It's time we traded on Thailand's good vibes

As the kingdom's economy recovers, NZ should seize the moment, says TIM WATKIN.

Thais seem to have a thing for New Zealand. It's there in the smiles when you say where you're from, in the advertisements and television programmes, in the tourists and students jetting into the country.

"New Zealand is a well-liked country," says New Zealand-Thai Chamber of Commerce president John Pollard.

"For example, in the advertisement for mobile phones, they use New Zealand and Maori dancing to appeal to people. "And a lot of soap operas, which are really popular here, shoot scenes in New Zealand as part of the story. The characters' kids go to school there or they go for a honeymoon."

So he can't understand why New Zealand companies aren't doing more to turn those good vibes into better profits.

"We tried to organise a trade delegation. It was all organised, then cancelled through lack of interest. I don't know what you have to do to get New Zealand companies interested."

Mr Pollard, who has spent 10 years in the kingdom, is fond of Thailand.

Especially at the moment, when he is seeing the early signs of a healthy economic blush returning to the country's cheeks.

As managing director of engineering design firm Meinhardts Thailand, he's at the leading edge of trends.

"We as a company are booming. There's big money being spent in retail and in new hotels and renovations and now, finally, we're starting to get some factory work. We've had nothing for years, but we've just won two or three."

Thailand is fighting back after its falling currency led Asia into the 1997 financial crisis. With a GDP per capita of $US6020 ($14,025) last year, it is one of the region's wealthier countries, only just behind Malaysia ($7370) and well ahead of the Philippines ($3380) and Indonesia ($2940).

"The point is the size of the market here," Mr Pollard says. "You've got 10 per cent of 60 million who are middle-class, mostly in Bangkok, and you've got 90 per cent up-country wanting to be middle-class.

"They will get there in the next 20 or so years, so there's a huge potential for growth."

The Government, soon to be replaced after losing this month's general election, has been pummelled by critics who say the recovery has been too slow.

But the country had export growth of 22 per cent, led by joint venture companies, and GDP growth of 4.2 per cent last year.

"This year we expect something like 3.8 per cent growth," says Dr Chalongphob Sussangkarn, president of the prominent Thailand Development Research Institute.

"Between 1960 and 1985 we were growing 6 to 7 per cent per year. Between 1985 and 1995 it was something like 10 per cent.

"Between 1996 and 2000 we grew by zero per cent. So we've lost half a decade. Over the next five years, starting in 2002, the target is an average of 5.5 per cent. That's reasonable.

"We don't want to go too fast because it would lead to a current account deficit and then we would have problems in managing the foreign debt repayments without affecting the baht too much."

Mr Pollard agrees that for foreign clients, currency stability is an important issue.

"The only thing that worries me is the exchange rate. That could be a real problem for people with off-shore costs. But it looks stable, so that's good. I would rather have a 4 per cent [growth] that's meaningful than a 10 per cent that's going to crumble or crash."

With greater stability, Thailand is again looking overseas to attract foreign investors and promote joint ventures.

New Zealand's trade commissioner in Thailand, Judy Bennett-Smith, says New Zealanders would do well to consider Thailand as a hub for Southeast Asian operations.

"Set-up costs are low here and it's central [in the region]. Through the Thai Board of Investment there are some good incentives available if you are setting up in particular industries or a particular region."

And looking outside Bangkok makes good sense, says Mr Pollard. "Bangkok's had a boom, but the provincial towns never have. Each provincial town is as big as Auckland, so there's a lot there."

The reality of corruption and back-handers remains, but considerable effort is being made to reduce it in the public sector, while in the private sector it's not an issue, he says.

What's more, says Ms Bennett-Smith, "they're gradually trying to reduce the red tape involved and there's a recognition that Thailand has to make it easier for overseas investors."

According to Dr Sathit Uthaisri, a Bangkok Bank group executive vice-president, the first thing to do is to rebuild the confidence of foreign investors.

Mention that foreign nervousness remains following the crisis and Dr Sathit simply says: "Baloney ... People should feel comfortable doing business here."

Mr Pollard says the banking system is still one of the biggest problems for foreigners wanting to do business in Thailand.

"It's still a mess. The banking sector is still not sorted out and the laws still not very good for collecting debts. There's a long way to go to sort those systems out."

But Dr Sathit says Thai banks have responded to the crisis and competition from foreign banks by spending money on reforms.

"We have been lucky that in this period of two or three years when the economy was down, everyone was sleepy and helpless.

"So it gave us time without competing with each other for expansions and market-share. We've spent most of our time improving things."

Ms Bennett-Smith says a growing number of New Zealand firms are looking to capitalise on Thailand's progress.

Five contacted her last year, in sectors ranging from manufacturing to market research.

The total exports for the year to last June grew 20 per cent to $NZ283.8 million FOB, with exports in sectors such as pine timber and beef more than double pre-crisis levels.

Ian Frost, in charge of Carter Holt Harvey (Thailand), is another who has seen signs of life returning. Certain sectors have particular potential, he says.

"Automotive and machinery parts, electronic equipment, computer hardware ... I think the service sector is showing some life."

In 1997 and '98 there was nothing. Now there are all sorts of new opportunities," says Mr Pollard says Thailand has always been a good country to do business in - "much easier than neighbouring countries, which is not the perception New Zealanders have."

Dr Sathit says that after hitting rock-bottom in 1999, Thailand's economic recovery is steady and nearly complete.

"Two more years. Come back and we'll have champagne. The growth rate will not be that spectacular, but it will become more solid and better structured. It will be real growth."

* Tim Watkin travelled to Thailand with help from the Asia 2000 Foundation.