Thailand’s Political Crisis ‘Puts Burma Developments at Risk’

By William Boot 14 January 2014

The political crisis gripping Thailand is jeopardizing key economic infrastructure developments and other potential investment in Burma, reports warn.

The crisis has all but paralyzed Bangkok government and civil service activity, freezing planned major investments in international railway and road links and petrochemical projects, industry analysts said. It has also effectively put on hold plans to promote the Thailand-Burma joint venture Dawei port on Burma’s southeast coast, the analysts said.

Among projects now hobbled are Thai plans to produce chemicals and polymers—used in making a range of plastics, such as polystyrene—for export to China and countries of the Association of Southeast Nations (Asean). Road and train links out of Thailand into Burma offered a chance to promote the development of a Burmese plastics industry.

“If the [transport infrastructure] work is carried out, chemicals and polymers from Thailand would flow more easily into the less-developed Chinese provinces which border this portion of Southeast Asia, such as Yunnan and Guangxi,” said analyst John Richardson, writing in a report for ICIS, the international petrochemicals industry analysis company.

“Or [the polymers] might first move to, say, Myanmar where labour costs for plastic processing are lower than in Thailand. Finished and semi-finished plastics goods could then be transported to China, back to Thailand or to elsewhere in ASEAN,” he wrote.

But the Thai government’s plans for a new network of high-speed railways linking the country with Laos, China, Burma and Malaysia have been shelved.

“The [Thai] government has seen its flagship 2 trillion baht [US$60.6 billion] infrastructure investment bill hobbled by the political crisis,” said the London Financial Times.

“While many across the political spectrum agree Thailand urgently needs better roads, railways and ports if it is to realize its vision of becoming a hub for Southeast Asian regional trade with China, the opposition Democrat party says the plan is ill-directed, lacks sufficient parliamentary oversight and risks fueling corruption,” the paper reported.

ICIS said the new infrastructure is needed “so that there can be a more seamless flow of goods and services between China, Thailand, [Burma], Vietnam, Laos and Cambodia.”

The Thai crisis has not only crippled government spending programs, it has driven down the value of the baht currency and reduced both 2013 and 2014 economic growth forecasts.

“The Thai protests have deepened investor worries about a nation that is the region’s second-largest economy and has ambitions to be the bridge between China and the Association of Southeast Asian Nations (Asean),” the Financial Times said. “Investors long used to riding Thailand’s turbulent politics are showing increasing signs of becoming unsettled as the expanding protests add to concerns about worsening economic indicators.”

Thailand and Burma only recently reached a new agreement to jointly develop the Dawei port and industrial zone in a bid to attract major Japanese investment.

“In reality [Dawei] is dependent on the Thai side developing infrastructure that will link Dawei to the rest of Southeast Asia by road and railway,” Bangkok independent energy industries consultant Collin Reynolds told The Irrawaddy on January 13.

“Both countries need a third partner, ideally Japan, to make this project work. The [state-owned] Japan External Trade Organization has made clear that it wants to see some infrastructure connecting Dawei with the outside world before it makes any commitments on investment,” he said. “The Yingluck Shinawatra government in Bangkok cannot take anything forward since it resigned over the street protests and took on a caretaker only role until elections are held.

“The courts have effectively blocked most funds to the caretaker government and it is hard to see any election going ahead as planned on February 2.”

The Dawei project is planned to include an oil transshipment port, a refinery, steel mills, petrochemical plants and a major electricity generating station. The development includes road, railway and oil pipeline routes running from Dawei into Thailand to link up with north-south transport infrastructure.

However, there is one business sector where Burma might benefit from the economic paralysis in Thailand: oil and gas.

Plans to invite international bids for 22 new oil and gas blocks in Thailand this year look like being shelved.

The blocks, both offshore and onshore, have a combined estimated reserve of 3 to 5 trillion cubic feet (85 billion cubic meters to 141.6 billion cubic meters) of gas and between 5 and 10 million barrels of oil, said the Bangkok Department of Mineral Fuels which is responsible for handling licenses.

The opening up of the blocks has already been delayed because of public opposition following an oil spill in the Gulf of Thailand in the middle of last year that polluted holiday beaches. If there is further postponement due to the political chaos, said Reynolds, it would likely drive international oil company investment away—and perhaps across the border to Burma where more blocks are expected to be on offer this year.