Thai Billionaires Embracing Yingluck Soft Power for Asia Exports
In the hubbub of the World Economic Forum on East Asia in Bangkok in May, Thapana Sirivadhanabhakdi, a scion of a business empire stretching from beer to real estate, jumps up from his seat during an interview when he sees Thai Prime Minister Yingluck Shinawatra passing by. He bows to her, beaming, his palms pressed together near his forehead as he utters, “Sawatdee-khrap,” which means “Hello” in Thai.
Yingluck, elegantly dressed in a black suit and surrounded by her entourage of cabinet ministers, stops briefly to return the smile and the greeting, Bloomberg Markets magazine reports in its September issue. Thapana, 37, is an unabashed fan. He says Yingluck’s charm, patience, tolerance, politeness and flexibility have helped restore political stability to the country since she took office in August 2011. “She represents the soft power of Thailand,” he says.
Thapana directs the conversation back to the overseas expansion his business has embarked upon. His firm, Thai Beverage Pcl (THBEV), Thailand’s biggest brewer and distiller, has Myanmar in its sights. The neighboring country’s political transformation has presented Thai businesses with an underserved consumer market of more than 60 million people. Separately, in its biggest acquisition, Thai Beverage said in July it agreed to pay $2.2 billion for a 22 percent stake in Singapore-based Fraser & Neave Ltd., a shareholder in Asia Pacific Breweries Ltd. (APB), the maker of Tiger beer. Thapana, one of the sons of billionaire Charoen Sirivadhanabhakdi, who made his fortune selling inexpensive beer and whiskey in Thailand, says he’s negotiating to set up spirits and beer factories in Myanmar with a local partner, which would make Thai Beverage one of the largest producers there.
Thapana’s plan reflects a growing trend of Thai companies expanding overseas. Having overcome the obstacles of the 2008 global credit crisis and last year’s devastating floods -- and armed with cash, regional expertise and business connections -- Thai firms are looking abroad for new opportunities, including promising and largely untapped consumer markets such as Cambodia, Laos, Myanmar and Vietnam.
Coal producer Banpu Pcl (BANPU), energy company PTT Pcl (PTT), Siam Cement Pcl (SCC) and Thai Union Frozen Products Pcl (TUF) are among Thai companies that have spent a total of $20.4 billion buying overseas assets from the beginning of 2008 -- the year Thai firms, taking advantage of the crisis, started investing more outside the country -- through July 18, according to data compiled by Bloomberg. That compares with just $1.4 billion from 2003 to 2007.
Charoen Pokphand Foods
Several Thailand-based entrepreneurs have become billionaires by profiting from Asia’s consumption explosion. One is Dhanin Chearavanont, 73, whose family is Thailand’s richest, according to Bloomberg data. His business empire, Charoen Pokphand Foods Pcl (CPF), with a market value of $8 billion as of July 30, derives 39 percent of its sales from abroad, including China and Vietnam.
Another is Indian-born billionaire Aloke Lohia, who owns Thailand’s most acquisitive company, Indorama Ventures Pcl (IVL), the world’s largest producer of polyethylene terephthalate, or PET, a plastic resin used in a myriad of consumer products from toothbrushes to bottles.
Lohia says Thailand is a good platform for international businesses. The government in January cut corporate tax rates to 23 percent from 30 percent. The rates will drop further, to 20 percent, in 2013 and 2014. The Thai economy, the biggest in Southeast Asia after Indonesia’s, has been a rare bright spot as the European debt crisis deepened, U.S. economic growth cooled and Brazil, China and India braced for a slowdown.
In May, the Thai central bank raised its 2012 growth forecast to 6 percent; its March forecast was for 5.7 percent growth this year. The economy expanded in the first quarter as factories owned by such industrial powerhouses as Japan-based Honda Motor Co. resumed production in Thailand and local demand revived after the nation’s worst floods in almost 70 years. Manufacturing output in April rose for the first time in eight months.
For all of the upbeat assessments, the country faces rising competition in winning overseas investment away from other nations. Morgan Stanley earlier this year conducted a survey of 109 foreign firms with exposure to Thailand; of these, 63 percent said they planned to reduce or maintain their investments in Thailand, while only 37 percent said they intended to increase them.
“The challenge for Thailand is to move up the value chain and not get stuck on low-value-added jobs,” says Hozefa Topiwalla, head of research for Southeast Asia at Morgan Stanley in Singapore, who cites favorably the government’s plan to raise the minimum wage by about 40 percent, to 300 baht ($9.50) a day by 2013.
Political uncertainty remains a disincentive to investors, according to the World Economic Forum’s Global Competitiveness Report 2011-12. The WEF ranked Thailand 39th among 142 nations, down one spot from the previous year and three places from the year before that. Thailand has been rocked by violent protests since former Prime Minister Thaksin Shinawatra was deposed in a coup in 2006. Thaksin’s supporters held street demonstrations that led to clashes with the military and left more than 90 people dead in 2010. Thaksin, 63, has lived outside the country since fleeing a jail sentence for abuse of power in 2008.
In July, Thailand’s Constitutional Court said that if Yingluck’s governing party wants to rewrite the country’s constitution, it should hold a nationwide referendum first; the court’s decision boosted stocks as investors dismissed the threat of an immediate political clash. Thaksin’s allies say the amendments would be designed to increase the power of elected officials, while his opponents say they’re part of a strategy aimed at allowing him to return to Thailand.
Yingluck, Thaksin’s 45-year-old sister, has promised to govern the country in a spirit of compromise to reconcile Thaksin’s supporters and opponents. “I have to be fair for everyone, not just for my brother,” she told Bloomberg TV in May. She has taken steps to improve relations with the military and the palace. In removing Thaksin from office, the military high command said his offenses, which he denies, included showing disrespect to King Bhumibol Adulyadej.
In May, Yingluck announced she would donate family land valued at 20 million baht to the king, who took the throne in 1946 and who, at 84, is the world’s longest-serving head of state.
Today’s relatively thriving kingdom bears little resemblance to the country whose currency devaluation in July 1997 sparked a financial crisis that spread through Asia. The government at the time abandoned the baht’s peg to the U.S. dollar, as the current-account deficit widened; in 1997, the baht plunged 82 percent and the benchmark stock index dropped 55 percent.
In August 1997, Thailand agreed to a $17.2 billion bailout package from the International Monetary Fund in return for closing 56 ailing small finance companies, overhauling bankruptcy laws and other conditions. Thailand repaid its IMF loan in 2003, one year ahead of schedule.
In May, Thailand’s economic turnaround made an impression on Myanmar democracy-movement leader and newly elected member of Parliament Aung San Suu Kyi on her first foreign trip in 24 years. While Myanmar has remained an impoverished backwater, the Thai capital city has grown a mantle of glamour. It’s now dotted with posh restaurants, trendy bars and luxury hotels in the midst of ageless Buddhist temples.
The 67-year-old Nobel Peace Prize laureate, who was released from house arrest in November 2010, said that as she flew into Bangkok at nighttime in May, she was struck by the contrast between the city and her homeland’s former capital. “Thirty years ago, a scene that met my eyes landing in Bangkok would not have been very different from what would have met my eyes landing in Rangoon,” she told WEF delegates. “I was completely fascinated by the lights because I had just left a Burma suffering from electricity cuts.”
One of those who has benefited from the economic progress that Suu Kyi witnessed is Indorama’s Lohia. After seeing thousands of businesses go under during the 1997-to-1998 crisis, Lohia, 53, says he set his company on the path to international expansion in order to diversify risk. In 2002, he was looking for financing for his first overseas acquisition: Tiepet Inc., an Asheboro, North Carolina-based PET resin manufacturer that had gone out of business.
Lohia says a Bangkok banker friend advised him against the purchase because many Thai companies had gotten burned badly overseas. He says the banker pointed to the case of Thai tuna canner Unicord Co, which went bankrupt several years after acquiring U.S. rival Bumble Bee Seafoods Inc. for $283 million in 1989. Lohia went ahead, and today Tiepet, renamed StarPet Inc., is one of 39 Indorama factories in 15 countries manufacturing products including PET, which is used by Coca-Cola Co. and PepsiCo Inc. to make plastic bottles and by Procter & Gamble Co. to make disposable diapers. Indorama went public in Bangkok in February 2010. The Lohia family’s 66 percent stake was valued at $2.9 billion as of July 30.
Lohia came to Thailand by accident at age 29. In 1988, his father, who was running a successful textile business in Indonesia, sent Lohia, his youngest son, to Bangkok to find out more about the polyester business. Two decades later, Lohia is in the process of setting up a factory in Nigeria, which will become one of the first PET producers in Africa.
In 2011, Indorama ranked 62nd among 1,917 chemical companies as measured by annual sales, according to Bloomberg data. Lohia says his goal is to build the firm into one of the world’s top 15 chemical makers within 10 years. “That excites us and pushes us to our limits,” he says. While questions hang over the future of Thai politics, a sunny Lohia says he trusts that the country will settle into the stability required to spearhead growth in the years ahead. “Thailand has been extremely good to me,” Lohia says. “I am here to stay.”
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