As a former general, you might expect Thailand's Prayuth Chan-ocha to know a losing battle when he sees one. Perhaps not, as the prime minister prepares to throw the full weight of the government at currency speculators.
The baht's 9% rally in 2019 made it by far Asia's best-performing currency. A dubious honor, perhaps, for an economy as reliant on tourism and exports as Thailand. It is clear why Prayuth's team and the Bank of Thailand want speculators pushing up the currency to back off.
So far in 2020, it seems to be working: the currency is down 4.7%. BOT Governor Veerathai Santiprabhob has telegraphed steps to loosen curbs on how much money Thais can hold overseas and to allow exporters to store more profits abroad. Traders wonder if official BOT intervention to weaken the baht can be far off.
Yet Bangkok is fighting the wrong battle at the expense of the bigger economic war.
The baht fixation is understandable. Whatever you think of the 2014 coup Prayuth led, it restored stability to Bangkok. After an earlier coup in 2006, Thailand saw eight different governments, each more hapless than the last, come and go before Prayuth. That post-2014 stability attracted waves of foreign capital.
Too much, in fact, for Prayuth's liking as the baht soared. Its rally threatens tourism and exports, which together generate 70% of gross domestic product.
Such risks intensify as a new coronavirus emanating from Wuhan, China, may damage tourist arrivals. Chinese accounted for roughly 30% of all Thai tourism spending in 2019. All this explains why the Thai government wants to attack the exchange rate.
This fixation, though, ignores the valid reasons capital flocked to Southeast Asia's second-biggest economy. Thailand's current account surplus makes it an enviable outlier among peers burdened with deficits, including India, Indonesia and the Philippines. Bangkok's surplus was $3.38 billion as of the end of November, up nearly $500 million on October.
Thailand's balance sheet, meantime, somehow avoided ruin amid a revolving door of governments. Its debt to GDP ratio is around 40%, compared with Malaysia and Vietnam around 60%.
Yet foreign capital inflows that boost a currency are generally a good thing to have. The exception, of course, is the kind of hot money that overwhelmed Thailand in 1997. Too much cash chasing too few productive investments is a recipe for overheating and, occasionally, disaster.
Today's influx of capital can be channeled into giant infrastructure projects. They include the $45 billion Eastern Economic Corridor project which aims to raise Thailand's game in high-tech industries and launch a startup boom.
Thailand's score on the World Bank's ease-of-doing-business tables has been quietly rising -- from 26th to 21st on the junta's watch. It now ranks ahead of Germany, Canada and Ireland.
Thai inflation is decidedly tame, up a negligible 0.87% in December from a year earlier. It also has ample defenses against any global turmoil that may emerge if, say, the trade war intensifies. It boasts $228 billion of foreign exchange reserves.
Bangkok should really have confidence. In the late 1990s, currency speculators were attacking Thailand's frailties. Now, they are rewarding success and treating Thailand as a safe haven. Why not implement upgrades to make Thailand even more deserving of overseas investment?
Thai officialdom should be focused on diversifying its disproportionate reliance on exports and tourism. This means regulatory tweaks and tax incentives to increase innovation and aggressive investments in education and training. It means cultivating a stronger entrepreneurial ecosystem for Thailand to produce tech unicorns, fintech outfits and the higher-paying jobs they generate.
As much as the focus is on drumming up new business, Thailand must also retain it. It has long been the Detroit of Asia. Honda, Mitsubishi and Toyota are all there, running robust assembly plants. So are BMW, Ford, General Motors and Mercedes-Benz.
Peers, however, are keen to woo auto giants their way. Chennai, India, wants to rebrand itself as Asia's Motor City. The Philippines has grand car-manufacturing ambitions, as does Vietnam. Thailand cannot be complacent.
One area of concern: corruption. Even as Thailand reduces red tape for businesses, there are signs graft has become worse on Prayuth's guard. Since 2014, Thailand's ranking on Transparency International's corruption perceptions index has fallen from 85th to 101st.
Corruption squanders the fruits of the 2.7% Thai growth the World Bank expects this year. It concentrates wealth among the elite, increasing the odds Thailand gets ensnared in the middle-income trap, when per capita income tops out around the $10,000 mark. In nominal terms, Thailand's 69 million people now average just below $7,800.
A weaker currency addresses none of Thailand's structural problems, while also risking Donald Trump's wrath. Will the U.S. President really sit back quietly as a country with a $20 billion trade surplus with Washington fiddles with exchange rates?
The real battle should be driving Thailand's economy upmarket in ways that win even more foreign spoils. Today's obsession with exchange rates is a loser in the long run.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."