Lloyds Loading, political divide concerned, says Thai coup threat to long-term logistics

Lloyds reports: “But even though the short-term economic impact of the coup – Thailand’s 13th since the end of absolute monarchy in 1932 – has so far been limited, observers believe the long-term outlook for a country fundamentally divided politically and socially is poor unless a political agreement can be reached.”

Before the coup, the Yingluck government have tried to get massive funding for anti-flood and infrastructure work, pass the blockade of the Bangkok establishment. The logic of the blockade many agree, is that if the projects get the go-ahead, the Shinawatra Family, will become even more popular. Currently, after the Thai coup, the Thai junta is considering going ahead with many of the Shinawatra Family spending projects.

The following is from Lloyds Loading (Source)

Thai coup threat to long-term logistics

Mike King | Tuesday, 10 June 2014

The Thai Shippers Council has called for the new military government – which has named itself the National Council for Peace and Order (NCPO) – to reassure investors that key pillars of the economy will be run in accordance with liberal market economics.

Export impact minimal, but imports stagnating and analysts warn of serious future trade and freight implications

Air and ocean trade has so far largely been unaffected despite Thailand’s new military administration cracking down on protests in Bangkok and imposing curfews on truck movements. But analysts warn that the long-term economic implications of last month’s coup are more serious.

The military coup, which removed populist Prime Minister Yingluck Shinawatra on 22 May, saw an air force chief given the country’s economic reins and a navy commander put in charge of the key tourism sector.

Since then, markets and investors have been understandably nervous given that the Thai economy was already faltering and the last time Thailand’s soldiers seized power in 2006 they proved incapable of running the economy effectively.

But transport executives claim that trade volumes have, so far at least, been largely unscathed.

“Generally there has been very little disruption to production facilities and the supply chains in Thailand and the same goes for Panalpina’s daily operations there,” said Henrik Jensen, Panalpina Country Manager for Thailand, based in Bangkok.

“Over the past six months export trade volumes have been trending upwards whereas imports have been stagnating or slightly negative.”

Stewart Sinclair, managing director of Suvarnabhumi Airport ground handler Bangkok Flight Services, said curfews on truck movements in Bangkok had not caused much disruption to freight operations at the hub.

“There has been little or no impact on cargo,” he said. “The curfew is in place between midnight and 4am, which has no impact and volumes have held up well so far.

“Most of the cancelled flights are intra-Asian or charters. Most of the long haul flights are still running, as are the freighters.”

Analysts say that tourism was the main loser from the seven months of deadly street violence in Bangkok that preceded the coup.

This was a major factor in the economy shrinking 2.1% quarter-on-quarter in the first three months of 2014.

But even though the short-term economic impact of the coup – Thailand’s 13th since the end of absolute monarchy in 1932 – has so far been limited, observers believe the long-term outlook for a country fundamentally divided politically and socially is poor unless a political agreement can be reached.

The Thai Shippers Council has called for the new military government – which has named itself the National Council for Peace and Order (NCPO) – to reassure investors that key pillars of the economy will be run in accordance with liberal market economics.

“Exporters expect that the NCPO will come up with strategies to support the manufacturing and trading sectors,” said Thai National Shippers Council (TNSC) chairman Nopporn Thepsithar.

He said the TNSC would maintain its projection of 3% export growth this year, lower than the government’s projection of 3.5%.

Rajiv Biswas, Asia-Pacific Chief Economist at IHS, said although the coup had brought the illusion of temporary stability, it had not addressed the fundamental political schisms that divide Thailand or removed the risk of a new round of escalating violence.

“The lack of any roadmap to reconciliation between the two sides keeps the nation on the brink of civil unrest,” he told Lloyd’s Loading List.com.

“Some large foreign investors have already been saying that they are very concerned at the political turmoil and lack of any democratic political solution. “Several large Japanese manufacturing firms have announced that they are considering putting large new investment plans for Thailand on hold until the political situation stabilises.”

With Thailand’s GDP falling by 2.1%, quarter-on-quarter, in the first three months of 2014, Biswas said there was a significant risk that sliding consumer and business confidence would also erode economic growth in Q2.

“The risk is increasing that Q2 growth could also be negative, pushing Thailand into a technical recession,” he said.

“The weakening Thai GDP growth outlook is creating concerns about the debt outlook and increases the risk that Thailand’s risk rating may be lowered by a rating agency.

“Overall, IHS has halved its growth forecast for 2014 GDP growth since November 2013.”

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