Since the general election on May 14, Thailand has gone three months without a new government to lead the economy. Foreign investors, businesses and tourists are eager to see a favourable outcome following several unexpected twists and turns.
Some countries have issued a travel advisory for Thailand because of occasional unrest in Bangkok. Australia warned its citizens about an unpredictable security environment, given previous anti-government protests in Bangkok, while Canada highlighted demonstration sites that people should avoid.
The Stock Exchange of Thailand (SET) index fluctuated throughout last month, hit by uncertainty over the government formation, a delay in prime minister selection and a continued sell-off by foreigners.
Foreign investors have been net sellers for six straight months, cashing out 12.6 billion baht in July and 118 billion for the first seven months.
Even though many foreign businesses have faith in the country, greater political certainty is likely to affect their confidence and commitment to invest here if there are signs of a smooth power transition in the near future.
CONFIDENT YET CAUTIOUS
Alex Ma, deputy managing director of Toshiba Thailand Co, the marketer of Toshiba appliances, said so far there are no signs that the political uncertainty is affecting investment decisions in Thailand.
"We are quite confident in Thailand and its economy. Normally, we prepare plan A and plan B for any upcoming situation, however we remain confident in the economy and see no need to adjust plans," he said.
"Thailand is a strategic country in Asia-Pacific. We believe in its potential and in any situation we prefer a healthy economy, political certainty and stability for the people in the country."
Thomas Wilson, country manager for Thailand of German financial services company Allianz, said Thailand remains the most attractive market because of its programmes supporting foreign direct investment, such as those provided by the Board of Investment, as well as its infrastructure, labour efficiency and technology.
However, investment in Thailand faces some headwinds in the short term, partly because of political dynamics, he said.
"There is a tremendous opportunity for foreign direct investment as global supply chains realign. The top concern for tapping into this investment potential is the uncertainty surrounding the composition of the future government, its policies and the risk of political protests in the interim, negatively affecting the sentiment of both business leaders and consumers," said Mr Wilson, who is also president and chief executive of Allianz Ayudhya Assurance Plc.
"Another concern is whether the new government will ultimately be business-friendly, supporting sustainable and inclusive economic growth through predictable fiscal and monetary policies, regulations and the legal environment.
"We are not concerned about the recent protests and take comfort that the risk level is significantly lower than during Covid. Nonetheless, we continue to monitor the situation and have prepared business continuity plans should protests pick up."
Claude Seigne, chief executive of Axa Thailand General Insurance, said Thailand is still an attractive destination for investment. However, political uncertainty and delays in forming a new government can lead to a loss of confidence among investors and a reluctance to commit capital and resources to Thailand.
"The concerns of the foreign business community in Thailand regarding the political uncertainty following the general election and delays in forming a new government are primarily centred around stability and continuity. They seek assurance that there will be a smooth transition of power and that policies favourable to the business environment will be maintained," Mr Seigne said.
He said political protests can create uncertainty and temporarily disrupt business operations.
"We are monitoring the political situation and maintain contingency plans to mitigate any potential risks. We are confident the government can address the concerns of the protesters and continue to work towards building a stable and inclusive society that fosters economic growth and social harmony," said Mr Seigne.
In his view, Thailand remains an attractive destination for investors, especially compared with neighbouring countries such as Vietnam and Indonesia. It offers a strong infrastructure, a skilled workforce, a well-established legal and regulatory framework as well as a strategic location in the heart of Southeast Asia.
Thailand also has a developed financial system, a robust manufacturing sector and a thriving tourism industry, said Mr Seigne.
Chris Wailes, managing director of Volvo Car Thailand, said the company's sales results have been positive.
"With our clear focus on full electrification and the robust demand from Thai consumers, we don't anticipate any disruption to our business growth in Thailand," he said.
A panoramic view of Bangkok's skyline. The Stock Exchange of Thailand index fluctuated throughout last month, hit by uncertainty over the government formation, a delay in prime minister selection and a continued sell-off by foreigners.
PENDING A VERDICT
Nattapol Kamthakrua, director of the securities analysis department at Yuanta Securities (Thailand), said following some positive developments this week, the political outlook remains uncertain in two areas.
The first is whether the Pheu Thai Party will successfully form a new coalition government.
Second, the market is watching the Constitutional Court verdict scheduled for Aug 16 on whether it will accept the Ombudsman's petition on the use of Parliamentary Rule No.41 in the prime minister vote.
"We have to wait until Aug 16 to see if the parliamentary vote for the next prime minister can go ahead or is delayed. If the vote is postponed, the stock market will decline again. If the vote can occur after the ruling, the index can increase to a range of 1,550-1,560 points," said Mr Nattapol.
"If this process runs smoothly, I believe the market will rebound and foreign investors will return to buy Thai stocks."
Asia Plus Securities (ASPS) agrees, noting that if the court issues no new orders or rejects the petition, the prime minister vote will be held and a new government may be formed soon. If not, the political vacuum may be prolonged.
While waiting for clarity, the SET index is expected to swing narrowly with a thin volume, ASPS said in a research note.
"We believe the political situation is making progress. If the prime minister vote takes place, it will have a positive effect on the SET index as foreign fund inflow and trading volume should become robust again," said the brokerage.
The Federation of Thai Capital Market Organizations (Fetco) said its investor confidence index (ICI) remained in neutral territory last month, mostly because of political uncertainty. The July ICI, which anticipates market conditions over the next three months, was 83.5, up 2.2% from the previous month.
Conducted from July 20-31, Fetco's survey found the confidence of foreign investors is in the bearish zone, falling 33.3% to 66.7, while that of retail, broker and institutional investors is neutral at 93.9, 113 and 100, respectively.
BUSINESS AS USUAL
Tanes Petsuwan, deputy governor for Asia and the South Pacific at the Tourism Authority of Thailand (TAT), said it is normal practice for countries to warn their citizens about safety during overseas trips. However, the agency didn't observe any slowdown or concerns from travel agents.
Mr Tanes said he views the current political demonstrations as manageable, not as severe or violent as a decade ago.
He said the agency would continue monitoring international feedback and travel warnings as the situation develops. The TAT hopes every sector can work together to prevent a harmful political outcome, said Mr Tanes.
Siripakorn Cheawsamoot, TAT deputy governor for Europe, Africa, the Middle East and the Americas, said Canada's advisory is only at level 2, which does not affect tourists' insurance. Only the highest warning level -- "do not travel" or level 4 -- would invalidate tourist insurance, said Mr Siripakorn.
The agency remains upbeat on the Canadian market, as Air Canada plans to operate five direct flights per week between Vancouver and Bangkok during the cool season.
Mr Anutin, second from right, chairs a meeting of Bhumjaithai MPs at party headquarters on Tuesday after agreeing to join Pheu Thai. Varuth Hirunyatheb
CANNABIS OUTLOOK
Last week the Pheu Thai Party gradually drew more allies to a new coalition under its lead. This shift could favour some business sectors hoping for brighter prospects from a new administration.
Jacky Ong, chairman of Cannabis Investment Summit World (CISW) Holding Group, said a Pheu Thai-led alliance would be good for investment in cannabis-related businesses, which were earlier concerned over a stricter cannabis policy pushed by the Move Forward Party.
Under a 23-point agreement, a bloc of eight parties led by Move Forward agreed to reinstate the plant as a narcotic under the jurisdiction of the Public Health Ministry and pass new laws supporting certain beneficial uses, while regulating all other uses, cultivation, import and export of the plant.
Advocates and investors in cannabis businesses were hoping for a more relaxed policy.
"Move Forward wants to reclassify cannabis as a narcotic, but people in the business are more optimistic about the new coalition," said Mr Ong.
The Pheu Thai Party teamed up with Bhumjaithai Party on Aug 7, paving the way for a new government without Move Forward Party. He believes Pheu Thai and Bhumjaithai will support policies to make cannabis a new economic crop.
Bhumjaithai successfully pushed for the decriminalisation of cannabis in the middle of last year, but the state has yet to implement a law to effectively control its use. Bhumjaithai leader Anutin Charnvirakul said earlier the passage of a cannabis control bill would be a condition for his party's participation in the new government.
"We can use cannabis to help develop medical tourism," said Mr Ong, pointing to one benefit of the plant.
CISW is preparing to co-organise the 2nd CISW Cann Festival International and CISW Wellness Festival in Pattaya during Sept 7-10, aiming to make Thailand a major tourist destination for cannabis wellness.
He said he is aware of the lengthy process and obstacles to establishing a new government, but believes the economy will recover and develop slowly.
DIGITAL SENTIMENT
The Digital Industry Sentiment Index rose in the second quarter to 54.1, up from 54.0 in the first quarter, said the Digital Economy Promotion Agency (Depa).
The increase is attributed to entrepreneurs' confidence in the economic recovery, based on growth in the tourism sector and private consumption. However, businesses remain worried about the inability to form a new government.
Some operators decelerated their investment plans to observe the policies of the new government. Entrepreneurs anticipate the government can provide a clear policy to facilitate access to financial resources, foster a digital workforce and attract foreign digital talent.
Depa conducted the confidence survey among 500 enterprises in its database across five sectors: hardware and smart devices, software, digital services, digital content and telecommunications.
Molpasorn Shoowong and Komsan Tortermva- sana