Thailand's boom: To the northeast, the spoils

Sat Jun 15, 2013 9:05pm EDT
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By Paul Carsten and Pairat Temphairojana

UDON THANI, Thailand (Reuters) - Steel girders jut from the low skyline of the Thai city of Udon Thani near the Laos border as workers lay cement for a new shopping mall, one of many illustrating a boom in the Thai economy beyond the bright lights of Bangkok.

The malls, factories and construction sites in Thailand's northeast are emerging alongside its farms as a potent economic fuel in one of Asia's top emerging markets. Growth in Thailand, Southeast Asia's second-biggest economy, has begun to slow, but the economy of the northeast is in the grip of a boom.

The economic renaissance of "Isaan", Thailand's poorest and most populous region, has coincided with expansionary policies - from wage increases to farm subsidies - that are enriching an area at the heart of a "red shirt" protest movement that backed Prime Minister Yingluck Shinawatra in a 2011 election.

As a new middle class emerges, investors and companies are taking note. CLSA emerging markets guru Chris Wood cites the region in explaining long-term bets on Thailand.

"There is a macroeconomic ramping up of the northeast," he said.

The potential may never be realized if a crucial 2.2 trillion baht ($71 billion) infrastructure program becomes a casualty of the feuding between Yingluck's ruling Puea Thai Party and its opponents.

But if the plan went ahead, as is generally expected, it would change the entire economic structure of the northeast, said Rahul Bajoria, an economist at Barclays Capital.

"It's the next entry point for investors and consumers - if they link it up to China, it becomes the entry point to Thailand, not Bangkok," he said.   Continued...

A worker welds girders at the 168 Platinum mall construction site in Udon Thani in northeastern Thailand April 9, 2013. REUTERS/Paul Carsten