1. ECONOMY & POLITICS IN THAILAND Graham Macdonald Chairman, British Chamber of Commerce Thailand --------- Danny Pruce Deputy Head of Mission, British Embassy --------- November 2010

2. Graham Macdonald -Lived & worked in Thailand for over 16 years -Co-founded MBMG Group in 1995 -Co-founded BCCT Eastern Seaboard in 1997 -Chairman of BCCT Eastern Seaboard since 1998 -Chairman of BCCT Charity Group since 2009 -BCCT Main Board Director since 1999 -BCCT Vice Chairman 2005-2010 -BCCT Chairman from July 2010 -President Care for Kids from 1998 -President of Royal British Legion Thailand from 2009

5. -Help members develop their businesses -Introductions & sign-posting -Direct marketing & public relations -Management/Skills Development -Thai language events -Information resource & doing business advice -Networking & social events -Advocacy & problem resolution BCCT Role

6. To serve the needs and promote the development of British business in Thailand and as ‘Partners in Progress’ contribute directly to Thailand’s economic advancement BCCT Mission Statement

7.  Visas and work permits  Property  Foreign Business Act  UK – Thai Trade Initiatives Key Advocacy Issues

8. Tuesday 8 th June 2010 at Government House

9. - Support members based outside Bangkok (regional centres) - Stimulate business contacts => new members - 2010: budget for events in Phuket, Chiang Mai & the Eastern Seaboard - Focus on business presentation and networking events - Mini–displays for members’ products/services - All welcome - but members pay less BCCT Upcountry

10. The Thai Economy

11. The Baht – strong but…… The last 2 years have seen Asian currencies strengthen against the USD, in what could be the beginning of a major trend pattern Also, surplus USD liquidity (USD600 billion via QE2) will continue to influence THB and other Asian currencies Currency change relative to US$ Data source: Bloomberg

12. Currency appreciation

13. The strong Baht Finance Minister H.E. Korn Chatikavanij said at a BCCT Lunch on Monday that, “Dollar depreciation is a worldwide problem. Rather than spend time thinking about how to weaken our currency, better to consider what benefits we can gain from a strong Baht." Mr Korn said Thailand must invest trillions of Baht to help strengthen the country's water management, rail, telecommunications and education systems. The country should take advantage of the strong Baht to move forward with investments requiring high import content due to lower costs in local terms. At the same time, higher imports would help increase capital outflows and ease pressure on the Baht to appreciate.

14. Strong Baht is good for imports

15. THB:USD However, despite all the good and bad points, the fact remains the Baht is stronger now that and any time since June 1997 and it will remain so for the foreseeable future so we are just going to have to adapt.

16.  A halt to new foreign investment: Companies who assist with M&A and market entry indicate that business has really dropped off.  Big projects have stopped: Projects that require overseas funding or insurance have been delayed. INVESTMENT ( - )

17.  A golden opportunity: to spot golden acquisition opportunities next year.  Projects: Survey of 50 BCCT companies in Thailand, 48 remain committed to investment plans.  Real value in Thailand: “We truly believe in the capabilities and economic growth in the Kingdom. It makes real sense to continue to invest in manufacturing expansion in the country.”- Ewen McDonald, Managing Director Rolls-Royce (Thailand) Ltd INVESTMENT ( + )

18. INVESTMENT (+) cont. A total of 284 Japanese projects, with a combined investment of THB71.342 billion, have been granted BoI investment privileges during the first 10 months of this year. The figure rose from 201 projects from a total of THB52.3 billion in the same period of 2009. The Nation – November 9 th 2010 Thai and Chinese investors plan to invest a combined THB3 billion to further develop the Thai-Chinese Rayong Industrial Zone and set up new projects there so that the facility can serve as a production base for expansion into Asean. Bangkok Post – November 11 th 2010

19. SWOT Strengths -In the right place at the right time – situated amongst the fastest growing parts of the world - Advantage in service sector – tourism, healthcare - Strong business fundamentals – balance sheets, banking sector Weaknesses -Political disturbances hindering medium to long term strategic planning Opportunities - Regional integration – ASEAN and East Asia Community -Capital inflows from China and other emerging markets Threat -Regional integration – ASEAN and East Asia Community -Consolidation of western MNCs away from Thailand -Growing competition from China and other low cost production bases

22. For service sector, the number of inbound tourists in September 2010 amounted to 1.19 million persons increased by 14.5 percent per year, and resulting in 3rd quarter in‐bound tourist of 3.69 million persons, or a growth of 12.5 percent compared to the same period of last year and reflecting continuous revival of service sector from tourism. Tourism

23. - Headline inflation in September 2010 grew at 3.0 percent per year - mainly from increased prices of fresh foods particularly vegetables and fruits - Core inflation grew at 1.1 percent per year - Unemployment rate in August was at 0.9 percent of total labour force, an equivalent of 350,000 unemployed persons - Public debt to GDP ratio at the end of July 2010 stood at 42.5 percent - well below the 60 percent public debt ceiling under the Fiscal Sustainability Framework - External economic stability remained robust and resilient to risk from volatilities that could arise from the world economy as indicated by high ‐ level international reserves at USD 163.1 billion or approximately 3.9 times of short term external debt. Economic stability remains robust

25. - For the first 5 months of this year the Thai Board of Investment reported that Foreign Direct Investment (FDI) more than doubled from the same period in 2009 - The momentum continued into H2 with large projects from the likes of Ford, Suzuki, Mitsubishi and Toyota announcing large scale plans HOWEVER! - It is interesting to note the above companies are already here. They know the recent problems do not target foreigners on purpose and so these companies can still meet targets and help Thailand to become the 10th largest auto producer in the world by 2014. Foreign Direct Investment

26. Supply‐side sector indicators for September and 3rd quarter of 2010 showed that the Manufacturing sector continued to expand but decelerated from the period earlier. At the same time, agricultural sector showed sign of revival. Preliminary Manufacturing Production Index (MPI) in September increased at 6.8 percent per year, resulting in 3rd quarter growth of 9.4 percent per year, decelerating from the 17.7 percent per year growth in the previous quarter. Similarly, the Thai Industries Sentiment Index (TISI) for September declines from the previous month to the level of 102.4 for second successive month following the issue of Baht appreciation. However, the TISI index at above 100 level suggests the strong confidence on the Thai economy. For agricultural sector indicator, Agricultural Production Index (API) in September contracted at ‐0.6 percent per year, particularly from tapioca production which resulted in 3rd quarter to contract at only ‐2.5 percent per year. This is a slight improvement from the previous quarter contraction of ‐2.7 percent per year. Agricultural price in the 3rd quarter expanded at high level of 30.2 percent per year, which has enabled real farm income to grow at 18.5 percent per year. Manufacturing

27. Director ‐ General of the Fiscal Policy Office recently concluded that “Economic indicators in September and 3rd quarter of 2010 indicated ongoing domestic demand growth that could alleviate the trend of exports slow ‐ down. It is therefore expected that the Thai economy in 2010 will expand within the range of 7.3 – 7.8% from last year, already taking into account the impact of Baht volatility and flooding. Fiscal Policy Office

28. Quarterly Economic Indicators

30. Asia is exporting within itself

34. Solid fundamentals provide capacity to grow  Robust external financial positions -Provide capacity to cope with external shocks  Low public debt (45% of GDP) -Allows for speedy & large fiscal stimulus  Healthy household savings -Imply resilient consumer spending potential  Low corporate indebtedness - Implies large capacity for new investment to grow Solid Fundamentals

35. Asia: Ease of Doing Business Ranking Country Overall Rank Starting Business Construction Permits Employ Workers Register Property Get Credit Protect Investors Pay Tax Cross Border Trade Enforce Contracts Close Business 20102009 Singapore11421164251132 United Kingdom 5616 352321016 239 Thailand12 5513526711288122448 Malaysia23218810961861424355957 China8986151180140326193125441865 Vietnam93911166910340301721477432127 Brunei9694153754183113119224816037 Indonesia12212916161149951134112745146142 India13313216917510493304116994182138 Cambodia145139173145134116877358127141183 Philippines14414116211111510212713213568118153 Laos16716589115107161150182113168111183 Myanmarn.a (ranking out of 183 countries) Source: World Bank: Doing Business Series 2010 (total 183 countries)

36. Corporate Governance In October 2010 Thailand moved up four spots to rank fourth in Asia on this year's list compiled by the Asian Corporate Governance Association and CLSA Asia-Pacific Markets The CG Watch report assesses the quality of corporate governance in 11 Asian countries Thailand scored 5.5, up from 4.7 in 2007 and was recognised as the most improved country due to highest score improvement Singapore was the best performer with a score of 6.7, followed by Hong Kong at 6.5 and Japan at 5.7. The Philippines was last on the list, scoring 3.7. Others include Malaysia (6th), India and China (7th), South Korea (9th) and Indonesia (10th)

37.  Thailand – A land of contrasts.  Ongoing political instability has damaged Thailand’s brand but does not have to harm it permanently.  Strong economic fundamentals with good growth potential.  BCCT remains focused on serving members’ needs, and as a partner in progress contributing to Thailand’s economic advancement. SUMMARY

38. THANK YOU FOR LISTENING British Chamber of Commerce Thailand www.bccthai.com Executive Director – Greg Watkins greg@bccthai.com Chairman – Graham Macdonald graham@mbmg-international.com