Bangkok was wary of GCC efforts to ensure its food supplies by purchasing rice growing lands, and now political instability is chilling the investment climate.
Thailand's bloom fades for investors from Gulf
Bangkok was wary of GCC efforts to ensure its food supplies by purchasing rice growing lands, and now political instability is chilling the investment climate. Tom Spender reports Take a few steps into Soi 3 off the main drag through Bangkok's new city, and the atmosphere shifts several time zones westward. "Arab street", as the alley is known, reverberates to the sound of Arabic pop, chatter and news channels blaring from restaurants with names such as Nefertiti, or New Baghdad. Gulf families stroll through the narrow space as slightly built Thais dart through the gaps between them.
Amid the clutter of this transplanted mini-souk, it is no accident that many of the Arabic-language signs are for pharmacists and private clinics, for Bangkok has positioned itself as a prime destination for health tourism and, in the wake of the attacks on the US on September 11 2001, Emiratis and other Arabs have become its most eager customers. Bumrungrad, one of Bangkok's big international hospitals, now receives about 100,000 day visits by Arab patients each year, says Kenneth Mays, its marketing director. The rate of visits has shot up from less than 10,000 visits per year before the attacks, when the US was the destination of choice for Arabs seeking medical treatment and visas there were easier to come by. Altogether, about 60,000 people visit Thailand from the UAE each year, according to the Thai consulate in Dubai.
Nevertheless, while the restaurants of Arab Street busily ply their customers with shawarma and shisha, the real staple of the UAE-Thai relationship looked set to become rice - until last month. Gulf investors were scrambling to secure farmland in Thailand, which accounts for about a third of the rice on the world market, after a shortage last spring that saw rice-producers such as India, where almost a third of the rice imported into the UAE is grown, stop exporting in order to guarantee supplies for their own populations. Thailand, which previously accounted for less than 10 per cent of the UAE's rice, did not stop exporting, but prices soared to more than US$1,000 per tonne, double its current level.
But the Thai government has moved swiftly to prevent foreigners owning farming businesses after a storm of protest this summer at what some called a land grab. Under current rules, foreigners can form joint ventures in Thailand but Thais must own 51 per cent, and Thai officials are now pushing for further restrictions. "Any investment would need to be indirectly with local partners and take into account the interests of local stakeholders like farmers, customary land rights," said Eckart Woertz, the economics programme manager at the Gulf Research Centre (GRC) in Dubai. "So the UAE could think about investing in existing Thai trading houses or food producers or do contract farming, but they do not seem to be able to acquire land directly as they do in Sudan or Pakistan."
As things stand, GCC countries as a whole have just four announced investments in agricultural business in Thailand, according to the research centre, compared with 20 such deals in Sudan. However, the Thais have said they are prepared to embark upon joint ventures with Gulf countries, with one minister adding that he saw Dubai as a potential trading and distribution centre for the region. "We are ready to form joint ventures with countries from the Middle East, be it on the government-to-government basis or business-to-business, in agricultural product processing and the food business," Alongkorn Ponlaboot, Thailand's deputy commerce minister, told the Bangkok Post newspaper last month.
"The Middle East is, in fact, Thailand's major rice client and we are all prepared to co-invest in setting up a rice-stocking centre somewhere in the Middle East to distribute the grain to that region." While the imperative to feed millions of hungry mouths accounted for feverish interest in Thailand's agricultural sector, the overall Thai investment climate has cooled owing to persisting political instability, analysts say.
Last November's occupation of Bangkok's two airports by yellow-shirted protesters calling for the dissolution of the then government stranded more than 230,000 travellers, interrupted trade and damaged Thailand's tourism industry. Since then, sporadic demonstrations by the rival "red shirts", as the largely rurally-based supporters of the ousted former prime minister Thaksin Shinawatra are known, have continued, fuelling uncertainty. Nevertheless, the UAE has made a brace of headline-grabbing investments in Thailand. Tourism is targeted with the Jumeirah Private Island Phuket, a five-star resort just off the island of Phuket in the Andaman Sea that includes 65 villas with their own private infinity pools. The resort was scheduled for completion by last year, however no one at Jumeirah was able to say what stage development had reached or when the resort was likely to open.
Emiratis have also invested in South East Asia's rapidly growing energy needs by buying Pearl Energy, based in Singapore, which was first purchased by Aabar Energy in 2006 and then sold to Mubadala Development for about US$833 million (Dh3.05bn) in May last year. Pearl's flagship oil-pumping operation is in the Jasmine offshore oilfield in the Gulf of Thailand, but it is also scouting for oil and developing oilfields in Vietnam, the Philippines and Indonesia. The company produced 19,000 barrels of oil per day at the end of 2007 from the Jasmine field as well as three other fields in Indonesia, according to Mubadala, which says Pearl will help it retain market share in oil both domestically and internationally.
Mubadala's move comes against a background of spiralling energy demand in rapidly developing South East Asia. The region of 568 million people, excluding the Philippines's population of 96 million, is forecast to need three times more power by 2025, according to data compiled by the Petroleum Institute of Thailand, Reuters reported last week. South East Asia and the Gulf's common status as increasingly wealthy nodes on the global trade map prompted the first get-together between foreign ministers of the GCC and the Association of South East Asian Nations (ASEAN), which took place in Bahrain in June and resulted in proposals for a joint trade agreement and a GCC-ASEAN business association.