Thailand and International Accounting
© 2007 Jesse Kedy

Overview
I. Demographics
II. Economy, FDI, and Terms of Trade
III. Tsunami
IV. Leadership
V. Thai Airways
VI. Southwest Airlines
VII. Accounting Differences
© 2007 Jesse Kedy

Demographics
Population: 65 million
Mostly rural (82% in provinces)
Biggest city: Bangkok
(about 6 mil.; 50% of GDP)
Ethnicities:
- Thai 75%
- Chinese 14%
- Other 11%
Major Religions:
- Buddhist 94.6%
- Islam 4.6%
© 2007 Jesse Kedy

Economics
Developed infrastructure
Free-enterprise economy; pro-investment policies
GDP/ capita: $8,300 (PPP)
Economy growth:
-2003: 6.9%
-2004: 6.1%
-2005: 5%
© 2007 Jesse Kedy

Economics (con’t)
Unemployment: 1.4% (2005)
By sector: Labor GDP
Agriculture: 49% 9.3% (40% in 1980)
Industry: 14% 45.1%
Services: 37% 45.6%
Poverty rate: 10%
Income disparity (Gini): 43.2
© 2007 Jesse Kedy

Gini Coefficient since WWII
Income Disparity (0 = Perfect Equality; 100 = Perfect Inequality)

World Map,
Gini Coefficient

Foreign Direct Investment
World's 4th most attractive nation for FDI (2004-2007)
(after China, India, and the US)
FDI During Asian Economic Crisis:
© 2007 Jesse Kedy

Declining Terms of Trade
Export Revenue Growth Import Costs Increase
Source: http://www.nesdb.go.th/econSocial/macro/outlook_data/econ_outlook_q2_48/q22548_press_eng_colour.pdf
© 2007 Jesse Kedy

26 December, 2005: Tsunami
© 2007 Jesse Kedy

Impact
8,500 dead
Massive destruction of property in southern
provinces of Krabi, Phangnga, and Phuket
High oil prices, weak demand from Western
markets, severe drought in rural regions,
decline in tourism, lower consumer
confidence
© 2007 Jesse Kedy

Leadership: Thaksin Shinawatra
Shin Corporation
Thais Love Thais
“Anti-corruption” campaign
Rural Populism at the Expense
of Upper-class
Prime Minister since 2001
© 2007 Jesse Kedy

Leadership: Thaksin Shinawatra (con’t)
Thaksinomics
- Subsidized universal health care - Village-managed development
- Low-cost universal access to funds
HIV medication - Low-interest agricultural loans
- Privatized Oil & Gas GOES
- Infrastructure development in
rural areas
Who would these policies appeal to?
© 2007 Jesse Kedy

Thaksin: Results Controversy
1997 Economic Crisis PM or Domineering CEO?
“Thailand’s savior” Insider knowledge (1997)
IMF loan 2 years early Near conviction –
GDP/ capita up 49% concealing business
Overall GDP up 45% assets (2001)
Balanced budget Bribery?
Refused Tsunami Aid $667 million in tax savings
“Thailand is strong
enough to cope…”
© 2007 Jesse Kedy

Thai Airways (THAI)
History
Formed in 1951 as a national airline
Rapid growth early on
Present
Thailand’s biggest airline
Several operations
(especially Cargo Division)
Fleet: 87 Aircraft (mixed)
72 destinations in 37 countries
© 2007 Jesse Kedy

…Thai Airways
Risks
Tourism Recovering
Rising Fuel Prices
Foreign Currency
Exchange
• Revenue in 40 Currencies
Investments
• New Aircraft
• Suvarnabhumi Airport
(new operations base)
© 2007 Jesse Kedy

Southwest Airlines (LUV)
Incorporated in Texas in 1967
Focus: Short, High-Frequency Flights
Fleet: 445 Boeing 737 aircraft
61 destinations in 31 states
Biggest US Carrier (Domestic Flights)
Lowest Operating Costs of all Major Airlines
1. Single Aircraft Type
2. Point-to-Point Route Structure
3. Dedicated employees
© 2007 Jesse Kedy

Differences in the Detail
Examples Thai Air Southwest
Pages per statement 2 1
CF, Operating Activities 26 Items 10 Items
Non-Current Assets 14 items PP&E
Non-Current Liabilities See Handouts
Accountability “The accompanying notes “See
are an integral part of accompanying
these financial statements.” notes.”
© 2007 Jesse Kedy

Comparing Financial Statements
Most differences based on THAI’s statements
being more detailed. Why?
Wouldn’t an American company be subject to stricter
accounting standards than a Thai company?
1. Internationalvs. Domestic Airlines
2. Additional Risks (FX, Fuel, Tourism, Investments)
3. Global Investors (demand more information)
4. US Financial Markets – more popular
© 2007 Jesse Kedy

Questions???
© 2007 Jesse Kedy