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Multinationals in Thailand fear worsening unrest


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By Sri Jegarajah January 13, 2014 2:09 AM




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Thailand's current political turmoil has yet to impact major foreign investors with operations outside Bangkok but some multinationals fear a worsening risk profile and indicate a reluctance to approve expansions and new projects.

The latest bout of unrest and associated fears of softer economic growth has shaken equity, credit and currency market sentiment, with global investors pulling nearly $4 billion out of local stocks and bonds since early November. Still, foreign-owned factories have been spared the worst of the disruption as they're located in industrial complexes in provinces outside the Thai capital.


Japanese-owned auto and electronics plants in Thailand have the most to lose if the political turmoil escalates, according to Gavin Greenwood, a regional political analyst with Hong Kong-based security firm Allan & Associates.

Companies such as Pioneer (Tokyo Stock Exchange: 6773.T-JP), Honda Motor (Tokyo Stock Exchange: 7267.T-JP) and Toyota Motor (Tokyo Stock Exchange: 7203.T-JP), are the "canary in the coal mine," Greenwood told CNBC's ' The Call '. "They are showing increasing hesitancy and concern at what's happening," he said. However, "they haven't done anything about it yet," he added "but Japanese investment rather than anyone else's is the thing to watch."

Inside the Thai capital, companies are "switching on contingency plans," said Dennis J. Meseroll, Bangkok-based Director of business consultancy Tractus Asia. The American Chamber of Commerce in Thailand confirmed to CNBC that their members were ready to take precautionary measures if needed.


"As always, when unsettling events occur, U.S. companies have contingency and back-up plans to ensure business continuity and employee safety," Judy Benn, AMCHAM Thailand's Executive Director told CNBC in an email on Jan. 8. "Our member companies are ready to implement such measures if it becomes necessary."

Meseroll at consultancy Tractus said though immediate disruptions are not expected outside Bangkok, businesses are increasingly questioning the longer-term viability of future expansions against an uncertain political backdrop, while the endgame in the present political drama appears particularly unclear making forward-planning doubly challenging.

A major question posed by big business both local and foreign, according to Meseroll: "What's the ultimate goal (of the protesters), other than just unseating the Thaksin family? If anyone says they know what's going to happen next, that would be folly."


The Thai political climate is an "evolving factor that influences business strategy," he added. "Companies are always considering where they're going to locate. Over the last five to six years we had a couple of clients where we did regional site location projects who said they didn't want to look at Thailand."

Inevitably, duration and the severity of the current political impasse remains a key concern.

"My personal view is similar to many business leaders here that, just like every country, this kind of political unrest impacts business both directly and indirectly especially when it continues for a period of time with no light at the end of tunnel," said a Bangkok-based executive with U.S. multinational.

- By CNBC's Sri Jegarajah. Follow him on Twitter @cnbcSri


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