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25/09/2016

Thailand’s economy: Free trade, fishing and fruit industries in the spotlight

Trade & Society

Thailand’s economy: Free trade, fishing and fruit industries in the spotlight

Tour skiffs off the Thai coast. Sala Dan, 2008.

[Roberto Saltori/Flickr]

As the Royal Thai Army plotted its coup against the democratically-elected government in May 2014, Thailand was the second largest economy in ASEAN, and stood on the brink of signing a landmark Free Trade Agreement with the EU.

Now, less than two years later, that FTA has been shelved indefinitely whilst the junta is in power.

The European Commission stands poised to make a decision any day now on banning all Thai fish imports to the EU, an industry worth some $3bln in 2014. Widespread allegations of labour abuses in Thailand’s fruit processing and fishing industries — two key sectors — have soiled the country’s international reputation.

Even military exercises with the US — whilst not cancelled entirely — were downgraded.

Critical as the fishing industry is to Thailand, the decision to freeze negotiations on an FTA whilst the junta is in power is the most damaging.

‘Zero chance’ of Thailand FTA under junta, Commission official says

EXCLUSIVE / The suspended Free Trade Agreement with Thailand will “never be ratified” whilst the country is under a military dictatorship, a top aide to EU Trade Commissioner Cecilia Malmstrom admitted on Friday (20 November).

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As EurActiv.com revealed in November, after hopes a swift comprehensive EU-ASEAN FTA faded, the Commission looked around for individual ASEAN nations to sign the first bilateral deals with.

They chose Singapore, Vietnam and Thailand. Miguel Ceballos Baron, deputy head of Cabinet to Trade Commissioner Cecilia Malmström, told a business audience in Brussels last year that Singapore was picked because it was “the most open, quick and highly-ambitious” of the ASEAN economies, Vietnam because it was a “developing and emerging power”, with Thailand somewhere between the two.

But with the overthrow of a directly-elected government going against the ethos of Malmstrom’s new ‘Trade for All’ policy of including human rights and the environment in all future trade deals, the European Commission had no choice but to suspend talks with Bangkok – which had “advanced a lot”, according to Baron.

Indeed, he went further. Pointing to social media, and popular protests against TTIP and other trade deals, Baron predicted that even were the Commission inclined to sign an FTA with Thailand, it would “never” be ratified by the Parliament whilst the junta was in power.

It is important to note the FTA has not been entirely scrapped. It could, theoretically, be resurrected following a proposed election in Thailand in 2017, presuming such a poll was deemed to be properly democratic.

But, at present, the Thai junta has more pressing concerns on its hands.

The government is now waiting an announcement from the Commission on whether it would impose a complete ban on Thai fish exports to the 28-member bloc.

Due to breaches of the so-called Illegal, Unregulated and Unreported (IUU) fishing protocols, Thailand has been on a ‘yellow’ warning card since April 2015.

The IUU rules are designed to maintain a sustainable and replenishable fish stock.

A team of EU inspectors flew to Thailand in January to inspect the measures so far taken by Bangkok, and a decision is expected imminently. An upgrade to a ‘red card’ would mean an immediate halt to an industry — not least the key tinned tuna sector, of which Thailand is one of the world’s biggest producers — worth some $3 bln annually to Thailand.

Few in Brussels expect the yellow card to be upgraded. But it is not impossible: Belize, Guinea, Cambodia and Sri Lanka have in the past had such sanctions imposed on them.

For the Thai economy, it would be a body blow, something the junta appears to recognise. It prompted General Prayuth to use his Christmas Day address to the Thai people to promise a clean-up of the industry.

He said, “We must acknowledge that faults have existed for a long time, and establish a clear agenda regarding legislation, management, punishment, care for victims and continuous across-the-board monitoring of the fishing industry.”

Prayuth insisted on a weekly progress report to him personally, a sign of the urgency of the threat of a ban.

As was a full-page advert in February in The Economist, boasting of the Thai government’s achievements in clamping down on abuses at sea.

The fishing sector is just one area, albeit the most prominent, where Thailand stands accused of abuse, however. Another is the fruit tinning industry, where allegations abound of exploitation of workers and labour abuses, especially of migrant workers.

However, the experience of one activist, British lawyer Andy Hall, suggests Thailand’s response is to shoot the messenger — or, in this case, whistleblower — rather than deal with the problems at source.

 

Hall conducted interviews with workers at a tinned fruit plant which exports to the European drinks market, for a Finnish NGO.

It found examples of forced labour, child labour, unlawfully low wages and long hours.

Although he had no part in writing the subsequent report, “Cheap Has A High Price”, Hall is now facing a 12-day trial in May on seven counts of criminal and civil defamation.

If found guilty, Hall could face eight years in prison. He is also being personally sued for 7 million euros.

UK and Finnish diplomats and monitoring the case, and it has been the subject of loud condemnation in the European Parliament, with UK MEP Glenis Willmott (Labour) championing Hall’s case.

She told EurActiv.com, “The harassment that Andy has been subjected to by the Thai authorities is completely unacceptable.”

MEPs condemn Thai junta

Thailand’s military junta came under cross-party attack at the European parliament on Thursday (8 October), with MEPs demanding a return to democratic rule, the release of political detainees, and an end to human rights and labour abuses.

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So what of the future?

Thailand’s other main industries are electronics, automobile parts, textiles, and tourism. It is also a major exporter of tin and tungsten, and trying to promote itself a future Asian hub for medical tourism, biotechnology and aircraft servicing and maintenance.

At a seminar for business leaders in Brussels in January, the Thai government was keen to market itself as a stable and forward-looking centre for foreign direct investment.

Embassy officials outlined the tax breaks — up to 8 years exemption from corporate income tax, with a possible 50% reduction after that — and advertising Thailand as a site for new “clusters” of innovation, such as robotics, automation, digital and medical tech.

And they insisted the military coup had not adversely affected investor confidence.

Duangjai Asawachintachit, Deputy Secretary General of Thailand Board of Investment (BOI), told the meeting: “Fortunately, investors were not too harsh on us [after the coup], given our situation, because  … actually in 2014, [when] the change [of government] took place, the BOI hit the highest records ever in our 50-year history.

“Normally we would receive around 1,600 project applications a year, but in 2014 we received 3,100 projects.”

She added, “If you look back at what has happened in Thailand, we’ve been through many things, but one thing that’s very noticeable is that it’s never had any impact on our economic policies.”

That contrasts starkly with the official opinion of the US government, which notes that “The economy experienced slow growth and declining exports in 2014, in part due to domestic political turmoil and sluggish global demand.”

Figures for 2015 are not yet in, but the World Bank predicted growth of just 2.5%, meaning Thailand would become the slowest growing country in ASEAN.

One of General Prayuth’s first meetings, within days of seizing power in 2014, was to meet European investors from the Thai-European Business Association (TEBA), where he told them, “We are not dictators, that just order whatever. I am prepared to do everything. Just show me your investment roadmap.”

Yet perhaps no more poignant sign of how Thailand has fallen out of favour compared with its ASEAN neighbours since the military coup is needed than the reception provided by President Barack Obama, at the US-ASEAN summit last month in California.

Singapore’s Prime Minister, Lee Hsien Loong, was feted during his time at the Sunnylands venue, granted private audiences with Facebook founder Mark Zuckerberg and Apple’s CEO Tim Cook, lunch with the founder of PayPal, Dan Schulman, and even took a spin with Elon Musk in an electric Tesla car.

By pointed contrast, Prayuth was met by President Obama with a curt, “We continue to encourage a return to civilian rule in Thailand.”

Positions

Background

The Royal Kingdom of Thailand boasts the world’s longest-reigning monarch, 88-year old King Bhumibol Adulyadej, who has been on the throne 70 years this year.

Modern-day Thai politics was forged in the student uprisings of the 1970s, first in 1973 against the anti-communist military dictator Thanom Kittikachorn, a US ally during the Vietnam war.

His return to the country in 1976 saw renewed student protests, culminating in the Thamassat University massacre, an attack no peaceful demonstrators by the military which saw dozens, possibly over 100, killed. Unlike in 1973, when King Bhumibol had backed the students, scholars point the finger at the monarch for this time ordering the crushing of the revolt.

Experts now believe the military intend to stay in power to oversee a royal succession from the elderly and frail King, to his son - a potentially tinderbox situation as most Thais have lived under no other head of state.

Contemporary Thai politics is split between the Shinawatra dynasty, who have been elected to power twice - first billionaire telecomms tycoon Thaksin (2001-2006), then his sister Yingluck (2011-2014), and frequent returns to military rule. Both were overthrown.

Thaksin is now a fugitive based in Dubai and with question marks over his role in the extra-judicial killing of some 2,000 drug dealers during his rule, whilst Yingluck is under a form of house arrest in Bangkok, facing corruption charges over a rice subsidy scheme, which many outside observers believe is politically-motivated.

Shinawatra supporters, largely peasants and the working classes from the north, wear red shirts, in opposition to the yellow shirts, heavily concentrated in the capital, Bangkok, who prefer the military and the monarchy.

Timeline

  • March-April 2016?: expected decision from EU on Thailand's 'yellow card' for IUU fishing violations
  • July 2016: promised date from military junta for a referendum on the draft constitution
  • “Mid-2017”: promised date for national elections