New vs. Old Rich in Thailand

Thailand: Commentary - Thailand's nouveaux rich take on the old money crowd
21 February 2008
Thai News Service
By ML Nattakorn devakula, News Analyst, Bangkok Post

In case you have been sleeping under a rock, the liquor tycoon and owner of more properties than you can imagine - Charoen Sirivadhanapakdi - has been on a buying spree. The extension of his business from hard liquor to beer took a successful turn when he abandoned foreign label joint-venture beers to instead pursue an entirely new Thai-owned, middle class-targeted beer. This is what has become the Chang (Elephant) brand.

Now, however, his business clout seemingly is about to extend further into areas formerly associated with "new money".

Please refer to some of my articles in the past published here in Anchorman. The latest one is the Jan 17, 2008 commentary titled, "TiTV: a proxy battle of a greater war." It lays out some of the explanations behind the struggle between old rich and nouveau riche in the kingdom. A phenomenon that is becoming more apparent than ever is the resurfacing of the old conservative business elite in trying to reclaim the clout they once had.

Here's the fact of the matter. Due to the unstoppable success of the Chang beverage brand, the Thai Charoen Commercial Group has been able to leverage itself to expand into a whole host of other ventures. This includes a number of hotels and golf courses across the country. In Bangkok alone, there are Plaza Athenee and Imperial Queen's Park, just to name a few.

Interestingly enough, the TCC empire has been able to gradually grab the competitive edge in non-alcohol consumer beverages as well. Popular Oishi's green tea and energy drink Rangers and Carabao Daeng (acquisition under MoU status) are among the recent acquisitions to its long list. Further, the conglomerate is set to extend its line of products into coffee-making, and you know whose backyard that is. This is comparable to Microsoft wanting to dominate search and so in its quest to out-compete Google it proposes to purchase Yahoo.

The rise of the nouveaux riche in Bangkok was all about diversifying the pool of money held in the hands of entrepreneurs. You had, for example, Prayudh Mahagitsiri able to exert clout after finding ultra profitable coffee-making andNestle products. You had, for example, Suriya Jungrungreangkit coming to billionaire status with his automobile and parts assembly plants. You had Suriya Larpvisutthisin receiving a deputy commerce minister post at one point after politically leveraging from the multi-millionaire status achieved through the brief success of Picnic cooking gas. You had Thaksin Shinawatra, taking advantage of the runaway telecom-related concessions, to catapult himself up all the way to the country's top job.

The events of the past year represent quite a reversal of fortunes. Take the Shin Corp- Temasek deal in a nutshell. Then prime minister Thaksin was advised by trusted hands that the divestiture out of his family's controversial business holdings would be a move that was going to save him politically. The divestiture was the last straw in bringing about a small popular uprising leading to a military power grab. The consequential formation of a junta-appointed government led to investigations that threatened to revoke (and in some cases effectively revoked) operating licences of concessions held by these sold companies. The revenues generated under the sale were frozen by the state - and still approximately 50 billion baht remain seized at this particular moment, even after having a democratically elected government. Temasek Holdings' acquired companies ranging from Advanced Info Service to Shin Satellite to iTV have seen a plunge in stock prices and profits, while simultaneously seeing an increase in the political risks threatening the very functions of the held concessions.

The Thai Charoen Commercial Group's inroads into telecoms, if realised, would be done out of the necessity of having a Thai owner for companies whose businesses by law must be Thai-controlled. There is no strange and alternative motive by Charoen to increase the clout he already has in Thai society. It would be a financially wise transaction since the stock values of Shin Corp-controlled companies are simply worth buying at this point. Plus, it is better than having all these telecom concessions revoked, which would hurt consumers.

After all, who has 34 billion baht in idle cash to buy 42% of a company involved in this much controversy? He himself is not the threat.

For Charoen is intelligent enough to know that invading the collective turf of Santi Bhirombhakdi, Chaleo Yoovidhya, Prayudh and Thaksin all at the same time is not a strategy of convenience.

It may not even be a strategy of choice. It certainly is not the safest of all moves in the long term.

Business-wise, short-term, the deal does solve a lot of problems for all entities involved.

Yet the transaction - even if it takes place or not - already in our imagination represents a seizure of assets from the nouveaux riche back to the established "old money" powers.

Simultaneously, the Singaporean government dishes out all those billions for telecommunications companies it should have never wanted. That money heads directly to the Thai state coffers because, conveniently, the country was on the receiving end of an extra-constitutional power putsch. Synchronised to perfection, is it not?