Let’s move the capital

Posted: November 20th, 2011 | Author: Thom | Filed under: Corruption, Economics, Governmental Policies, International Business, Thailand

Although the editors of the Asia Now blog have left the floods in Thailand behind for some time , we are still on top of the event! There was already a blog article posted on the subject but there are now rumors of moving the capital of Thailand to safer grounds. This might sound unfeasible, but is it really?

In fact it would not be the first time Thailand moves its capital, the reason back then was that it’s former capital was destroyed by the Burmese army, resulting in the collapse of their kingdom and a shift from in capital from the city of Ayutthaya to Bangkok. This being way back in 1782, one might think that it is not feasible in modern time. Wrong, Myanmar moved its administrative capital only a few years ago, back in 2005.

As the floods in Bangkok shows little sign of getting better, and its impact on Thailand’s economy and the global supply chain of many computer and automotive components are expected to be severe. Several other non-economic issues start to rise as well, such as people getting stranded throughout Bangkok. Not to mention the government’s messages which remain confusing and hard to understand, this being a result of the division in the Thai political society, in times in which unity in the political system is a necessity. In addition, water borne diseases are starting to become a serious issue in Bangkok and the outlying suburbs.

The forecast is that Bangkok is likely to face similar if not worse floods in the years to come. Knowing that by now 30 of the 50 districts are flooded it’s hard to imagine that it can get worse. The cause that the situation might get worse is the urbanization in the city’s outlying areas which has reduced the regions of vegetation that absorbed water in the past, overbuilding in the city core has done the same. These factors add up to a level that it will affect Thailand’s future in terms of the economic prosperity. Such floods could repeatedly devastate Thailand’s manufacturing base and threaten the millions of people in the capital, which dominates Thailand as the country’s political, cultural, and economic epicenter.

The capital, built on a swamp, is still sinking every year by 20 cm, and with global temperatures rising and weather patterns changing, Thailand is likely to face a longer, more intense rainy season for years to come which would the city harder to drain and would more consistently overflow the Chao Praya River. The OECD has classified Thailand’s capital as one of the ten most endangered cities in the world.

“In 50 years…most of Bangkok will be below sea level,” Anond Snidvongs, an expert on water management said.

One solution that some Thai environmental experts have begun to suggest: Move the whole capital to land that’s higher, more secure from flooding, and easier to protect with dikes. Some think that, over time, this is the only solution and that, even with continued groundwater pumping, better dikes, and more effective flood management the situation will still be hardly manageable.

Twenty MPs of the ruling Pheu Thai Party have signed a motion last Thursday for an urgent debate on a proposal that the House of Representatives to set up a committee to study the possible relocation of the capital to another province less prone to flooding.

Therefore, the capital should be relocated from Bangkok to a more suitable province, which may be Nakhon Nayok, Phetchabun, or elsewhere.

Mr Sathaporn said during the Thaksin Shinawatra government there was a proposal for the capital to be relocated to Nakhon Nayok, where water can be quickly drained because of its sloping terrain, and the National Economic and Social Development Board was instructed to conduct a primary study on doing so. Nakhon Nayok, was seen as the best choice at the time. Because of factors like the possibilities to a new centre of the economy, transport, communications and other sectors, since it as not far from Suvarnabhumi airport.

Knowing Thailand and its politics this reminds me of “Bangkok’s version of Stonehenge” one of many corruption scandals that were severely costly and never made a change. It even reeks of Thaksin, who was the master of great impossible ideas.
“The Bangkok version of Stonehenge”

The Bangkok Elevated Road and Train System (BERTS) also known as the Hopewell Project, was a failed project to build an elevated highway and rail line from central Bangkok to Don Muang Airport. Construction started in 1990, but was halted with only 10-13% complete, due to the Asian financial crisis. Contracts had been given out in questionable manners, and the currency collapsed which all together had made it impossible to come up with the financial means. The endearing name comes from the leftovers of the project, over one thousand concrete pillars standing useless along the planned routes.

Besides, moving the capital still leaves the commercial heart behind and with it some 10 million people. Not to forget, Thailand’s busiest port and its centralized location. Being Dutch I would like to add that Amsterdam and other Dutch cities successfully exist below sea level thanks to the Delta Works, what Bangkok lacks is good governance and an effective competent plan. His plan will not come cheap but getting flooded on a yearly base is not cheap either.

To sum it up some numbers to give an Wdea of the magnitude of the floods on Thailands economics, the floods are expected to shrink the economy by 1.1 percent in the last quarter. Overall growth for 2011 will likely be 2 percent, down from the predicted 3.7 percent. The Federation of Thai Industries estimated that the damage of the record flooding to industry will total $6.2 billion. The government has dropped its estimate for this year’s rice production from 27.5 million to 23 million tons. The U.S. Department of Agriculture estimates that annual Thai rice exports will reach 8 million tons next year, down from 10.5 million tons this year.

The future may also be less rosy as the trust in Thailand gained a big blow. Over 300 Japanese companies were directly affected by the disaster and estimates suggest they will take months to recover. Apple CEO Tim Cook said that Apple has suffered supply chain snags due to factory closures as well. Experts expect industry wide hard disk shortages next year.

“While God may have created the world, it was the Dutch who created Holland”

Japanese companies in particular have made enormous investments in Thailand and have been particularly hard hit by the flooding, but all computer disk drive makers and many car manufacturers have been affected. Industrial zones such as Nava Nakorn, Bangkadi, and Bang Pa-in have been submerged, causing over 10,000 factories to suspend production and lay off over 350,000 workers.

Disruptions were felt in Japan and, to a lesser extent, the United States because the closed industrial estates host high-tech and automotive manufacturers like Western Digital, Seagate, Nissan, Toyota, Isuzu, ON Semiconductor, and TDK Magnecomp.

Many foreign investors will now rethink their decisions to place so much of their supply chain in Thailand. As a result of the deluge, semiconductor and automobile makers, such as TDK and Honda, have halted production. Four automotive factories, accounting for 630,000 Toyotas and 240,000 Hondas annually, have closed.

However, in the wake of this crisis, Prime Minister Yingluck Shinawatra may have to reexamine some of her campaign promises, such as the rice price support scheme, which has negatively affected exports, and the nationwide minimum wage hike, which could hamper economic growth. Altogether, Prime Minister Yingluck must make wise policy decisions to restore these industries.

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