2010-09-07 15:52:09 - Thailand Defence and Security Report Q3 2010 - a new market research report on companiesandmarkets.com

Prime Minister Abhisit Vejjajiva’s victory in winning the support of lawmakers in a ‘no-confidence’ vote on June 1 2010 strengthens the view that a revisit of violent protests in Bangkok will be unlikely, at least in the short term.

However, we note that the resolution of Thailand’s structural problems in income inequality and a reconciliation of its divided population will be key to the country’s long-term outlook. On this front, we are sceptical whether these structural problems can be resolved anytime soon. Indeed, Thailand currently scores a relatively weak 65.4 for our short-term political risk rating, highlighting our concerns in the particular components of security and social stability.

While the domestic situation obviously dominates, at the same time the border dispute with

 

 

Cambodia continues to simmer. In mid-February, Phnom Penh said it might seek intervention of International Court of Justice or the UN Security Council to settle the disagreement over land near Preah Vihear temple. The dispute is already threatening to spread to a wider ASEAN theatre.

There is also tension in the southern part of the country where more than 3,500 people have been killed in almost daily violence since January 2004. Insurgencies in neighbouring Myanmar, Cambodia and Laos are constant security concerns. Consequently, Thailand’s terrorism risk rating remains at a low 32.5. The industrial base is essentially commercial and defence contract works form only a part (and sometimes a small part) of the revenues for companies involved in Thailand’s defence sector.

In economic news, GDP surged 5.8% y-o-y in Q409 snapping four quarters of negative growth and confirming a full-year contraction of 2.5%. We are now forecasting GDP growth of 3.6% for 2010 but acknowledge this growth rate may be exceeded. There are good indications that consumer spending is picking up and this recovery trend can be sustained over the coming quarters. Low interest rates will be maintained by the Bank of Thailand as the economy is still not on a firm footing and this will encourage consumers to take on more debt.

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