The latest forecast came after economic adviser Ana Corbacho led an IMF mission from March 3-18 to conduct the 2016 Article IV Consultation. The mission exchanged views on recent economic developments and the country’s outlook with the government, the Bank of Thailand and other public institutions. It also met with private-sector analysts and academics.

According to Corbacho’s statement after the conclusion of the visit, the Thai economy recovered in 2015 after a slowdown induced by political uncertainty.

Headline inflation dropped by 0.9 per cent, undershooting the central bank’s target of 2.5 per cent plus or minus 1.5 percentage point +(-) 1.5 percent, mostly due to the fall in energy prices.

Core inflation and inflation expectations also declined.

The current-account surplus rose to 8.8 per cent of GDP, thanks to a sizeable improvement in the terms of trade, soaring tourism and import compression associated with tepid domestic demand.

Thailand’s financial markets weathered relatively well the repeated episodes of global financial volatility. The recovery is expected to strengthen moderately. A slight improvement in confidence and low energy prices foreshadow a pick-up in private consumption.

Public investment will remain a key driver, rising over the next few years and crowding in private investment.

Headline inflation is projected to turn positive this year, but may take time to reach the midpoint of the inflation target band.

The current-account surplus is projected to shrink over the medium term, as the positive shocks to terms of trade partially reverse and domestic demand improves.

Important risks cloud the outlook. On the external front, rebalancing in China may result in a faster slowdown or larger negative spill-overs.

A bout of global financial volatility could accelerate capital outflows and further tighten financial conditions. On the domestic front, slower-than-expected execution of mega-projects will reduce domestic demand, the IMF says.

Negative inflation could linger longer than expected, resulting in higher real interest rates and a rising real debt burden. Against the lacklustre outlook and downside risks, Thailand’s strong fundamentals provide room for manoeuvring to lift economic prospects in both the near and long terms.

The IMF mission’s recommendations focus on three main areas – deploying an expansionary macroeconomic policy mix that aligns short- and long-term goals, safeguarding financial stability, and enhancing potential growth.

Natee Sukonrat, chairman of the NBTC’s broadcasting committee, said his committee yesterday acknowledged the court’s decision.

On March 22, the court rejected the petition for a temporary injunction against the seizure of Thai TV Co’s bank guarantee. The decision was based on the fact that the company and the NBTC were battling each other in another legal case. Sombat Leelapata, acting deputy secretary-general of the NBTC, said the commission would notify Bangkok Bank, Thai TV Co’s guarantor, in writing this week.

Early last month, the broadcasting committee decided to revoke Thai TV Co’s two digital-television licences as it had refused to pay the second instalment of its upfront licence fees since last year.

The committee also ordered Thai TV to pay the remaining five instalments worth Bt1.63 billion plus value-added tax as well as the unpaid annual licence fees and a daily fine of Bt60,000.

The company had been licensed to broadcast the Thai TV news channel 17 and Loca Family channel 15, which was later renamed MVTV Family.

Thai TV Co, led by media veteran Pantipa “Sister Tim” Sakulchai, had petitioned the court for a temporary injunction to protest against the NBTC’s administrative order, but the court did not make a decision at the first hearing on February 23.

After that, the company was given until March 11 to pay its outstanding fees. It failed to do so, Sombat said.

According to a source in the banking industry, Bangkok Bank has reportedly set aside enough reserves to cover the Thai TV case even though it has not yet received a claim from the NBTC for the guarantee.

The MoU will see AIS starting |a non-commercial trial service |on 15MHz of the spectrum. AIS |has informed the National Broadcasting and Telecom-munications Commission about this plan.

The MoU is expected to be signed soon. Earlier, AIS chief executive officer Somchai Lertsuthiwong said the company expected to sign it this month.

AIS is seeking more spectrum bandwidth to serve its 40 million subscribers after failing to win an NBTC licence to the 900-megahertz spectrum last December. Currently it has licences to 15MHz of the 1,800MHz spectrum and 15MHz on 2.1GHz.

TOT is expected to gain revenue of around Bt10 billion a year from this 10-year partnership with AIS.

A TOT source said the MoU was just for the trial service and there was no payment requirement for the spectrum use.

After this MoU is signed, AIS and TOT will sign five contracts, beginning with the AIS commercial trial service on TOT’s 2.1GHz, which is scheduled to be signed within 30 days of the first MoU.

The second one is a contract between AIS subsidiary Advanced Wireless Network (AWN) and TOT to expand TOT’s 2.1GHz network coverage.

AWN will invest in this network expansion and lease it to TOT to provide wireless service.

The third contract is for TOT’s wholesaling of 80 per cent of the bandwidth of this new network built by AWN to AWN.

TOT is expected to gain revenue of around Bt3.9 billion a year from wholesaling the bandwidth to AWN.

Under the fourth contract, AWN will lease 13,000 telecom towers from TOT.

The towers were built during AIS’s concession contract with TOT, which has since expired.

The TOT source claimed that AIS had agreed to transfer all these towers to TOT after signing a contract to lease them from TOT.

TOT will get around Bt3.6 billion a year from this leasing deal.

The signing of the second to fourth contracts will take place within 60 days after the singing of the first contract.

Under the fifth, AWN will lease all of its 900MHz network equipment from TOT, which is expected to gain revenue of Bt2 billion a year from this deal.

The Office of the Attorney-General is still examining these |five contracts. TOT needs the approval of its board before it can sign them.

While supporting investment in development of the country’s rail system in general, and proper investment in the high-speed-rail project, Democrat Party leader Abhisit Vejjajiva said in the letter toPrayut that, during his government’s term, the project was aimed at regional connectivity under joint investment, construction and management with China.

He said that previously, the high-speed train was routed to Nong Khai province for connection with China’s planned high-speed rail route from Kunming.

Based on the Transport Ministry’s earlier assumptions of 7.5 million passengers per year in the initial period and 20 million per year in the long term, Abhisit said in the letter that these assumptions might not be viable under the government’s new plan to have the high-speed train run only to Nakhon Ratchasima province without any connection with China’s high-speed train. This could sharply erode the economic and financial worthiness of the project, while the possibility of regional cooperation was certainly dismissed, he said.

Abhisit also emphasised that there remained financial risks in this project that were beyond the scope of Thailand as the sole investor.

Assuming China lends Thailand Bt170 billion and charges it 2-per-cent interest, the Thai government will carry a Bt3.4-billion annual interest burden. If the fare is set at Bt500 (more than Bt3 per kilometre), that means it would require 7 million passengers per year to cover the interest costs alone. But that number was based on the ministry’s previous assumption of the train running through Khon Kaen, Udon Thani and Nong Khai, and connecting with Laos and China.

Abhisit urged that investment, management and supervision of the high-speed train’s operation should be run by a joint investment company, which could be newly established, given the State Railway of Thailand’s heavy workloads.

He also suggested that environmental and human impacts from investing in this project and other mega-projects should be assessed prudently.

The project could be made successful if Prayut negotiated directly with China’s leader, he said, citing previous delays from confusion as well as the inability of both countries to make decisions.

As the high-speed train would focus on passenger transport, not cargo, he urged the government to make development of the logistics system an urgent issue to increase the nation’s competitiveness through accelerating other projects for cargo transport. These efforts would include the double-track railway project and the motorway project.

Meanwhile, according to an analysis report issued yesterday by the Economic Intelligence Centre of the Siam Commercial Bank, the government’s decision to invest solely in the project helped overcome a previous delay in negotiations with China and the construction is now likely to start this year.

Positive effects

Because of this, Thailand will be able set the terms and conditions for the construction contracts, which will add positive effects to Thai businesses along the value chain, especially for civil work and electrical-system work in which Thai contractors are competitive with foreign builders.

“The civil-work and train systems and train contracts for the Bangkok-Nakhon Ratchasima project are expected to be worth Bt74 billion and 4 billion respectively. This excludes benefits to local businesses along the railway’s route,” said the EIC.

However, the research centre noted that the investment for the railway project might affect the state’s fiscal position, since it is estimated to add public debts amounting to 1.5 per cent of gross domestic product.

“Combined with other government mega-projects, this may cause public debt to exceed 50 per cent of GDP within three years, which is a worrisome level. This will make the Thailand Future Fund project, which will raise funds for infrastructure investments, even more necessary,” it said.

He said that chief among them, the disbursement of central budget worth Bt56 billion in the middle of this year to finance some infrastructure projects should significantly boost the economy. The impact would be significant if more than 70 per cent of the budget or about Bt40 billion is disbursed, he added.

A total of Bt65.5 billion is expected to flow into the economic system due to the infrastructure investment and other stimulus measures – the subsidised housing scheme (Baan Pracha Rath) and Songkran spending boost.

Charl said if several developers joined the Baan Pracha Rath scheme, this could boost the economy by Bt10-Bt20 billion.

The Cabinet is expected to approve the measure to boost Songkran spending, which may allow taxpayers to deduct their taxable income by expenses incurred during April 9-17 by upto Bt15,000.

KResearch expected this to boost the economy by Bt5 billion.

Tim Leelahaphan, Thailand economist of Maybank Kim Eng Securities, said that the Songkran measure would help boost consumption and drive domestic tourism. The Tourism Authority of Thailand (TAT) has set a new target for domestic tourism revenue of Bt900 billion – around 40 per cent of combined domestic and inbound tourism revenue – this year, up from Bt850 billion predicted earlier and Bt790 billion in 2015. Tourism accounts for about 10 per cent of Thailand’s GDP.

As domestic tourism would be a focus this year, after Songkarn, he expected the government to announce similar schemes during the low tourist season to boost travel. Tourism accounts for about 10 per cent of Thailand’s GDP.

Late last year, the government launched a special tax break allowing individuals to deduct up to Bt15,000 on purchases made during the year-end festive season. Taxpayers capitalising on the break raked in Bt4 billion in deductions.

The cooperation involves major Thai corporations pairing up with small and medium-sized enterprises to explore business and investment opportunities in Asean.

Commerce Minister Apiradi Tantraporn said the ministry wanted to set up a central database on trade and public/private investment which would support in-depth analysis and investment and business decision-making.

The Thailand Team is made up of representatives from public and private organisations, the Chamber of Commerce, Board of Trade, Federation of Thai Industries, commercial banks, plus local and foreign businesses here who will join forces in helping to boost exports and investment overseas, beginning with neighbouring CLMV, Apiradi said.

The Thailand Team will compile trade and investment data and attempt to solve obstacles to trade and investment in CLMV.

This way, the government can find ways to talk with CLMV governments and commercial figures in June on how to resolve issues that hinder trade and investment, Apiradi said.

In addition, major Thai corporations with foreign trade and investment experience will continue to assist local SMEs who are new to the international business market and exploring and tapping opportunities in Asean.

Berli Jucker Corporation Plc will lead SMEs in trying to tap the Vietnamese market while Siam Cement Group Plc will assist SMEs in exploring construction-material opportunities in Cambodia in the third quarter.

Bangkok Bank will serve as a financial adviser to SMEs and help them obtain required capital.

Vietnam stands out because of its cheap labour, its big market with a population of 90 million, and free-trade agreements with 55 countries, aside from political stability and promised economic reforms, said Pham Hong Hai, chief executive officer of HSBC Vietnam.

Optimism will remain high as long as geopolitical risks in the region do not escalate and if the Vietnamese government does not become unhappy with past reforms and slow down future moves.

Another risk is wages moving up and ruining the country’s competitive advantage. Vietnam’s minimum wage is about US$120 (Bt4,200) a month, compared with about $300 in Thailand.

“Overall those are the risks, but I don’t think they will be concerns in the short term, given [that] the government is very committed [to] reforms and 60 per cent of population still lives in rural areas, ensuring that wages [will] not move up soon,” he said during a visit to Bangkok last week.

The government is now in the process of privatising state-owned enterprises, which generate 35 per cent of gross domestic product, and focusing on efficient use of budget deficits to avoid hyperinflation.

Meanwhile, reforms in the banking sector have reduced the rate of non-performing loans from 10 per cent three years ago to 2.9 per cent now. Reforms are also taking place to improve the ease of doing business. Above all, the US-led TPP – a pact with 11 member countries that together control 40 per cent of global trade – is a highlight.

Hai said textile and garment manufacturers from mainland China and Hong Kong moved to Vietnam a year before the TPP agreement was wrapped up to enjoy the associated benefits. He expects more of these, as well as other industries, to come, and warned that Thai companies should not miss the boat.

While the manufacturing and processing industries look attractive because of cheap labour, he said this would increase demand for services and logistics. With an increasing middle-income population, Vietnam also needs more investment in retail, healthcare services and education services, which are Thailand’s strengths.

Hai noted that in the early stage of development, Vietnam welcomed all types of foreign direct investment, though it was selective in terms of high-quality, high-value-added industries.

“The Vietnamese government’s mindset and sentiment is very pro-foreign investment. Given incentives, taxes and benefits, this will create a favourable environment,” he said. “I see bigger investments in the future.”

HSBC claims to be the biggest foreign bank operating in Vietnam. It is expected to play a big role in assisting foreign clients of the bank, which has a presence in seven of the 10 member countries of Asean. With about 1,400 staff, the Vietnam office plans to hire more to cope with business expansion.

High-value investment

Besides labour-intensive industries, some high-tech multinational companies have made inroads into Vietnam. According to Viet Nam News, Apple plans to set up a research and development centre in the country. Samsung’s planned $300-million R&D centre won the government’s approval last week, following its $3-billion investment in a manufacturing facility in 2013.

According to Hai, this followed the success stories of others such as Intel and Bosch. Intel faced difficulty in finding engineers at first, but now it looks to expand further. Meanwhile, Bosch has also set up an R&D centre, after a manufacturing facility. Some textile companies have also set up design centres.

He noted that the government had tried to ease the shortage of talent in Vietnam by facilitating the hiring of foreign workers. The Asean Economic Community should somewhat ease this obstacle.

“Vietnam has the skill sets [already]. What the country needs is someone to train them, so that they can add value to the process. That’s a great way for the country to move forward. We need to move up the value chain. If you rely on cheap labour costs, you can’t compete for long,” the banker said.

Of the members of the CLMV (Cambodia, Laos, Myanmar and Vietnam) sub-region, Vietnam is very attractive, said Kevin Tan, CEO of HSBC Thailand. Cambodia’s attractiveness is on the rise, and Laos and Myanmar could be more attractive in the near future.

“But from the point of view of political stability and infrastructure, Vietnam is still better than those countries. Relatively, VN is very attractive,” he said.

Hai acknowledged that recent interest in Myanmar served as a wake-up call for Vietnam, that it needs to move up the value chain.