A matter of censorship

Overlooked, at times endorsed, a stifling of debate in Thailand’s media forums continues to affect the country’s stability 

Faced with government censure, prosecution for defamation or the consequences of discussing certain key issues, (self) censorship is an established practice in Thailand. Infrequently obvious, yet oblique and systemic, this is an old game. 

“The index does not reflect just government abuses but also abuses by armed militia, clandestine organisations and pressure groups. In Thailand, criminal networks, corrupt local politicians and armed groups are also partly to blame for this deterioration in the situation of journalists.” 

This letter, dated 2005, from then Secretary-General of Reporters Without Borders (RSF) Robert Ménard to former Prime Minster Thaksin Shinawatra conveys the concerns that many media channels still understand when reporting in Thailand. 

Though Thaksin’s military ousters swore to liberalize elements of the Press Laws and remove interference from state and private actors, Thailand has continued to slide. From 59 in 2004’s RSF Press Freedom Index (PFI), it has fallen almost one hundred places in just six years to 153 today. The World Bank’s ‘World Governance Indicators’ also reported a major deterioration in ‘Voice & Accountability’ this year, putting Thailand alongside Venezuela and Zimbabwe. 

The backdrop to this is the government’s monitoring and censorship operations, particularly of red shirt media and sites hosting comments deemed critical of Thailand’s revered monarchy. Encompassing several ministries, the armed forces, undisclosed budgets and new legislation, over 210,000 web pages have been blocked according to the most recent civilian estimates; the government no longer releases the figures. 

Thailand’s much discussed political risks are building, and an opaque forum for discussion of the realities facing the country only heightens the risks.

Record growth in the Stock Exchange of Thailand and the Thai Baht might seem to contradict risk concerns, but with western markets still fighting to recover, Asia is a natural investment destination and many are willing to overlook certain negative considerations; if they are aware of them. A scenario not without precedent. China has already demonstrated that an authoritarian system with strict controls can enjoy economic growth. 

Thailand undoubtedly remains an attractive investment destination with the government courting continued foreign direct investment. Awarded a world rank of 66 and 10 regionally by the Heritage Foundation’s 2010 Index of Economic Freedom, Thailand has also scored well in the World Economic Forum’s 2010-11 Global Competitiveness Report, down two at 36. 

Stability is investors’ paramount concern today and Thailand continues to promote this image. Yet strong undercurrents remain at all levels of Thai society that are not always conveyed in available media and political forums. This can create information gaps, fuelling market shocks and volatility when investors cannot plan ahead or become nervous. 

Yet government censorship, largely political, is also exacerbated by a pervasive self-censorship that quietens dissenting views and a criminal code manipulated to silence critics through defamation suits. 

The government and individual's pursuit of those seen to be critical of Thailand’s revered monarchy has also led to charges of lèse majesté being used to intimidate opponents, journalists and academics with a growing abandon. Web page administrators are now held accountable for comments posted in public forums and Meechai Ruchupan, former President of the Senate, veteran government legal advisor, and former President of the Council of the State recently indicated that this liability extends to owners of property similarly graffitied. 

For foreign media that have discussed taboo subjects, publications have been pulped or withheld by distributors, agencies have closed their offices to protect staff from public reprisals, others have subsequently transferred their reporters out of the country. 

The business sector is not immune from such public protestations.

In November 2009, Bloomberg found itself on the front line with the filing of a market report which speculated on the SET’s 2 - 3 per cent drop, on a day when the rest of Asia was up. Two traders who re-posted the article online in the closing hours and after the markets closed were subsequently arrested. Bloomberg was denounced, an official investigation launched, a Channel 9 expose on Bloomberg’s motives in publishing the information and accusations by yellow shirt leader Sondhi Limthongkul that it was trying to take down the country.* 

No charges were ever brought against the traders, but nor has the investigation been formally closed. A scenario repeated across a broad spectrum of individuals and institutions whom the authorities have investigated in past years. 

For media, Thailand is a minefield of grey areas. There are no clear red lines surrounding several taboo subjects and a country whose rhetorical intentions proclaim media freedom is too often contradicted by practical implementations.

In a region with such authoritarian governments as China, Myanmar and Vietnam, a senior Asia correspondent with an international news wire, speaking to Business Report Thailand, remarked, “There are only two countries that I cannot write on what I want, Singapore and Thailand.” 

Singapore’s comparison is unexpected, perhaps, yet warranted. 

Both countries have strong defamation laws which can be and have been manipulated to silence critics, particularly in government. Singapore, now at 136 in the RSF PFI, has maintained an average position of 141 since the index’s 2002 inception, the same year that Thaksin sued the Far Eastern Economic Review; the first salvo in a legacy of foreign and domestic media attacks. 

In October, Pasit Sakdanarong, Secretary to the Constitutional High Court, fled to Hong Kong, two days before videos he is alleged to have recorded of illegal lobbying for the court to rule favourably in the Democrat party’s pending dissolution case were made public on Youtube (a site the government controversially blocked in 2007). Domestic media has quickly picked up the story, but questions remain. Why had he felt it necessary to flee the country and why did he not turn to domestic media to break the story first? The government has sought his return to face charges under the Computer Crimes Act, introduced in 2007 by the coup government and identified by opponents as a keystone in censorship practice. It seems that critical voices, however intentioned, are not yet permitted. 

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Investor Spotlight: A frontier market too far?

A foreign investor looking in, Jeremy O'Friel ponders Thailand's fortunes

"The currency crisis of 12 years ago does not feel long enough ago to be forgotten."

Of all the lessons learned from the credit crisis of 2008 and beyond, perhaps the starkest was that liquidity remains king. As Benjamin Franklin once noted – the only thing more important than return on capital is return of capital. It is within this mindset that one tends to examine the potentially lucrative markets of Southeast Asia from a hedge fund manager’s point of view, namely with one beady eye on liquidity, or rather lack of it.

Clearly, there are tempting reasons to be involved in Asia. The region seems, through a combination of solid oversight and historically high savings rates, to have avoided the banking crisis suffered in the supposedly more sophisticated parts of the financial world, leading bourses in such cities as Kuala Lumpur and Bangkok to within spitting distance of new highs. But fears linger and many in the investing community remain psychologically scarred by the ‘Asian flu’ of the 90s. Given the complexity of the instruments employed therein, the masters of the hedge fund universe remain even more reticent, and are unlikely to plunder countries such as Indonesia, Thailand or Vietnam until they see clear and sustained evidence of higher levels of liquidity and freedom from state intervention in currency and other markets. Looking specifically at the Thai situation, one must examine all three of the currency, fixed income and equity markets to ascertain what the prospects are for a further development of the market and what needs to happen in order to entice more foreign investors.

Clearly, Thai equities are on the rise, with inflows next year poised to hit THB100m and the SET having recorded again of a shade under 26% through time of writing, making it one of the best performers worldwide. Yet the concerns centre around three important features – concentration, size and political backdrop. With banks making up 5 of the top 10 issues by market capitalisation (Thanachart, Bangkok, TMB, Siam Commercial and Kasikorn), hedge fund managers perhaps feel that they would be better off looking elsewhere for diversification, whilst it is only thirty five years ago that the liquidity fell to sufficiently low levels that the Bangkok Stock Exchange - the predecessor to the Stock Exchange of Thailand – ceased operations. It was no surprise that Thailand failed to make the grade in being included in Goldman Sachs’ Next-Eleven (N11) list of countries to follow the BRIC nations into the big-time, even though Asian neighbours Vietnam, Indonesia, South Korea and the Philippines did. Finally, the riots of earlier in the year are still the first thing that observers from outside of the country think of when Thailand comes under discussion. One is bound to recall the civil unrest disruption was deemed sufficiently serious for the SET to temporarily close.

The currency markets are similarly viewed with distrust. Again, the currency crisis of 12 years ago does not feel long enough ago to be forgotten. The Thai (and indeed Malaysian) central bank have two clear goals – stability of exchange rates and low inflation – and are not averse to direct intervention and even the implementation of currency controls to achieve the former. As has been learned by many other countries such as the United Kingdom, providing artificial support or resistance for any particular currency can be an expensive and ultimately fruitless exercise. Yet in the absence of such intervention, the presumed march upwards of the Baht could damage Thailand’s export-led economy. The absence of such upside potential in the currency is another reason for hedge fund managers to look elsewhere for a bit of free carry whilst holding equity positions.

Bond markets are perhaps the most attractive place of the three to dabble. Ironically, the success of domestic fixed income securities sector owes much to the same crisis that scarred so many others. In the aftermath of 1997, the Thai banks were reluctant to lend to local industry and so companies turned to the bond market. The inevitable forces of competition over the next 10 years led to lower borrowing costs, longer-dated maturities and fixed rates to such an extent that local banks now find it difficult to compete. Unfortunately though, bonds will always play second fiddle to equities in terms of where hedge fund managers place their assets and so again, international speculative appeal is probably limited.

In summary then, it is fair to conclude that unfortunately Thailand is a country that is still viewed with a certain amount of scepticism. Until the international investor sees a lower concentration and higher volume in equities, coupled with more freedom of exchange rate, Thailand is likely to remain peripheral in the opportunity set of even the most daring emerging markets hedge fund manager.

Jeremy O’Friel is the Managing Director of Belmont Investments, founded in 2009 with offices in Dublin and New York. Registered with the CFTC and NFA as a CTA and CPO, it has entered into an exclusive agreement with Altegris Portfolio Management (APM) to distribute all funds originated by the firm to investors outside of the US. Jeremy regularly visits clients in Thailand including MBMG Group and can be contacted through the MBMG Group on info AT mbmg-international.com

APM, a Registered Investment Advisor with client assets of roughly $2.75bn, is based in California. Formerly part of the Man Group, independent since 2002, APM specialises in managed futures and hedge fund strategies, with links to managers such as William Eckhardt and John Paulson. 

MBMG Group is a personal and corporate advisory and research practice with offices in Bangkok and throughout Thailand. MBMG Group was a pioneer of hedge fund research and recommendation within Thailand, and advises clients on assets of over $165 million, invested in a diversified range of assets managed by leading global experts.

This article was first published in Business Report Thailand, Issue 1, October 2010.

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