Can Thailand Turn Lemons Into Lemonaide?

I certainly don’t wish anyone hard times or any sort of financial despair but let’s face it, what I write isn’t really going to make a difference whether or not it actually happens.  All I can do is speculate on what happens if government predictions hold true and tourist numbers are cut in half in 2009.  Obviously it’s going to hurt a lot of people but might there be a silver lining?

First off, I tend to believe the government tourism estimates though I recognize that it’s more than a little self-serving for them to quote massive tourism number declines as a result of the PADs actions.  The reason I’m prone to believe their numbers is that this seems like the straw that breaks the camel’s back for a lot of visitors I’ve spoken to.  Not only do you have the 350,000 (and counting) stranded passengers in Bangkok but many a single man has saved up all year and banked his entire holiday on coming to Thailand (especially true in the US where people only get 10 days per year).  Believe me, if I had been trudging through my dismal job all year with only my 10 glorious days in Thailand keeping me going I would be well pissed off right now when I saw that there’s a good chance that normal airport operations may not resume until well into my holiday.

As I get emails from friends and families back in various parts of Farangland it’s obvious they think I’m in the middle of Faluja with bombs going off on every street corner and mobs of anti-government protesters roaming the streets.  Though I can only chuckle at the over-dramatization it does indicate to me that if any of these people had even the remotest thought of listening to all the good things I’ve said about Thailand and planning a trip for themselves those ideas are long gone.  As far as they’re concerned all of Thailand is in a state of chaos.  No television ad or tourism slogan is going to bring them over here anytime soon.

And that’s just the tourism side.  Don’t think that every major airline that has been using BKK as a SEA hub isn’t meeting to discuss whether they can afford to have aircraft costing hundreds of millions of dollars sitting on the tarmac in Thailand anymore.  Business analysts working for thousands of companies all across the globe are burning the midnight oil as we speak putting together contingency plans on where else they might trade or build business operations in the region.  Hell, when Vietnam starts looking more politically stable than your country you’ve really screwed the pooch.

The World Bank’s Worldwide Governance Indicators ranks Thailand’s political stability at 16.8 out of 100 (down from 44.7 in 2007).  Risk measurement companies around the world are downgrading Thailand and have for some time.  And these are the people that big multi-national companies rely on to advise them of the risk associated with their overseas investments.

Then there’s the whole supply chain problem.  Many businesses around the globe rely on getting fresh produce, medicines, etc from Thailand.  A shipment of produce sitting in the airport for the last week is as good as garbage.  Those trading partners on the other side of the globe are going to find new suppliers to get them through the crisis here.  Once they find reliable suppliers in other countries many may never want to deal with their Thai suppliers again.  Of if they do they’ll diversify their risk by sourcing from different suppliers in different countries thus their purchases of Thai products will drop.

Thailand’s real estate market has weathered past downturns reasonably well but can it do the same this time?  I was reading just the other day that many real estate agents are reporting zero market activity in the last several weeks.  Literally, they’ve sold nothing and have no indications of interest coming in.  And this is supposed to be one of the strongest seasons for them!   Potential overseas buyers aren’t returning phone calls.  Vacation home purchasers are foregoing their deposits and backing out of condo purchases.

I popped into one of the Soi Cowboy bars last night and spoke to one of my long-time friends who works there.  She was floored at how quiet it was.  She told me that several customers who had been in over the weekend and were trying to get out of Bangkok said they were never coming back to Thailand.  She told me that with a laugh but the laugh didn’t disguise her nervousness.

I dropped into Long Gun and there were maybe five punters in the place.  Suzie Wong’s only had two.  Baccara where it is often difficult to find a seat had no such capacity problems last night.  Is this what all of 2009 is going to look like?

According to Wikipedia Thailand’s tourism industry accounts for roughly 6% of their GDP.  Personally, I think that number is bullshit.  Other than hotels and airlines the tourism industry in Thailand is an all cash business which means hundreds of millions or perhaps even billions of baht aren’t being accounted for.  How many bar girls claim a single baht of income from prostitution?  Do massage parlors count as part of the tourism industry?  There’s an entire underground economy that I don’t think is being accounted for in the official government estimates so whatever the impact the government predicts is likely to be far, far worse.

But then there’s the ripple effect which follows how the money flows through the system.  Two thousand baht paid by some punter to a bar girl goes in a lot of different directions once it leaves his wallet.  Some will be spent by her directly on things like housing, food, mobile, and clothing.  Another part of her money gets sent back up to Isaan to her parents who also use it for housing, food, and clothing.  And each place that money is spent someone is booking that as revenue.  If that punter never gets on a plane to come to Thailand then not only is she out the 2000 baht but a whole chain of people lose their little portion of that revenue.

On the scale of a single punter and a single bar girl the effect is ridiculously miniscule.  Obviously no food vendor in Isaan is going to go out of business over a lost 5 or 10 baht that would have flowed to him from that single transaction but if, as predicted, tourist arrivals drop to 6 million in 2009 that 5 or 10 baht becomes 37.5 – 75 million less baht.  If every single one of those 7.5 million missing tourist arrivals would have averaged only one LT relationship with a girl that’s a staggering 15,000,000,000 baht in lost economic activity.

But maybe this is what Thailand needs.  When I said earlier that for some this may be the straw that broke the camel’s back there’s a built in assumption that this was not the only straw.  The escalating prices, ever more sophisticated scams, increasingly rude and obnoxious behavior of the girls, deteriorating levels of service, etc are the other straws burdening this camel.  One by one the pillars of what drew a lot of people to Thailand have been crumbling for some time.

In a way an implosion was inevitable.  I’ve read several Stickman posts where he discusses places like Cambodia and the Philippines and the fact that some punters are exiting Thailand for those places.  His posts always seem to end on a note that while things aren’t what they used to be in Thailand he’s not ready to make that jump yet.  There was always that “yet” that seemed to imply if things kept getting worse other places might start to look more attractive.  If you’re chasing a lifestyle and that lifestyle no longer exists then it’s time to move on.

So where is this silver lining that I suggested earlier?  Well, maybe it wakes some people up!  Maybe some farang and Thai visionaries arise who actually understand that you cannot keep expecting more while providing less.  You cannot run a third world country and charge first world rates.  You cannot promise the charm of Thai culture and thrust a bunch of touts and scam artists in people’s faces the second they step off the plane.

There are a lot of things that need fixing in Thailand and maybe if the Thai economy suffers enough pain perhaps it will make the government, businesses, and people wake up and realize that it’s in their best interest to fix these problems.  Whether it be revitalizing the tourist areas around Sukhumvit and Silom or opening up property and business ownership to foreigners, there are things that Thailand needs to do and has needed to do for a long time in order to keep the economy strong.

Right now Thailand is like a farmer who has been given a large plot of land that is yielding plentiful crops who just keeps farming it and farming it until he’s extracted all the nutrients from the soil leaving it barren and is then unable to feed even himself.  As far as Thailand is concerned the supply of stupid tourists is endless.  Chew them up and spit them out.  Buddha will just keep sending more.    And if Buddha quits sending you farangs, no problem, China and India have dumb tourists too.

Well now the tourists are gone as is much of Thailand’s reputation as a healthy business environment (which was questionable to begin with).  Thailand has two options; it can sit back and simply wait until people forget how screwed up it is or it can use this as an opportunity to act aggressively and lure investment and tourism back into the country.

If they go the sit and wait route things could get very, very ugly in Thailand.  I’m not talking about bars being forced to close and people having to tighten their belt a little kind of ugly.  I’m talking about the really ugly stuff that happens when an economy implodes; violent crime, drugs, forced prostitution, kidnappings, etc.

I think most people will agree that the pain and suffering are inevitable at this point so I’m not speculating on these things in the hope that Thailand gets rocked financially.    I’m simply looking at a situation that is almost guaranteed to shape up badly and trying to understand where things go from here.  Sometimes it is desperate times that open the door to new opportunities.  When people are removed from their comfort zone it becomes easier to make choices that would have been difficult under the status quo.

I’m not smart enough to propose what the solution should be but I think that the people of Thailand might be ready to hear from someone other than a Thaksin supporting group or the PAD.  Perhaps politicians who understand why Thaksin is so popular with the rural poor and also understand the issues that brought rise to the PAD might be in order.  Or maybe it’s business leaders who take advantage of an ailing economy and pressure the government to make reforms for the sake of the country’s business interests.

Whatever the answer is it likely won’t be easy but with the economy in shambles making hard choices might be a lot easier.