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Business trends

Thai big business casts a wary eye on upcoming election

Ties to ruling junta could leave conglomerates exposed after poll

Thailand's first election in eight years is expected to boost spending in the short term. (Photo by Akira Kodaka)

BANGKOK -- Thailand's first election in eight years will be a lavish affair, with nearly 100 political parties about to ramp up spending in search of votes ahead of the March 24 poll.

The upsurge in spending will give a short-term boost to hotels and restaurants, but the stakes are even higher for giant Thai conglomerates such as Charoen Pokphand and King Power. Both enjoy close ties to the ruling junta but will be keeping a wary eye on the election result.

CP is a front-runner in the bid for a multibillion-dollar high-speed railway to link Thailand's three main airports in and near Bangkok. King Power faces competition as its monopoly concession to operate duty-free shops at Suvarnabhumi Airport, Thailand's largest international gateway, runs out in 2020.

This is the first time the authorities have attempted to stage an election since early 2014, when voting was canceled after anti-government ultraroyalists stormed polling stations. This set the stage for a coup led by Prayuth Chan-ocha, then the country's powerful army chief and now Prime Minister.

He has sought to draw wealthy Sino-Thai business clans closer to the generals by launching "Pracharath Rak Samakkee," an initiative promoting the country's billionaires as big brothers ready to reshape the economy on behalf of the rural poor.

This is linked to the Palang Pracharat Party, founded by the junta to run in the elections and determined to court Big business.

The 24 conglomerates that signed up for the program include market leaders in sectors ranging from alcohol and food to retail, property and finance. Their leaders -- including the heads of Thai Beverage Group, Charoen Pokphand Foods and True Corp., Central Group, and Mitr Phol Sugar -- make up a who's who of Thai billionaires. Thai Union Group, The Mall Group and Bangkok Bank also joined.

Prime Minister Prayuth Chan-ocha attends an event in Chiang Mai on Jan. 14. The junta has said elections will go ahead on March 24. (Photo by Kosaku Mimura)

This nexus -- which was further cemented by the junta's offer of Board of Investment and Finance Ministry privileges to win over the conglomerates - could leave the companies exposed ahead of the polls.

Veerayooth Kanchoochat, a Thai political economist at the National Graduate Institute of Policy Studies in Tokyo says it would take a "dramatic regime change" for companies to suffer a setback after the polls.

Nevertheless, the conglomerates may be tempted to hedge their bets as they come under scrutiny under new rules putting a cap on campaign spending.

"If the business groups close to the regime could acquire long-term guarantees from a new, non-junta government after the polls, there would be no great risk of a reversal of fortunes," he added.

Charl Kengchon, managing director of the Kasikorn Research Center, predicts less expenditure on canvassing and outright vote-buying this election. "The authorities have already provided a guideline on how much each candidate and political party can spend," he said. "In addition, some analysts believe the new system should reduce incentives for candidates and parties to spend heavily."

However, suspicions of election abuse have grown after a prominent anti-graft activist, Srisuwan Janya, has accused the party of violating the junta's own laws on party funding.

This followed revelations about the millions of baht Thai businesses and tycoons had forked out for a party fundraiser. Among 24 companies that rushed to finance the party were King Power group of companies and Mitr Phol, a market leader in the sugar industry.

Beyond the party scene, the election is expected to lead to a boost for companies such as Dusit Thani Group, a leading Thai hotel chain with properties at home and abroad.

"General elections are very good for the hotel industry, as there is more traveling, entertaining and functions in hotels," Chanin Donavanik, chairman of the executive committee of Dusit International, told the Nikkei Asian Review.

Hotel stocks tend to perform well during election season, and analysts are predicting a bump for the Dusit chain, given its extensive properties in cities and provinces across Thailand.

The Stock Exchange of Thailand foresees a boost for other sectors, too. "Ahead of the past 10 elections, the SET has posted positive returns seven times," noted Bualuang Securities, a leading Thai securities company.

Some stocks perform well thanks to the spending that accompanies canvassing for votes, it said. "Our key sector focuses for the upcoming election are commerce, finance, food, industrial estates and tourism," it added.

Analysts, however, caution against building long-term expectations on the short-term gains of Thailand's current election cycle.

"We think elections are in general good for the economy, especially during the canvassing period, but the benefits are short-term," said Kasikorn Research's Charl.

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