such trademarks by Foundation Consulting and is notintended to represent or imply the existence of an association between FoundationConsulting and the lawful owners of such trademarks.This document is produced by consultants at Foundation Consulting for informationalpurposes. If you require advice or further details on any matters referred to, please contactyour Foundation Consulting representative.Foundation Consulting Private and Confidential Distribution Subject to Copyright
  3. 3. Version History REVISION CHART Version Author(s) Description of Version Date Completed1.0 GMT/MW/DA Published Draft 21 August 2011 Foundation Consulting Private and Confidential Distribution Subject to Copyright
  4. 4. Document OwnerThe primary contact for questions regarding this document is:Author: Gregory M. Thomas, Mike Williams, Duangporn AkkaravivatProject Name: TH-158Phone: +66 (2) 207-2392Email: g.thomas@fc-asia.comDocument ApprovalDocument Name: Perspective >> 2011 Thai General ElectionPublication Date: 21 August 2011Prepared by: Duangporn AkkaravivatFoundation Consulting Private and Confidential Distribution Subject to Copyright
  5. 5. Table of ContentsIntroduction 5Part One - Legitimacy 7 Legal 8 Power Sharing 9 Moral Leadership 10 Reform 11 Legitimacy - Conclusion 13Part Two - Governing 15 Economy 16 Education 17 Infrastructure 21 Productivity 22 Governing - Conclusions 25Endnotes 26Foundation Consulting Private and Confidential Distribution Subject to Copyright
  6. 6. IntroductionThe recent general election in Thailand has caught the imagination of the international press whohave heralded Yingluck Shinawatra 1as a “young, female leader *sic, who+ could drastically alter thepolarized nation.”2 Source - Aljazeera3 - How long will the honeymoon last?Thais love drama, known as Lakorn4, and politics in Thailand has played out as drama for a long timethrough intrigues or military intervention or street protests. The Election Commission’s (ECT)5endorsement of Yingluck Shinawatra as Thailand’s first female Prime Minister-designate provides anopportunity to change that, but she will face a daunting task starting, and some say ending, with hercoming out from under the shadow of her brother exiled former Prime Minister Thaksin Shinawatra. Source – BBC6 - Can Yingluck come out from her brother’s shadow? 5Foundation Consulting Private and Confidential Distribution Subject to Copyright
  7. 7. Imagine building a house, if the foundation is not solid or if the columns cannot support the weight,the entire house could fall down. This is similar to the situation that Thailand’s new government willbe facing.So what are the challenges faced by the new government to overcome?  First, the new government will have to navigate challenges to its legitimacy.  If successful, then the second challenge will be successfully governing a divided country as it prepares for 2015 and Asean Economic Community (EAC). On Shaky Footing?The first part will review some of the elements that could contribute to undermining the legitimacyof the new government. While the second part will review the elements that could derail Yingluck’sability of effectively govern. 6Foundation Consulting Private and Confidential Distribution Subject to Copyright
  8. 8. Part One - LegitimacyThe political landscape in Thailand today is continuing to mature. For each successive governmentestablishing its credibility as the legitimate ruling party is a primary concern. This is usuallyaccomplished after the party has risen to power rather than through the election itself. In the short-term, this is normal in a fractious political environment where there rarely is a clear winner.However, there is a long-term risk that democratic institutions will become vulnerable todemagoguery.In recent years, successive governments have succumbed to issues surrounding their legitimacy.Particularly governments affiliated with deposed Prime Minister Thaksin Shinawatra where thechallenges successfully brought down three governments to-date. Challenges to the legitimacy of aYingluck Shinawatra led government will provide a trial-by-fire and could possibly prove the undoingfor a Prime Minister with little direct experience in Thai Politics.Challenges of legitimacy are more than likely to come from five directions.  Legal  Reconciliation  Power Sharing  Moral Leadership, or the lack thereof  Reform Source – The International 7- Same same but different? 7Foundation Consulting Private and Confidential Distribution Subject to Copyright
  9. 9. LegalThe dust has barely settled from the election and the ECT has already begun investigating allegationsof electoral impropriety. While this is not new in Thailand, there is a significant risk that allegationsfrom either side will lead to a return of protests (either Red- or Yellow-shirts)8, and ultimately anerosion of confidence in the government’s ability lead.A partial list of identified legal risks includes:  Allegations, as yet unproven, that Puea Thai Party officials bribed journalists for favorable coverage during the election campaign.  Potential party dissolution cases regarding the involvement of banned politicians and the use of coercive tactics during the campaign.  Legal cases to nullify the election as well as a petition campaign to dissolve parliament.  Legal questions regarding the status of Red-shirt leaders elected to parliament which could weaken the government’s majority.  Questions whether traditional power brokers allow for and accept the decisions of an impartial judiciary.While there are other risks, this list highlights the tenuous position of the newly elected Puea ThaiGovernment. As with the past 3 governments since the 2007 election questions of the government’slegality could cripple its ability to move towards reconciliation.ReconciliationThe ‘R-word’ has become a catchphrase for fixing Thailand. It is not that simple.While earnest efforts towards reconciliation would help, interests on both sides are entrenched andresilient. As non-Thais we simply cannot comprehend the lengths that Thais will go to avoid conflict.The unrest as witnessed on the streets of Bangkok in recent years shocked the internationalcommunity, but to date a sense of pragmatism has helped to pull Thailand back from the abyss. “Over the past 20 years, Thailand has been on the brink of chaos a few times. There were a couple of times when we had a toe or two in the realm of anarchy. But we never really went there. Cooler heads prevailed and compromises were made. The governments crackdown on the Ratchaprasong occupation on May 19 last year may have brought an end to our latest flirtation with anarchy. But it wouldnt have ended there if the key people on both sides did not stop and say, Wait a second, this is bad for business.9 8Foundation Consulting Private and Confidential Distribution Subject to Copyright
  10. 10. However this view is a bit simplistic as trends can change and with each incident there is anescalated opportunity that ‘this’ time will be different than the last.Finding out the truth might prove to be impossible. According to sources, currently militaryleadership will not tolerate a loss of power or prestige. But the military is not the only obstacletowards reconciliation as all sides are unwilling to accept a loss of face and there appears a lack ofpolitical will to see the process through.Will Thailand see a South African style Truth and Reconciliation Commission10? Probably not. Theend result of ‘Reconciliation’ will be uniquely Thai in its approach and delivery. Source – In Asia11 - Who will accept responsibility?Power SharingThis is one of the most difficult challenges to quantify, while the true root causes of the 2006 coupwill never be known, it would appear that former prime minister’s meddling in military affairs playeda role. To successfully govern in Thailand the ruling party must collaborate with vested interests andthere is no guarantee that they will share the same agenda as the government. If past performanceis any indication this balancing act is difficult and will require commitment to work. With neitherside trusting the other it would appear that Thailand is entering a political cycle similar to the mid-1970’s. In a cycle such as this, small missteps or misunderstandings could ultimately undermine thegovernment’s mandate.One of Yingluck’s first obstacles to power sharing will be the naming a Minster of Defence who thecurrent military leadership will accept. This will provide a test of Yingluck’s ability to achieve aworking partnership with the entrenched interests who really run the country. 9Foundation Consulting Private and Confidential Distribution Subject to Copyright
  11. 11. Source – Bangkok Post12 - What’s behind door number 1?Moral LeadershipMoral leadership, by definition, requires leaders to act, follow, and hold others to a higher standard.This standard should be for the common good and not pit the needs of one special interest overanother. Organizations, governments included, tend to distort moral worth based on the interestsof the most active/vocal stakeholders; according to March13, some of the sources of distortioninclude:  Decision-making involving multiple actors with inconsistent preferences.  Strategic exchange of information, rather than neutrally informative, i.e. done with “ulterior” purposes in mind; misrepresentation is assumed.  Absence of time and attention in the decision-making process.  Simply put, the squeaky wheel gets the grease.This distortion commonly results in in policies that are inefficient or ineffective at best and solutionsthat create problems in other areas.If the government carries out an agenda that is too one-side or seeks to extract vengeance the pushback could undermine the government’s standing. At the same time if Yingluck is too successful inestablishing her credentials as moral leader she could be perceived as a threat from the moretraditional seats of power. This balancing act might prove difficult to sustain and given the record ofprevious governments, Yingluck’s relative inexperience in politics, and the need to share power andprestige with various interest groups the outlook is not positive. 10Foundation Consulting Private and Confidential Distribution Subject to Copyright
  12. 12. ReformHow do you enact reforms when those in power do not see the necessity for such reforms and thegeneral public is complicit in perpetuating the status quo?By all accounts corruption in Thailand is a problem. The Thai Chamber of Commerce and the Boardof Trade listed corruption as one of the most urgent issues to address.14 While successivegovernments have attempted to curtail corruption Thailand’s relative position, as per TransparencyInternational’s Corruption Perception Index (CPI), has slid backward in recent years. Given theincreased constraints on foreign business operating under the long arm of the UK Bribery Act andthe US Foreign Corrupt Practices Act (FCPA), an alternative approach to reform would be to legalizeall forms of corruption. This would eliminate some of the legal constraints for foreign businessoperating in Thailand and would help the market to better identify the true cost of doing business inThailand.Ironically, the 2006 coup which was meant to target the corrupt practices of the Thai Rak ThaiGovernment under Thaksin Shinawatra did little to end corruption. CPI Ranking 85 80 75 70 65 60 55 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source – Transparency International15While TI’s rankings lag behind actual instances of corrupt practice it would appear that a first stepwould be an end to extra-electoral influences on the transition of power (i.e. military, streetprotests, or a less-than-impartial judiciary).Commitment to the transition of power through electoral/parliamentary means is only a first steptoward eliminating corrupt practices other obstacles remain and will continue to weigh heavy onThailand’s competitiveness, such as:  Bloated civil service, police, and military ranks that are more interested in generating revenue for themselves than actually serving the country.  Lack of a full understanding of the need for an independent judiciary.16 11Foundation Consulting Private and Confidential Distribution Subject to Copyright
  13. 13.  Legal enforcement that does not recognize the need for equal protection.  Overhaul of promotion practices in all state agencies.  State ownership and intimidation of media outlets.  State owned enterprises that are often inefficient and uncompetitive.  Lack of genuine efforts to reform to the labor market to promote competitiveness and sustainability.  Government abuse of dubious laws that seek to limit or curtail civil liberties.  Overall lack of urgency to address these issues.The recent debt collection case in Germany provides a case study for how governments perceive therole of the judiciary. Whereas German officials repeatedly stated that they had no control over theactions of the courts and they respected the independence of the judiciary the Thai side was“genuinely astonished that the German government cannot influence its judiciary.”17Given the government’s need to broker with the traditional seats of power to achieve legitimacy andthe general lack of interest to change, the outlook for reform in the short term is not promising. Ifthe government acts too quickly it will increase the risk of counter actions from entrenchedstakeholders who feel threatened by moves towards liberalization or modernization and this couldeventually unseat the government. 12Foundation Consulting Private and Confidential Distribution Subject to Copyright
  14. 14. Legitimacy – ConclusionSo what does this mean? At this point we have focused on the known factors but unknown factorswill heavily influence the ability of Yingluck and the Peau Thai Party to overcome challenges to theirlegitimacy and remain in power for at least the next two years. For example, if party dissolutioncases go to the Constitutional Court, will the cases be decided impartially? What are the risks toestablishing moral leadership? Reform Reconciliation >18 Months Moral Leadership 6~18 Months <6 Months Power Sharing Legal 0 2 4 6 8 10 Chances of success, short- to long-termThe government will have a relatively low chance for success and it is more than likely that one ofmore elements will combine to undermine its legitimacy. From the current perspective, it wouldappear that the biggest risks are legal challenges or the inability to establish an agreeablemechanism for sharing power.This tenuous hold on power will weigh heavy on a Prime Minister with little direct politicalexperience and will cause her to seek refuge among advisers that will not be accepted by many. Thiswill increase the risk that the government will not serve out its full term. Depending on thecircumstances, dissolution might redefine the ‘norm’ in Thailand.For businesses, the events of the past 5 years have had limited impact on the economy as economicfundamentals remain sound, for now. As one of the most developed markets in ASEAN, Thailandrepresents significant potential. Given the current political environment it is more than likely thatthis potential will remain unfulfilled well into the next decade. 13Foundation Consulting Private and Confidential Distribution Subject to Copyright
  15. 15. Change of Success >18 Months Yes 28% No 72% Long-term chance of success 14Foundation Consulting Private and Confidential Distribution Subject to Copyright
  16. 16. Part Two - GoverningWhile the recent endorsement of the new government clears the first hurdle to legitimacy the moreimmediate task is to overcome the challenges to governing a divided country. The new governmentwill need to do a lot of heavy lifting to position Thailand for the AEC in 2015; however, theconsequences of getting it wrong are greater than at any point in Thailand’s post-war history. Giventhe failure of previous governments to achieve meaningful results along with the speed ofintegration both regionally and globally the outlook is murky at best. The recent political situationhas led to a state of inertia and it will take cooperation and adept leadership to position Thailand toachieve its full potential in the near-future. Now the real heavy liftingWill Yingluck and her team prove to be the right people at the right time? The answer will dependon the perspective of various constituencies. While the preferred approach varies from group togroup, there is, at some level, alignment on what the challenges are:  Economy  Education  Infrastructure  Productivity 15Foundation Consulting Private and Confidential Distribution Subject to Copyright
  17. 17. EconomyThe first priority for the new government will be the economy and with good reason. The globaleconomic outlook for 2012 is uncertain and the potential slowdowns in China, Europe, and the U.S.pose significant risk for an export-reliant economy such as Thailand’s. Also Thailand risks losing outin the competition for capital and skills as progress towards a more open market-based economy lagbehind several of its neighbors. While these changes, or lack thereof, will be less immediate to thegovernment’s electoral base, balancing populist promises with sound fiscal policy may provedifficult. According to a recent report in the Wall Street Journal, “concerns about inflation and otherproblems that could threaten the vibrancy of Southeast Asias second-largest economy.”18 Time for restructuring19The proposed rise in minimum wage will have a minimal effect on the broader economy in the mid-term and an almost negligible effect on growth industries. Raising minimum wage withoutaddressing some of the structural issues that have held back Thailand’s competitiveness for yearsincluding the outsized portion of casual labor to the total labor force and the need to rationalize thecountry’s tax regime to promote investment at all levels of industry will have almost no impact asreal wage growth will become capped in the long-term.Many voters listed the economy as their number one concern during the election and if the PueaThai government is unable to address these they might find themselves surrounded by disgruntledconstituencies.Can the government balance populist policies with sound fiscal policy? To a large extent thisdepends on the acceptance of certain economic models over others. In the case of Thailand, around investment would help to the country out of the ‘middle-income trap’. But given thecontentiousness of these policies and the self-serving nature of spending in the past, thegovernment will have to implement reforms along with investments to achieve sustainable results.Required economic reforms include: 16Foundation Consulting Private and Confidential Distribution Subject to Copyright
  18. 18.  Price liberalization and reduction in subsidies.  Fiscal and tax reforms, including broadening the tax base.  Financial sector and banking reforms.  Establishing favorable legal and regulatory framework for enterprise growth and development.The challenge for the new government will be pursuing policies that achieve these goals withoutalienating interests that are already skeptical of the government’s ability to perform. Casual Labor to Monthly and Daily Labor 21,000,000 Monthly Wage Casual Labor Daily Wage 9,000,000 8,000,000 Source – Thailand Macro Economic Briefing20EducationThailand has made significant strides in improving the quality of education, especially in Bangkok,but progress has been uneven and Thai students are generally less proficient in English and IT thantheir peers around the world. Fundamentally, the education system does not support developingthe necessary skills for a knowledge economy such as problem solving and project management.While there is a cultural disposition towards creativity, translating creativity into innovation is achallenge for the vast majority of students. To a large extent this is a byproduct of an education 17Foundation Consulting Private and Confidential Distribution Subject to Copyright
  19. 19. system that puts more emphasis on rote learning than research and development, the consequenceis a middle-income country with a workforce that for the most part has a low-income skill set.Left unchecked, Thailand’s education system will continue to churn out fresh graduates who areunprepared for the harsh realities of a global integration. The responsibility for preparing Thailandfor the enactment of the AEC in 2015 will fall on the shoulders of the new government and with itwill come the challenges creating a stable platform for the development leaders who can achieve amove up the Value Chain to compete in an integrated marketplace without legislated barriers toprotect monopolies.According to one visiting professor, ‘Thai students are 20 years behind their counterparts inSingapore.’ The system is being hollowed out through competition as illustrated by the rise ofinternational schools in Thailand. According to a presentation by Dr. Virachai Techavijit the “mainconclusion that can be drawn from the rapid expansion of the international school ‘industry’ inThailand is the fact that economic growth in Thailand and the effects of globalization are the majorfactors that have contributed to this phenomenon.”21 This is actually an oversimplification as it failsto recognize another possible cause; those with means are choosing to take their children outside ofthe Thai education system altogether. The new schools are just a reaction to that choice and not thecause of it. Rise of International Schools in Thailand - 1950 to 2010 112 67 38 1 3 10 Source – The International Schools Phenomenon in Thailand22Primary and secondary schools are not the only part of the system falling behind. A review of theuniversity system shows that need for reorganization and reinvestment as universities are unable torecruit the ‘best and brightest’. The 2010 World University Rankings23 does not include oneuniversity from Thailand in its Top 200 and the QS World University Rankings®24 only includesChulalongkorn University (number 180). This is surprising for the 19th largest country 25 bypopulation and the 30th largest economy26 but is telling of the effectiveness of the system as awhole. However the focus has not been on improving the standing of Thailand’s educational system.According to Chulalongkorn University Vice President MR Kalaya Tingsabadh "We categorize CU asworld-class in the national university division, not world-class in an international university 18Foundation Consulting Private and Confidential Distribution Subject to Copyright
  20. 20. division.”27 While the goal to serve the nation’s development is commendable, shouldn’t Thaiuniversities set an example for the improvement of educational standards? Universities in Top 200 6 5 4 4 4 2 0 China Hong Kong Japan Korea Singapore Taiwan Thailand Source - World University Rankings powered by Thomson Reuters28According to a recent editorial in the Bangkok Post, “Thailands education budget, at 30% of the totalnational budget, is already among the highest in the world. Yet its quality is in a shambles. Theschool system is oppressive. The children do not think independently.”29 Shockingly, neighboringcountries use the Thai system to measure the ineffectiveness of their educational systems as notedby Datin Azimah Rahim, President of Malaysia’s Parent Action Group for Education (PAGE), “Oureducation system was once on par with Singapore but it has since dropped to the level ofThailand.”30For Thailand to be competitive in the future, the government must find a way to increase theeffectiveness of its human capital investments at all levels as the system continually fails to preparestudents for the integration demands of a global knowledge based economy. If change does notcome soon the result will be a growing ‘donut-hole’ in Thailand’s human capital that will render thecountry incapable of competing in an integrated knowledge based economy. 19Foundation Consulting Private and Confidential Distribution Subject to Copyright
  21. 21. Bucks but no Buck Rogers31 20Foundation Consulting Private and Confidential Distribution Subject to Copyright
  22. 22. InfrastructureAfter 5 years of infighting the need for infrastructure investment has grown even more.In Bangkok, the road network has continued to improve and the Bangkok region is fortunate to havedirect access modern air and sea ports. However, integrated logistics is difficult to achieve on scale.This is exacerbated by the growth in the countries second level cities, a trend that consumer productcompanies and retailers have had a difficult time adjusting to. Increase in the number of employed persons in municipal areas with > 15k montly income between 2002 and 2009 3,748 75% of the increase is outside Bangkok and vicinities 2,897 2002 Bangkok Vicinities Other Provinces 2009 32 Source – Thailand Macro Economic BriefingRail links are poor and the State Railway of Thailand (SRT) has proven to be incapable ofmodernization. What is required is bold action and leadership, such as joint ventures, privatization,and wholesale reorganization to balance labor/management issues. While there is some hope withrecent announcements of a high-speed rail link with China in all likelihood this project will probablydelivered behind schedule and over budget.The telecom space is another example slow pace of development. With mobile operators choosingto roll out 3G service on their own rather than waiting for the government and government ownedtelcos. This is a high risk game as aggressive moves to launch 3G service under current contractsmight bring about reviews of the true shareholding structures of the number one (AIS) and numbertwo (DTAC) mobile operators. Internet connectivity in Thailand also lags far behind other countriesin the region, this constraint has actually slowed adoption of SaaS and IaaS solutions for mid-sizeenterprises as the IT infrastructure lack the bandwidth to support these applications.Continuing to ignore the need to improve its infrastructure will cap the country’s economic potentialat current levels. In the midst of this, the country’s internet usage rates are far behind moreadvanced countries in the region and there is some evidence suggests that real usage is much lowerwhen deducting internet users who are only online at work. 21Foundation Consulting Private and Confidential Distribution Subject to Copyright
  23. 23. Internet Users per 100 People 81 73 61 58 26 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Hong Kong SAR, China Korea, Rep. Malaysia Singapore Thailand Source - International Telecommunication Union, World Telecommunication/ICT Development Report and database, and World Bank estimates.33The new government will have to address the following to spur:  Increased access to markets (mostly agricultural) for the government’s political base.  Investment in so-called ‘mega’ projects to improve Thailand’s competitive advantages.  Adoption of reforms mandated under the AEC.The government needs to plot a course that will position Thailand for future growth withoutupsetting the interests that run the country today, something that previous governments have founddifficult to accomplish.ProductivityInnovation and productivity tend to suffer in low-cost countries as there is little incentive for either.For the government the challenge is to motivate private industry to take real steps out of the‘middle-income trap’. Activity in high-tech industries has grown in recent years the country mustestablish new competitive advantages. Regional integration through the AEC will eventually teardown some of the barriers that have shielded certain industries for so long. The proposed increasein the daily minimum wage will put further pressure on lagging productivity rates to remaincompetitive in the global market. 22Foundation Consulting Private and Confidential Distribution Subject to Copyright
  24. 24. According to a joint project of The National Economic and Social Development Board and the WorldBank, “Labor productivity fell sharply during the 1997-98 financial crisis and has remained stagnant ever since. The generally poor productivity performance of the services industry in recent years raises concerns about the potential of this sector to be an engine for gains in the real wages and living standards of Thai workers in the future.”34According to one economist, there are three areas in which industry can help move the focus fromlow-cost labor towards world-class competitive advantages:35  Appropriate education and training  Capital investment  Cutting edge research and developmentWhile a certain amount of automation is required to for industries to compete the fear is that over-reliance on automation will put pressure on cash flows and prove to be highly inflexible in the long-term leaving Thai companies in an even weaker position. Instead Thai companies should follow theJapanese model of utilizing automation with a human touch and not the wholesale replacement ofworkers which could further reduce the willingness to improve.Stagnation in productivity is not limited to the service sector; according to USDA Global Rice Yielddata, yield improvements from Thailand’s fertile rice growing regions lags behind other countries inthe region. In a country where the phrase for eating is literally ‘eat rice’, continued poorperformance could have significant ramifications for the country as a whole. Rough Rice Yield (t/ha) 7.00 5.00 3.00 1.00 1972 1994 1960 1962 1964 1966 1968 1970 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1996 1998 2000 2002 2004 2006 2008 World China Japan Thailand Vietnam Source – USDA - Rough rice yield, by country and geographical region 36 23Foundation Consulting Private and Confidential Distribution Subject to Copyright
  25. 25. When yields in Thailand are compared to Vietnam, a country that went through a prolonged periodof armed conflict, the picture is disturbing as it points to structural defects in the agriculture sector. Rough Rice Yield - Thailand & Vietnam 5.50 3.50 1.50 1994 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1996 1998 2000 2002 2004 2006 2008 Vietnam Thailand Source – USDA - Rough rice yield, by country and geographical region 37So where does this leave Thailand? Productivity must improve to support strategies to move up thevalue chain, but without a significant restructuring of the labor force to dramatically reduce thenumber of casual laborers38, business will lack the impetus to invest in continuous improvementprograms on a grand scale. The risk for companies doing business in Thailand is that the recentdebate surrounding wages and productivity will lead to more cost uncertainty in the short-term andwith exports representing 70% of Thailand’s GDP, the new government needs to navigate this issuecorrectly. 24Foundation Consulting Private and Confidential Distribution Subject to Copyright
  26. 26. Governing - ConclusionCan the new government implement policies to overcome these challenges? Yes and No. Yes, thegovernment will deliver a policy statement, but their ability to get buy-in from the civil service andindustry will depend on which methods the government and its ministers employ to reachconsensus. In a country where there is a cultural bias towards passive-aggressiveness this will not beeasy. The more progressive the government’s plan, the more likely it is fail simply because variousinterest groups won’t appreciate the need for change; as the saying goes there is rice in the fieldsand fish in the stream.For business, now is a time to tread carefully when considering Thailand. Beyond the potentialimplications of continued political unrest, the country is falling behind in terms of itscompetitiveness. If a company already has significant assets in Thailand, they need to think throughcontingencies for these assets to ensure they are viable in an integrated marketplace. If a companyis considering investment in Thailand it really needs to uncover the motivations behind the decisionby asking how this decision will support the creation of value. This is not to say don’t invest inThailand, depending on the industry and where in the value chain the investment will be, Thailandcan offer significant advantages. If the decision brings the company closer to its supply base or itscustomers the decision might be the correct one. But in an integrated ASEAN market, Thailand is nolonger the only choice and through its policies the government must act to correct this. 25Foundation Consulting Private and Confidential Distribution Subject to Copyright
  27. 27. Endnotes1 Yingluck Shinawtra (n.d.). In Wikipedia. Retrieved 6 July 2011, fromhttp://en.wikipedia.org/wiki/Yingluck_Shinawatra (Thai: , RTGS: Yinglak Chinnawat, Thaipronunciation: *jîŋ.lák tɕʰīn.nā.wát+)2 Macan-Marker, M (4 July 2011) Rural Thais roar to political forefront. In Aljazeera. Retrieved 6 July 2011,from http://english.aljazeera.net/indepth/features/2011/07/20117415539124100.html3 Profile: Yingluck Shinawatra (n.d.) In Aljazeera. Retrieved 24 July 2011 fromhttp://english.aljazeera.net/indepth/spotlight/thaielection/2011/06/2011630133948265426.html4 Lakorn (n.d.) In Wikipedia. Retrieved 6 July 2011, from http://en.wikipedia.org/wiki/Lakorn5 Office of the Election Commission of Thailand. Retrieved 6 July 2011, from http://www.ect.go.th/english/6 Pongsudhirak, T (12 July 2011) Thailands Shinawatras: From clan to dynasty. In BBC. Retrieved 24 July 2011from http://www.bbc.co.uk/news/world-asia-pacific-140752187 Muma, M (April 2010), Thailand’s Unstable Democracy. In The International. Retreived 24 July 2011 fromhttp://theinternational.isb.ac.th/article.php?article=3968 Profile: Thailands reds and yellows. In BBC. Retrieved 6 July 2011, from http://www.bbc.co.uk/news/world-asia-pacific-132942689 Vanijaka, V. (22 May 2011) The clone VS The puppet. The Bangkok Post. In Bangkok Post. Retrieved 6 July2011, from http://www.bangkokpost.com/opinion/opinion/238213/the-clone-vs-the-puppet10 Brandon, J. J. (29 June 2011) Will Thaksin Outmaneuver Thailand’s Military and Traditional Elites? In Asia.Retrieved, 24 July 2011 from http://asiafoundation.org/in-asia/2011/06/29/will-thaksin-outmaneuver-thailands-military-and-traditional-elites/11 Truth and Reconcilliation Commission. Retrieved 6 July 2011, from http://www.justice.gov.za/trc/12 Prateepchaikul, V. (23 June 2011). Gen Prayuth, erratic and worrisome. Bangkok Post. Retreived 24 July 2011from http://www.bangkokpost.com/opinion/opinion/243602/general-prayuth-erratic-move13 March, J.G. (1989) The Allocation of Attention: in Decisions and Organizations (pp. 3-12). Cambridge:Blackwell.14 Pratruangkrai, P (16 June 2011) Next Govt must handle corruption: private companies. The Nation. Retrieved19 July 2011, from http://www.nationmultimedia.com/home/Next-Govt-must-handle-corruption-private-companies-30157916.html15 Walker, A (9 July 2011) Thailand’s corruption record. In New Mandala. Retrieved 19 July 2011, fromhttp://asiapacific.anu.edu.au/newmandala/2011/07/09/thailands-corruption-record/16 Saiyasombut, S (20 July 2011). The impounded Thai aircraft and lessons from the Thai media. In AsianCorrespondent, Retrieved 20 July 2011 from http://asiancorrespondent.com/60414/the-impounded-thai-aircraft-and-lessons-from-the-thai-media/17 Ibid. 26Foundation Consulting Private and Confidential Distribution Subject to Copyright
  28. 28. 18 Murray, L. & Barta, P (6 July 2011) Fears Rise Countrys New Populism Could Boost Inflation, Cut Growth. TheWall Street Journal Asia. Retrieved 7 July 2011, fromhttp://online.wsj.com/article/SB10001424052702304760604576427432523320132.html19 Association of Canadian Community Colleges. (2004) Sri Lanka: Proposed Human Resource InvestmentProject. Project Preparation Technical Assistance Report for named project, ADB, Manila, p. 39.20 Suthiwart-Narueput, S (22 February 2011). Macro Briefing: Some things to watch in the business landscapein 2011 and beyond. Presentation to the American Chamber of Commerce of Thailand.21 Techavijit, V, (1 March 2007), P. 10 “The International Schools Phenomenon in Thailand and theImplementation of the International Baccalaureate”, Delivered at Oxford University.22 Techavijit, V, (1 March 2007), P. 8 “The International Schools Phenomenon in Thailand and theImplementation of the International Baccalaureate”, Delivered at Oxford University.23 The World University Rankings powered by Thomson Reuters. Retrieved 19 July 2011, fromhttp://www.timeshighereducation.co.uk/world-university-rankings/2010-2011/top-200.html24 World University Rankings 2010. Retrieved 13 August 2011, fromhttp://www.topuniversities.com/university-rankings/world-university-rankings/201025 List of countries by population (n.d.) In Wikipedia. Retrieved 19 July 2011 fromhttp://en.wikipedia.org/wiki/List_of_countries_by_population26 List of countries by GDP (nominal) (n.d.) In Wikipedia. Retrieved 19 July 2011 fromhttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)27 Khoapa, W. (21 February 2011) Worldclass standards and boosting, The Nation. Retrieved 13 August 2011from http://www.nationmultimedia.com/2011/02/21/national/Worldclass-standards-and-boosting-30149111.html28 The World University Rankings powered by Thomson Reuters. Retrieved 19 July 2011, fromhttp://www.timeshighereducation.co.uk/world-university-rankings/2010-2011/top-200.html29 Editorial (24 June 2011) Parties ignore educations ills. Bangkok Post. Retrieved 19 July 2011 fromhttp://www.bangkokpost.com/news/local/243703/parties-ignore-education-ills30 Victor, C (19 July 2011) More thinking students needed. The Malay Mail. Retrieved 19 July 2011 fromhttp://www.mmail.com.my/content/78188-more-thinking-students-needed31 Adapted from Schwab, Porter and Sachs (2002).32 Suthiwart-Narueput, S (22 February 2011). Macro Briefing: Some things to watch in the business landscapein 2011 and beyond. Presentation to the American Chamber of Commerce of Thailand.33 International Telecommunication Union, World Telecommunication/ICT Development Report and database,and World Bank estimates. Retrieved 20 August 2011 from http://www.worldbank.org/34 Bosworth, B Dr., Bhaopichitr, K Dr., Mahakit, W., Nararak, W, Thamsermsukh, A., Phoosakul, S. Khlaisuan,W., Wuttisorn, P. Dr. Limpanonda, S., Termpittayapaisith, S., Matin, K. Dr., Thongampai, R. Measuring Outputand Productivity in Thailand’s Service-producing Industries A joint project of The National Economic and SocialDevelopment Board and the World Bank 27Foundation Consulting Private and Confidential Distribution Subject to Copyright
  29. 29. 35 Trairatvorakul, P. (21 July 2011) ‘Thailand’s investment environment – looking forward’ Delivered to the JointForeign Chamber of Commerce of Thailand.36 USDA - Rough rice yield, by country and geographical region. In International Rice Research Institute.Retrieved 20 July 2011, fromhttp://beta.irri.org/solutions/index.php?option=com_content&task=view&id=25037 Ibid.38 casual labour. (2011). In Encyclopædia Britannica. Retrieved 20 July 2011 fromhttp://www.britannica.com/EBchecked/topic/690768/casual-labour 28Foundation Consulting Private and Confidential Distribution Subject to Copyright
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  31. 31. About Foundation ConsultingWe love challenges! We love what we do!Our team has helped more than 140 companies in the Asia-Pacific Region boost organizationalperformance and alignment, resulting in sales growth of up to 300% and increasing profits bymillions of dollars.We know the difference between strategy and implementation. We cut through bureaucracy,improve productivity, and strengthen the value chain. We deliver results.Who We Work WithWe work with growth companies and our knowledge covers the worlds major industries and todaysmost crucial business issues. Our broad range of expertise and straight forward approach ensuresthat we deliver unique adaptive solutions to your toughest challenges.What We DoWe help clients to Grow Sales, Grow Profits, and Grow People!How We Do ItOur approach, W.I.S.E., is simple yet scientific and leads to identifying the needs of all stakeholdersand crafting a specific yet sustainable plan that delivers results through an adaptive, straightforwardapproach that cuts through the bureaucracy, improves productivity, and strengthens the value chain.Foundation Consulting Private and Confidential Distribution Subject to Copyright
  32. 32. Bangkok OfficeThe Offices at CentralWorld29th Floor999/9 Rama I RoadPathumwan, Bangkok 10330Kingdom 1 Thailand Shinawtra of Yingluck (n.d.). In Wikipedia. Retrieved 6 July 2011, from http://en.wikipedia.org/wiki/Yingluck_Shinawatra (Thai: , RTGS: Yinglak Chinnawat, ThaiTel: +66 (2) 207-2392 *jîŋ.lák tɕʰīn.nā.wát+) pronunciation:Fax: +66 (2) 207-2626 2 Macan-Marker, M (4 July 2011) Rural Thais roar to political forefront. In Aljazeera. Retrieved 6 July 2011, from http://english.aljazeera.net/indepth/features/2011/07/20117415539124100.htmlHong Kong OfficeTwo International Finance Centre 3 Profile: Yingluck Shinawatra (n.d.) In Aljazeera. Retrieved 24 July 2011 from19th Floorhttp://english.aljazeera.net/indepth/spotlight/thaielection/2011/06/2011630133948265426.html8 Finance4Street Lakorn (n.d.) In Wikipedia. Retrieved 6 July 2011, from http://en.wikipedia.org/wiki/LakornCentral, Hong Kong SAR 5 Office of the Election Commission of Thailand. Retrieved 6 July 2011, from http://www.ect.go.th/english/Tel: +852 8191 5948Fax: +85263015 9336 T (12 July 2011) Thailands Shinawatras: From clan to dynasty. In BBC. Retrieved 24 July 2011 Pongsudhirak, from http://www.bbc.co.uk/news/world-asia-pacific-14075218Stamford7Office Muma, M (April 2010), Thailand’s Unstable Democracy. In The International. Retreived 24 July 2011 fromSoundview Plaza http://theinternational.isb.ac.th/article.php?article=396Suite 7001266 East8 Main Street Profile: Thailands reds and yellows. In BBC. Retrieved 6 July 2011, from http://www.bbc.co.uk/news/world- asia-pacific-13294268Stamford, CT 06902United States of America 9 Vanijaka, V. (22 May 2011) The clone VS The puppet. The Bangkok Post. In Bangkok Post. Retrieved 6 July 2011, from http://www.bangkokpost.com/opinion/opinion/238213/the-clone-vs-the-puppetTel: +1 (203) 285-6701 10Fax: +1 (203) 907-1933 Truth and Reconcilliation Commission. Retrieved 6 July 2011, from http://www.justice.gov.za/trc/ 11www.fc-asia.com J. J. (29 June 2011) Will Thaksin Outmaneuver Thailand’s Military and Traditional Elites? In Asia. Brandon, Retrieved, 24 July 2011 from http://asiafoundation.org/in-asia/2011/06/29/will-thaksin-outmaneuver-www.fc-america.com thailands-military-and-traditional-elites/ 12 Prateepchaikul, V. (23 June 2011). Gen Prayuth, erratic and worrisome. Bangkok Post. Retreived 24 July 2011 from http://www.bangkokpost.com/opinion/opinion/243602/general-prayuth-erratic-move 13 March, J.G. (1989) The Allocation of Attention: in Decisions and Organizations (pp. 3-12). Cambridge: Blackwell. 14 Pratruangkrai, P (16 June 2011) Next Govt must handle corruption: private companies. The Nation. Retrieved 19 July 2011, from http://www.nationmultimedia.com/home/Next-Govt-must-handle-corruption-private- companies-30157916.html 15 Walker, A (9 July 2011) Thailand’s corruption record. In New Mandala. Retrieved 19 July 2011, from http://asiapacific.anu.edu.au/newmandala/2011/07/09/thailands-corruption-record/ 16 Saiyasombut, S (20 July 2011). The impounded Thai aircraft and lessons from the Thai media. In Asian Correspondent, Retrieved 20 July 2011 from http://asiancorrespondent.com/60414/the-impounded-thai- aircraft-and-lessons-from-the-thai-media/ Consider the environment 17 Ibid.© 201X Foundation ConsultingAll Rights Reserved Foundation Consulting Private and Confidential Distribution Subject to Copyright

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