Thailand’s deficits spark wariness but outlook remains upbeat: analysts

The announcement of Thailand’s largest current account deficit since before the Asian financial crisis has sparked unease among analysts but they are still largely upbeat about economic prospects this year.

Central bank figures released last Monday showed a 942-million-dollar current account deficit in January, the highest in nearly eight years.

The figure dominated headlines as commentators nervously harked back to the cause of the 1997 crash.

An interest rate rise of 25 basis points to 2.25 percent followed on Wednesday as the central bank acted to ease inflation fears, but the stock exchange plunged 2.4 percent on the heels of fleeing investors.

"The Thai economy has already recovered but we should still be in alert mode," Finance Minister Somkid Jatusripitak was quoted as saying in the Nation newspaper Saturday.

"If we don’t help each other, bad news in the form of the current account deficit could occur again," he warned.

An import surge, a downturn in tourism after the December tsunamis, and high oil prices were the main causes of the swing to the third and largest current account deficit since the crisis.

But government officials expect tourism to bounce back by year-end, while most analysts agree that imports have been productive and timely.

Pat Phattapongse, head of research for KGI Securities, told AFP the deficit should be expected since one of Asia’s best-performing economies is entering a fresh growth phase.

"This year we’re moving away from a demand-driven economy to supply-driven," he said, referring to the shift from the consumption-led growth created by Prime Minister Thaksin Shinawatra’s populist policies to investment-led growth.

"Clearly, this is going to have ramifications for the current account deficit and trade balance," he said, noting that good fourth-quarter results among companies "shows that the economy still has some steam to it."

Pat was also unfazed by the stock market’s bearish reaction.

"If you look at the graph, since November it’s been a straight line up without any real pullback, so I think it was a healthy correction."

Vincent Milton, managing director of international agency Fitch Ratings, was similarly sanguine about the year ahead, as Thaksin begins his second term after an overwhelmingly election victory in February.

"The general picture on the corporate side has been strong growth earnings over the last 12 months and that’s expected to continue on the back of capacity expansion and new investment," Milton said.

The government is tipping 5.5-6.5 percent growth for 2005, compared to last year’s 6.2 percent and 2003’s 7.8 percent.

Analysts are still watching for hiccups in the economy, fearful of possible plunging consumer confidence in the wake of the tsunamis as well as potential fallout from slowing global markets.

The waves killed at least 5,395 people in Thailand and sent the crucial tourism industry into a tailspin, with international arrivals dropping 18 percent.

"We’re worried that the first half or quarter of this year, post-tsunami, you may have a bit of a shockwave through consumer confidence taking some wind out of consumption," KGI’s Pat warned.

Export growth meanwhile depends on what happens in China, Europe and Japan. "We see those markets softening," he said.

Exports grew 11.6 percent in January year-on-year, compared to a 23.0 percent average for 2004. Imports jumped 33.6 percent year-on-year, compared to 27.4 percent for 2004, leading to a 1.47 billion dollar trade deficit.

Sompop Manarangsan, an economics lecturer at Bangkok’s Chulalongkorn University, said more risk factors were now at play for the economy.

He said the government’s decision to begin dismantling a 13-month-old subsidy on diesel would add inflationary pressure and risk further interest rate rises.

"From now on interest rates are going to be a crucial factor in causing some adverse affects on the Thai economy," he said.

Sompop said export growth prospects were dim, while domestic consumption was likely to be constrained by a drought putting pressure on agricultural production and dragging on growth.

Sri Lanka’s property market to withstand tsunami onslaught: analysts

The tsunamis that ravaged Sri Lanka are unlikely to dampen the island nation’s booming property market in the months ahead as foreigners hopefully sniff out bargains and aid floods in, analysts said.

Property prices on the palm-fringed island nation have risen dramatically in the past three years, due partly to a February 2002 truce in its long-running civil conflict holding, a rise in interest among well-heeled Sri Lankan expatriates as well as the abolition of a tax on foreign buyers.

In some areas of Colombo, properties were being sold for double or triple their price pre-tsunami compared to a few years ago, while beachside properties did a roaring trade despite the reintroduction of the 100 percent stamp duty for foreign buyers in 2004.

And analysts say that the December 26 tsunami tragedy that killed nearly 31,000 Sri Lankans has not curbed market enthusiasm for either foreign or domestic buyers.

"Given what has happened it’s actually surprising…. There has been a tremendous increase in the number of inquiries" about purchasing and renting properties in Sri Lanka, Iqbal Cassim, from, told AFP.

His web site caters to foreigners and Sri Lankan expatriates.

"They may have been thinking that prices may have come down, or there would have been a correction, or that they could get a deal. But most of the property owners are not desperate to sell," he said.

"Demand has been good but it’s still a seller’s market. Prices are quite high and I don’t think it’s going to come down because of the tsunami."

Government plans to introduce tough legislation banning new construction in a 300-metre (-yard) zone along the coast to prevent a repeat of the tragedy, while providing land to those displaced, may still be a wildcard.

"There may be some correction in beach and coastal areas (because of this)… but especially in Colombo it’s been quite buoyant and if at all it may even go up," Cassim said.

Land offered to displaced people could increase local market supply if the recipients sell plots, JB Securities managing director Murtaza Jafferjee told AFP. He said past low-income housing projects had suffered this phenomenon.

"Most of the affected people who have to be relocated will be given Crown land … so with excess supply on the market that could dampen property for domestic purposes," Jafferjee said.

However, overall he too said the tsunami-effect would be minimal, with excess liquidity in the economy — boosted further now by massive aid inflows — still likely to be pumped into property.

"I would think that it would continue to be buoyant because there is still excess money supply out there," he said.

Pre-tsunami, Jafferjee foresaw a cooling off in the market as too many people were priced out: "Prices have become so high, they’re just not affordable anymore."

Cassim, too, said prices were due to be reined in by a flood of apartment developments set to hit the market but this would now be balanced out by the influx of aid and technical experts who will need to be housed.

"I don’t see prices coming down. I don’t think they will go up immediately but it will be at level for at least six months, after which I would foresee prices going up again," he said.

In the longer term, aid with fewer strings attached and a focus on improving infrastructure could see shifts of patterns in the market.

For instance, the construction of a planned highway from Colombo to the southern seaside town of Matara, badly hit by the tsunami, and in near potential resort areas, could level off Colombo’s heated market, analysts said.

"If they build the highway, parts of the country in the deep south will be more accessible," Jafferjee said.

"I would think that if the infrastructure goes in, there will definitely be an improvement in the property market and then to some extent a levelling off of the market in Colombo."

Ranga Goonawardena, general manager of major player Ceylinco Housing and Real Estate, said that prices in residential coastal areas may drop in the very short term, but would bounce back before booming again.

"There is a lot of demand from people who are buying for investment purposes. They will also buy if the prices come down drastically. After two to three years, the prices will again start booming," he said.

Cambodia’s crucial garment industry braces for end to quota system

Cambodia’s crucial garment sector is bracing for the end of a 30-year-old global textile quota system in December, hoping to position itself as a labour-friendly alternative to China.

The highly mobile garment manufacturing industry contributes more than 90 percent of Cambodia’s export earnings and employs an estimated 240,000 mostly female workers, making it the linchpin of one of the world’s poorest economies.

The expiration of the multi-fibre agreement (MFA), which allocates textile quotas to developing nations for export to rich countries and gave Cambodia its entree into the global market, is expected to see giant China elbow out competitors.

"We are very worried that by the end of the year when the agreement expires, a lot of workers will lose their jobs and see their living standards fall," says Sam Srey Mom, acting president of the prominent Free Trade Union of Workers of the Kingdom of Cambodia.

Workers, most of whom have uprooted from villages in this predominantly agricultural country in the hope of finding work, have few employment options with no other established industry here.

They earn a minimum wage of 40 to 45 dollars per month under conditions monitored via a unique factory inspection system set up by the UN’s International Labour Organisation (ILO).

The system was put in place following a 1999 agreement between Cambodia and the United States which required the sector to improve working conditions in return for receiving quotas to the US market.

Ken Loo, secretary general of the Garment Manufacturers Association in Cambodia (GMAC), envisions survival in some form for the industry and says Cambodia’s reputation could help give it an edge.

GMAC is working alongside the government in pushing for the United States, the destination for two-thirds of Cambodia’s exports, to reduce tariffs on garments exported from the impoverished country.

"With the abolishment of quotas we see that the only way they can continue this system of reward and encouragement is by giving us preferential treatment on tariffs," Loo says.

The gold star may also help the industry in its lobbying for a reduction in the 50 percent local content requirement by the European Union — Cambodia’s other major importer — for garments to be duty exempt.

Fabric and yarn used here is imported, due to a lack of local supply, meaning local content is now 40 percent at the most, Loo says.

More generally, as demand in the West grows for goods produced under decent conditions, investors could be attracted to the Cambodian scheme.

"Certainly the industry sees its compliance with international and national labour law as a significant factor in its positioning in the post-MFA world," says Ros Harvey, chief technical advisor for the ILO garment sector project.

"What the industry’s hope is, is that compliance will mean the industry is attractive to buyers who are concerned with this issue."

Harvey also says that the ILO has collected strong evidence that improving working conditions is more than just a marketing strategy. "It is a way for a factory to improve its productivity," she says.

Importantly, the system may give Cambodia an edge as it seeks to sell itself as an alternative to China for investors nervous about a US "safeguard mechanism", in place until 2008 under World Trade Organisation rules, which if activated would restrict China’s garment exports.

"If buyers are afraid and they want to diversify, they do not want all their orders to be in China just in case something like this happens, then they have to choose another country to place their orders," says Loo.

"We hope we can position Cambodia to be in that position, to be their number one choice."

It is possible that some drift may have already occurred, with around 30 factories operated mostly by investors from China, Hong Kong and Taiwan opening in Cambodia in the past year to bring the total number of active factories here to 209.

GMAC has also been calling on Cambodia’s government, infamously riven with corruption and entangled in red tape, to get its act together or risk seeing investors flee as early as September, when buyers place orders for next year.

"The industry has been shouting, screaming our heads off, at the government over the past two or three years, and we have not seen much movement," Loo says.

"It’s only this year that we’ve seen the hustle and bustle…. We just hope it’s not too little too late."

Thai economy to move ahead at cracking pace in 2004

Thailand’s economy steamed ahead in 2003 to become Southeast Asia’s top economic performer and is poised to continue its dizzying comeback from the 1997 financial crisis in the year ahead, analysts said.

Although some signs of overheating emerged towards the end of the year, the kingdom’s economic fundamentals remain solid and foreign investors are eyeing Thailand as a hot prospect for 2004, they said.

The finance ministry has tipped economic growth for this year to clock in at 6.4 percent thanks to a surging stock market, a strongly resurgent real estate sector, an appreciating baht and booming exports.

Thai Prime Minister Thaksin Shinawatra, whose stimulus policies are largely credited with driving the economy at a speed second only to China’s regionally, is aiming for 8.0 percent growth next year and double-digit expansion in 2005.

"The Thai economy has over the last 18 months shown pretty robust signs and is in a long overdue recovery from the crisis," said Brian Coulton, a Hong Kong-based senior director of international ratings agency Fitch.

Domestic demand is soaring, private investment is picking up, bank credit growth to the private sector has turned positive, the current account is in surplus and low inflation has continued, Coulton noted.

"As a result of those trends and better-than-expected export performance, Thailand has done quite well … For all those reasons we’re pretty positive on the economy."

Thaksin’s economic management and the political stability that has come with his massive control over parliament has also boosted investor confidence despite initial doubts over his government’s commitment to financial reforms.

It has also translated into feverish domestic consumer confidence, with many low-income households previously unable to access credit borrowing from state-run banks encouraged by Thaksin to loose their purse strings.

"From a macro position, this has been very effective. By targetting lower income groups who are credit constrained, the impact on spending has been quite powerful," Coulton said.

In a move aimed at sending a positive message to foreign investors, in July the government made its final repayment to the International Monetary Fund (IMF) two years ahead of schedule.

After the regional crisis hit, the fund stepped in to bail Thailand out with a financial package worth 14.5 billion dollars and it eventually drew down 12.9 billion dollars from the IMF.

Sompop Manarangsan, an economics lecturer at Bangkok’s Chulalongkorn University, agreed the outlook is rosy, pointing to an expected bounceback in the tourism industry, strategies to attract more foreign investors and planned government investment in major infrastructure projects.

"In terms of international competitiveness, Thailand’s prospects are good and better than neighbouring countries," he said.

The downside to the economy’s bounceback have been niggling fears that the sizzling property market and stock exchange have rallied too strongly from the grim depths they plunged to during the crisis years.

A multitude of mothballed property developments have been restarted while the bourse, which until recently suffered from lacklustre interest, shot up 82.93 percent over the first 11 months of 2003.

Sompop warned the government must tread carefully.

"If we cannnot manage and control the bubble areas well it may undermine the Thai economy in the longer term, particularly next year as we can see a lot of uncertainty, especially from the external sector."

Others are more relaxed about the risks of another bubble, arguing that growth in Thailand is coming off a very low base and that there is little danger of imbalances in the near term.

Coulton did, however, express a lingering concern over the snail’s pace of reform in the banking sector, which was hammered by massive non-performing loans (NPLs) when the float of the baht triggered the 1997 crisis.

"The concerns that we have are from a credit strength prespective … We’re still disappointed on progress in the banking sector, NPL rates are still too high," he said. "Creditor power is not strong enough in the Thai legal system."

Five years on, Thailand crawls out of crisis as it struggles to reform

Five years after Thailand floated the baht and triggered a disastrous regional economic crisis, analysts say plenty has been achieved, but to make the most of the current recovery reforms must go on.

As a recovery fuelled by consumer spending and an ambitious government stimulus package kicks in, economic growth predictions for 2002 have been boosted to up to four percent, a far cry from 1997 when the economy contracted by around eight percent.

Still, not everyone is enjoying the nascent upturn.

"Things were much better then," says language-school owner Tanimnan Janluan of the pre-crash days.

"I could charge students more and make money more easily. Five years ago most of my students were sent here by Japanese companies. Now they are Japanese students looking for jobs and they don’t want to pay as much."

And analysts are warning that growing optimism must not hinder reforms that the crisis period showed were crucial.

"There is not that much appetite left for reform — people are saying the economy is recovering well and we should take advantage of that," says Supawud Saichua, head of research at Merrill Lynch Phatra Securities.

"You have seen Thailand do some of the right things, but some of the things that have been too tough we have not tackled yet," he adds.

Nevertheless, Supawud says Thailand has tackled key reforms over the past five years — beginning with the baht itself.

"The most important thing was that the baht was floated, and that gave Thailand a more flexible exchange rate so we could adjust it rather than defend it by losing a lot of money," he said.

The decision by the central bank on July 2, 1997 to abandon the fixed exchange rate regime in place since 1986, in favour of a managed float, represented a de facto devaluation that drove the currency down 15-20 percent in a single day.

From 25-26 baht to the dollar where it had hovered for a decade, it now sits at about 42 to the greenback, after making handsome gains in recent months.

Thailand’s travails helped expose the deep deficiences in the so-called "tiger economies" and caused a crisis of confidence that swept the region.

Indonesia, South Korea, Thailand, the Philippines and Malaysia were most affected by the turmoil which prompted massive International Monetary Fund bailouts. Thailand accepted one totalling 17.2 billion dollars.

But things are now — cautiously — looking up.

"One of the main problems was there was too much investment, but over the past five years we have used up that excess capacity," says Supawud.

Prudential banking requirements have also become tougher, he says.

Banks have "instituted new credit standards and are looking to be much more concerned about cash flow, whereas before they were only concerned about collateral value," he says, adding that the banking sector has now probably recognised some two-thirds to three-quarters of its losses.

Corporates have downsized their assets and improved their debt-to-equity ratios from around 2.5 in pre-crisis times to 1.5, Supawud adds.

Thanawat Patchimkul, head of research at DBS Vickers Securities, agrees that the economy has improved.

"Sometimes it’s so gradual that we don’t notice it, but if we compare this time to right after the floating of the baht, we’re stronger," he says.

International reserves are up from 27.0 billion at the end of 1997 to 35.8 billion dollars, and outstanding non-performing loans (NPLs) have dropped from a peak of 45 percent to just over 10 percent.

Thanawat also says the structure of the country’s external debt — both public and private — has improved, with substantially more becoming long term.

"Even though we have had difficulties in the past few years, we are still paying off the external debt," he said.

But remaining reforms are still needed, and corporate governance in particular must be improved, according to Thanawat.

"Governance has improved quite a lot since the crisis but in the eyes of foreign investors it might not be enough," he says.

Manufacturers must also improve their productivity, and financial institutions need to increase their competitiveness, he says.

Many say that high public debt — which has exploded from 35.3 percent at the end of 1997 to 53.5 percent — must be carefully monitored.

"We have already reached the ceiling of public debt that the Thai economy can bear," Chulalongkorn economics lecturer Sompop Manarangsan says. "I don’t think the Thai government has much room for pursuing this sort of fiscal stimulus any longer."

Amendments to financial laws that proved woefully inadequate during the crisis, such as bankruptcy and foreclosure laws, are also yet to be passed.

"The last government tried very hard to have these laws amended but they still got stuck," says Sompop.

Nevertheless, compared to other countries who have suffered massive crises such as Argentina, analysts believe Thailand has struggled through relatively unscathed.

"We’ve come through the crisis very, very well … There was no violence on the streets and that demonstrates the country’s political, social and economic strength," Merrill Lynch’s Supawud says.

"We should capitalise on that and move forward."

Carbon dated transactions

When customers at a downtown branch of Thailand’s fifth-largest bank take a deposit or withdrawal slip, they take a sheet of carbon paper too – it means they can write their own receipt. It’s no surprise then, that Bank of Ayudhaya (BAY) customers were taken aback by the August launch of the bank’s first foray into online retail banking.

Executive vice president Charlotte Donavanik believes the bank’s conservative image could be an asset when it comes to enticing the more cautious customers online: "Customers are thinking, if we’re doing it online, it must be alright."

A soft launch in June, pitched at Bangkok’s Assumption University, attracted some 2,000 account applicants. The bank’s target for 2001 is 20,000, to be drawn substantially from the bank’s three million depositors, spread across 417 branches.

Thailand currently has around 100,000 online customers, split between four other banks. It is a small market – one that analysts aren’t certain it’s worth pursuing in the current difficult banking environment. "Shifting to retail online banking is fairly inconsequential to a bank’s overall operations here," says SG Securities Asia analyst Andrew Stotz. "Computer penetration rates are tiny, so spending is potentially a massive waste of money. It is possible, though, that it could help on the corporate side."

The bank does have this base covered too. In fact, the bank plans to spend Bt3.5 billion over the next three years on 27 individual IT projects, falling under five categories: e- business, branch automation, developing a centralised clearing system, core banking, and developing a data warehouse. Accenture finished a two-month review of the master plan in August, while Pricewaterhouse Coopers has provided the framework for overall IT security.

"This year is definitely a turning point for us," says Donavanik. "In the past, with traditional banking, we could plan and cope with our existing systems."

The regional economic crisis changed all that. It has taken a while, however, for the competitive implications to be felt, she says, as banks have been compelled to focus on solving more pressing problems, such as non-performing loans. "Competition really only started in 2000," she says, "so we are not far behind."

The sharpest focus is currently on the e-business category, within which seven projects fall:

* E-banking;

* E-trade, an electronic B2B trading system that allows corporations to conduct trade via the Internet, launched in April;

* E-payment, a gateway for B2C transactions, launching Q4 this year;

* Cash management, aimed at corporates;

* E-ATMs;

* Mobile banking, to be launched in October in conjunction with DTAC and AIS in Q4; and

* E-information, provided via their new corporate website, to be launched this month (September).

Senior vice president and vice president of IT development Suvichai Lovichit was brought on board in October 2000 to overhaul the bank’s IT strategy. "We looked at the existing system, what the competition was doing, and what future technology would be," he says. His team identified what the bank wanted to achieve and what users required; from there, they bought packages mostly off-the-shelf to match their needs, such as BroadVision applications.

The various working groups involved in the projects are comprised of a mix of business and IT staff, weighted towards the former to ensure results are exactly what users require. The six-member IT steering committee, which prioritises and reviews progress of the projects, includes just one IT manager.

Good communication between IT and business staff has been vital to the process, says Donavanik. "It’s a must for us that IT and business [managers] work together. The IT people should understand users’ back office requirements, and at the front end, they need to understand our products, our marketing strategies, our target groups."

By the same token, she says, business managers need to understand what IT is capable of providing – and not providing.

As the projects have rolled out, the lesson for management has been one in flexibility. Senior vice president and manager of the IT operations department, Werachat Wahawisan, says the schedule for completion of projects has changed as their true degree of difficulty has become apparent.

For instance, getting corporate customer services online has been a particular challenge. "Banking for our corporate customers was a priority. But when we explored what we needed to do to transfer our services online, it became quite difficult… It’s taken more time not only to develop the software itself, but to establish the business processes to handle [corporate] functions."

It’s too early to measure any project successes, but improved productivity and management of information are key objectives. While some staff cutbacks are part of the bank’s overall restructuring process, staff are not being made redundant as a result of IT changes. Instead, staff freed from their daily duties will be retrained as salespeople, charged with increasing the bank’s customer base and selling revenue-generating products.

While analysts agree on the importance of Thai banks investing in IT – chiefly to improve their efficiency, implement better risk management, and increase their revenue – they are reluctant to comment specifically on BAY’s overall plans alone.

"It’s easy to talk about plans – banks have to say that they will upgrade their systems," says one. "In terms of implementation, however, it’s a different thing. Once they seriously launch, then we’ll take a look at what it means."

So the jury is still out. In the meantime, at the very least, BAY’s conservative image is enjoying a remarkable makeover.

Lotus positioning

The 42-storey Thai Farmers Bank headquarters lies on the “wrong” side of Bangkok’s Chao Phraya River, giving staff an unusual view of the city. This is not the bank’s only unique outlook: it’s considered to have one of the more visionary IT and overall re-engineering strategies in Thailand’s post-crisis environment.

Thai Farmers Bank (TFB), the country’s third largest, has been implementing a massive re-engineering process since its current president, Banthoon Lamsam, took the helm in 1992. Ongoing IT investment forms a substantial part of that process: this year’s IT budget alone is around Bt3 billion.

The bank’s latest project involves the installation of Citrix MetaFrame servers, which upon completion will provide employees across all 530 branches with access to applications such as LotusNotes and Microsoft Office. It’s a step the bank hopes will improve its stance even further in Thailand’s increasingly competitive banking environment.

“It will definitely add value in the longer term,” says JP Morgan and Chase banking analyst Pornchai Prasertsintanah. Although the bank’s operating profits are currently inferior to its larger rivals, Pornchai says TFB is implementing various important changes that should lay a solid foundation for future growth. “The next two to three years may be depressed in terms of their bottom line, but they’ll then be in a better position to compete with foreign banks.”

The project kicked off in 1996, when TFB moved to their current headquarters and prioritised linking employees to the central IT system, particularly so they could access Lotus Notes. Once that was done, the bank’s 47 zone offices were targetted. They were successfully integrated by 1998.

The following year, Citrix Systems was brought on board to help with the greater technical problems involved with deploying the system to all remaining branches. All Bangkok branches were connected by the end of August this year, while branches across the rest of the country are expected to be part of the system by year end.

For the bank, the rollout of what could be seen as a reasonably basic system translates into savings of time, money and productivity. Due to the project’s nature and integration with overall IT infrastructure, however, the bank says it cannot produce figures that measure this precisely.

“In terms of infrastructure, having Lotus Notes is like having a road connecting us to each province,” says first senior vice president systems group, Chartchai Sundharagiati. “We cannot tell what cost savings will be generated by having this infrastructure, but we have to build it if we are going to compete with other banks.”

Instead, they can provide simple examples of how things will improve under the system. For instance, memos from headquarters to branches will no longer need to be sent as hardcopy – they can be emailed instead. And in the future, online approval for loan applications will be possible. Currently, applications and supporting documentation need to be sent to headquarters as hardcopy, with a turnaround of up to two weeks. Under the new system, approval will take just a few days.

“If we can approve loans faster than a competitor, it means customers will come to us,” says assistant vice president of the research and process development department, Winij Panamaeta. “It will help make our products more competitive.”

It’s precisely these retail customers analysts say Thai banks must target if they are to stay afloat in a changing environment. Merrill Lynch banking analyst, Therapong Vachirapong, describes Thai banks as “sleeping giants”, with tonnes of customers they’re not making the most of. But with competition nipping at their heels, their market focus is gradually shifting away from corporations towards smaller retail markets.

The bank’s moves on information technology are likely to allow it to tap this market more efficiently.

“It’s a big step for TFB in terms of operational reforms – they’re basically changing the way they do business,” says Therapong. Banks used to lend money on a collateral-value basis, meaning risk evaluation was simple. Now, however, it’s preferable to assess clients on the basis of their cash flow. “But to do this, you need more analysis – and thus more information. This requires an upgrade of the IT system.”

TFB’s IT subcommittee, charged with formulating IT strategy, is comprised of a 50/50 split between IT staff and key users, and headed by the vice president of the IT department and top management. While president Banthoom Lamsam has not been directly involved, his influence has been felt via his encouragement to bring in various consultants – Accenture and McKinsey are just two of many – for advice along the way.

Chartchai says the current project’s biggest challenge has been dealing with the scale of its implementation. The lesson learned so far has been to plan well, and start out small by doing plenty of pilot tests. “If you don’t do a lot of testing, then you’re likely to get some surprises. You need to keep control of the system’s usage,” he says, before returning to his road analogy. “Too many cars -you’ll have a traffic jam.”

Despite upbeat assessments from analysts, Chartchai is circumspect in defining TFB’s IT position relative to other banks. “We’re an early adopter, we’re not a leader,” he says. “We might be leading in some ways, but our purpose is to utilise IT and apply it effectively.”

The bank can be sure that more eyes are focusing on the wrong side of the river than ever before to see how they’re managing their aims.

Holiday home market looks appealing

The top end holiday homes market is seeing movement after the overall market effectively closed down during the crash period, say experts. A real return to action in the middle market is not expected for another three to five years, but prices have bottomed-out, meaning now could be a good time to buy.

Executive director of CB Richard Ellis James Pitchon says that the market for large developments of purpose-built holiday homes in the Pattaya/Jomtien and Hua Hin/Cha-am areas dried up by the mid-90s, with little movement since then. However, he says that over the last two years there’s been a boom in luxury villa accommodation on Phuket, in particular for long-term leases selling for up to US$1 million, primarily to overseas purchasers. "Obviously, this is not a mass market. Overall [the mass market] is not a liquid market – liquidity is lower than in Bangkok."

Managing director of Cushman and Wakefield Apisit Limlomwongse says he’s seen some increase in mid-market activity since 2000, with Hua Hin, Cha Am, Pattaya, Rayong and Khao Yai being the more popular places. "Increasing numbers of both Thais and foreigners are now looking to buy a weekend home due to inexpensive prices," Mr Apisit says. "It’s a good time to buy, as prices of good properties have bottomed out. Hua Hin is currently at the top of the list for a weekend home because there is not much oversupply, compared to Pattaya or Khao Yai."

With the expansion of Hua Hin airport and the opening of more international hotel brands, Mr Apisit describes the upside potential of Hua Hin as "very good".

Prices vary based on location and quality of development. Current prices of Hua Hin and Cha-am condos ranges from Bt20,000 to 45,000 per square metre, depending on the development’s quality. For Pattaya, prices start at around Bt15,000 and range up to Bt35,000 for better quality condos.

Other costs also need to be factored in. Firstly, a payment into a sinking fund – of around one to three per cent of the sale price – is usually required when purchasing a condo, and is used for repair and maintenance of common areas. Buyers should also expect to pay an average monthly maintenance fee of approximately Bt20 to 30per square metre for these condos – so the maintenance cost for a 35 square metre condo, for example, would be Bt8,400 to 12,600 per year – excluding cleaning costs. The costs of annual repairs, such as repainting and replacing fixtures like water heaters, should also be considered. Allow Bt1,000 to 1,500 per square metre per year.

According to associate director of Colliers International’s research and consulting division Mr Suttipan Kreemaha, the prices of good quality villas on Phuket are selling locally for up to Bt10m each, although this rises to around Bt18m if the property has a docking bay for boats. Maintenance fees on such properties are not insubstantial – expect to pay around Bt15,000 per month for a top end villa with docking bay.

Cushman and Wakefield’s Mr Apisit advises potential buyers to initially consider how frequently they plan to visit their weekend home: if it is not often, it may be better to stay at a hotel.

Other recommended actions he suggests are:
* Check to see whether the management provides quality services. Central services such as fitness centres, restaurants, laundry and swimming pools provided in a weekend home are usually not as good as in a quality hotel.
* Check the state of the resale market in the case you find yourself needing to sell.
* If the property is not located on a public road, ask for a legal document confirming that the property can be accessed from the public road.
* Ensure there is a fire protection system in place.
* Avoid buying off the plan unless there is a system to protect your deposit. This may be an escrow account, where the buyer deposits money with a middleman, usually a bank, but the developer cannot withdraw that money until they have completed their duties as stated in their contract.
* Check the finished product. For instance is it furnished, semi-furnished?
* Before buying a piece of land, ensure that the law allows you to build on it. In some areas like Hua Hin, construction is forbidden in designated areas.

Buy art for art’s sake and it just might pay off

Investing in the Thai art market is not for those wanting to make a quick buck. For most collectors, buying art is driven by a love of particular pieces. Financial gain is secondary, and in most instances collectors will rarely sell pieces they like, even if their market value increases. Nevertheless, there can be good and bad periods to buy – and now could be a good one.

Christie’s Bangkok representative Yaovanee Nirandara says that if you have a taste for Thai art, this could be an opportune time to buy. "Prices haven’t gone up for two years, and the economy is now picking up," she says. However, Ms Yaovanee, an art collector herself, advises against entering the market for purely financial reasons. "You really have to like the paintings you buy. If you like, understand, and appreciate them, then they’ll be something you keep for a long time."

Collector Thomas B Van Blarcom agrees. "I only buy pieces that speak to me," he says. One of his favourite pieces is an abstract painting by Vietnamese artist Tran Luong, bought four years ago. "This piece yelled at me. I bought it for Bt12,500. Today that would be a bargain for a piece of this artist’s work, but I only bought it because I liked it – it’s just nice if it turns out to be a good investment as well."

For beginners to the market, Yaovanee advises studying old auction and gallery exhibition catalogues, available from places like Silpakorn University library and the National Library. Regional publications like Asian Art News and Art Asia Pacific are a further reference. Sotheby’s Bangkok representative Rika Dila suggests meeting with gallery owners. "Chat with them, get a feel for the work of different artists. Get to know prices, and then go for what you like."

According to Rika, collecting Thai art isn’t something many Thais actually do. To keep abreast of the top Thai names, she advises keeping an eye on those artists beginning to attract international attention. "It’s not like New York, where artists sign up to galleries – you just can’t tell who’s going to become famous here."

Around three years ago, for instance, Japan took an interest in Thai artists, such as Chatchai Puipa. The average prices of their work quickly rose from Bt180,000 to around Bt300,000 to 400,000. Artists who have achieved broad international recognition include Thawan Dachanee, Montien Boonma, and Tawee Nandakwang. Tawee’s Calm Against Roaring Winds sold for Bt2 million at Christies July 2000 auction.

The gallery system that works in places like the US is yet to develop any depth here, which makes it difficult both to predict which artists will become successful, and for the Thai market itself to really develop. Galleries with established reputations, according to various sources, include Numthong Gallery, Surapol Gallery, Gallery 55, Tadu Gallery, Project 304 (for cutting edge work) and Thavibu Gallery.

Another option is to buy from a reputable auction house.

Prices vary, but Rika says you should expect to pay around Bt40,000 to 50,000 for the work of established artists, or as little as Bt20,000 for younger artists.

It can take a substantial amount of time for the value of a painting to increase – if it increases at all. "You shouldn’t buy art because you think it’s going to become famous, and will be a good investment," Rika says. "Enjoy what you buy – but there’s no guarantee it will be marketable in 20 years."

Unit 138-139, 1st floor
The Peninsula Plaza
153 Rajadamri Rd
Tel: 02 652 1097/9

Gallery 55
2nd Floor Home Place Building
238/33-35, Sukhumvit 55
Tel: 02 712 7148

Surapol Gallery
Tisco Tower, North Sathorn Rd
Tel: 02 638 0033/4

Project 304 and Numthong Gallery
Both located at the Co-op Housing Building
109 Thoet Damri Rd
Tel: 02 279 7796

Tadu Contemporary Art Gallery
Royal City Avenue, Rama IX Rd
Tel: 02 203 0926

Thavibu Gallery
Silom Galleria Building, 3rd Floor
Suite 308, 919/1 Silom Rd
Tel: 02 266 5454

Recruiters make searching easier

Looking for a change of career, but not sure where to start looking? Need to fill a position quickly, but don’t have time to advertise and screen applicants yourself? Recruitment companies, steadily becoming more widely known and utilised in Thailand, could be your answer. And if you’re a candidate, the only cost involved is your time.

Country general manager of global human resources specialist Manpower, Simon Matthews, says that only unscrupulous agencies – the sort occasionally drawing bad press – charge candidates for placing them in positions. "Reputable companies only charge the client," he emphasises. Even that cost only becomes payable when a candidate commences work, and is refunded if the worker doesn’t stay for a minimum guaranteed period – usually two to five months, depending on the recruitment company. The cost ranges from around 12 per cent to 33 per cent of the placed candidate’s annual salary – the higher amounts are for executive placements. Costs for temporary staff varies widely.

Both Manpower and Adecco, another global human resources specialist, provide staffing solutions across many industries, meaning they accept resumes from a broad range of candidates. Both companies assess candidates’ skills before placing them on their books. "We don’t provide career counselling, but we do talk to people about their expectations, and let them know if they’re unrealistic," says Mr Matthews. Manpower offers some complementary training opportunities – self-paced computer courses, and courses in time management, presentation and negotiating – but not on a scale comparable to countries such as the US. Plans are underway to increase training opportunities. "To equip people with skills makes them more marketable, and from our point of view, it makes them easier to place," says Mr Matthews.

Adecco, too, will provide complementary training where necessary.

Unrealistic expectations can also be a problem from a client’s perspective. "Someone might want an executive secretary, with five years experience, bilingual, computer-skilled – but they’re only willing to pay up to 20K," says Adecco Consulting’s general manager Aree Petcharat. "The current market rate would be 35K up to around 40 or 50K, so we need to explain that they should drop some of their requirements if that’s what they’re willing to pay."

Furthermore, Aree maintains that local companies need to be educated about the benefits of using a recruitment company’s services. "Local companies often think our fees are high. We need them to understand that paying that fee is an investment in their company. And when we find the right people for their company, they are going to bring in more income for them."

ISM Tech recruit only in the IT area, meaning candidates and clients get a service tailored to their needs. "We’ll test a candidate’s technical skills, as well as do reference checks, both personal and on what they did and didn’t do in past jobs," says president Peter Fischbach. "Because we focus on IT, we have a lot of contacts in the area, so we can usually just call one of them."

There are also executive recruitment specialists, such as Pricewaterhouse Coopers, which have some 35,000 resumes on their books. Their executive recruitment partner, Munthana Thamlikikul, says that it’s important for executive recruiters to have a thorough understanding of their client’s business and operations. "We can then advise our client on whether the position they wish to recruit for is the right one," she says. "For instance, a client might wish to recruit a financial controller. We might examine their operations, however, and find they only need to recruit at the manager level. This suits their business better, and also leaves room for the employee to be promoted later on."

Interested in applying? Ms Munthana says that it helps if candidates send a concise, up-to-date resume. "Include your experience, and state your preferred position and companies you’d like to work for. Also include your current salary and expectations. All of this helps us to place you."