Third World Network Briefing Paper for CSD7, No.2, 1999
FOREIGN TAKEOVER OF THAILAND'S TOURISM INDUSTRY - The other face of liberalization
By Anita Pleumarom
In February 1999, the Thailand Tourism Society (TTS), which represents tourism and related businesses, threatened to launch a campaign to seek support from its members to delay a progressive liberalization programme for the hotel, restaurant and travel agency sectors. Under the foreign business amendment bill, which is presently discussed in parliament, the tourism industry is to be opened up to foreign operators on a wide scale.
TTS president Wichit Na Ranong suggested that the liberalization plan be delayed to avoid negative impact on Thai ownership and business competitiveness. According to the foreign business bill, foreign investors will be allowed to acquire a 100-per-cent stake in hotel, restaurant and tour businesses instead of a maximum 49 per cent. Wichit said small and medium-sized operators would suffer if they were not prepared to compete.
Chanin Donavanik, president of the Thai Hotel Association (THA), said there had been a mixed response from THA members on full liberalization. Some hotels, which shoulder a huge debt burden, are keen to seek foreign capital while hotels with no financial problems disagree to the opening up to foreign transnational corporations (TNCs). But Chanin admitted that the adverse effect of the planned liberalization was that local hotel-property owners risked losing their businesses to foreign investors. According to the THA vice-president, Charnchai Satyaprasert, only about two per cent of hotels in the country would benefit from liberalization as they could repay debts by selling out their assets to foreigners. And the foreigners, who buy into Thai hotels cheaply, would have an advantage over Thai operators.
The Tourism Authority of Thailand (TAT), which has very much favoured tourism liberalization, privatization and globalization, acknowledged in a recently published report that the outcome of hotel liberalization will be “mergers and acquisitions”.
“Since the oversupply is the major problem of the Thai hotel industry at present, liberalization will not bring in investment in new hotel construction but in the form of takeovers and acquisitions. The number of property exchanges is expected to be high during the first three to five years of the liberalization,” stated the TAT report. It further said that Thai hoteliers, who have no financial problems are expected to “adjust” their business strategies, for example by entering a larger hotel chain network.
Sensing the strong drive against liberalization in the local tourism industry, Piraphan Saliratapak, vice-chairman of the parliamentary commission appointed to consider the foreign investment law, indicated the government might consider not fully liberalizing the tourism sector if Thai hoteliers come up with substantial documents to support their opposition to the reforms. As a first step, the concerned commission added a paragraph in the draft law that categorizes tourism as one of the industries, which “are not well-prepared for outside competition”.
Takeover battles for control of Thailand’s tourism assets are already looming. American Goldman Sachs, for example, an influential Wall Street financial institution, already bought a 30 per cent share in the Dusit Thani Hotel Group and has in recent weeks made an aggressive move to takeover the five-star Regent Hotel in Bangkok, which belongs to the Rajdamri Hotel Group. It also controls Starwood Hotels and Resorts, and is the owner and operator of the Westin and Sheraton Group of hotels, Westmont Hospitality, a leading owner and operator of hotels in Canada and Europe, and Strategic Hotel Capital, a major investor in the US hotel industry.
While Goldman Sachs is primarily interested in Thailand’s five-star hotels, Merrill Lynch, another Wall Street giant, appears set to takeover the country’s aviation industry. According to recent press reports, the company has been selected as the financial adviser for the privatization of Thailand’s airports. Although insider sources said its experience was questioned to properly perform the task in the airports privatization process, the concerned committee set up by the Transport and Communications Ministry insisted that Merryll Lynch had obtained the highest score in the ranking. One official said the bid-winner would reap tremendous benefit from selling the stakes of the two airport agencies, the Airport Authority of Thailand (AAT) and the New Bangkok International Airport (NBIA). Earlier Merryll Lynch had already signed a memorandum of understanding with Thai Airways International to be the financial adviser for the privatization of the national carrier.
Notably, both Goldman Sachs and Merryl Lynch are major hedge fund managers that have caused the financial collapse in several countries with their capital speculations. Ironically, they are also prominent players in assisting the International Monetary Fund (IMF) to push through structural adjustment programmes (SAPs), which involve forcing developing economies to liberalize and to make the tourism industry a top priority. In Thailand, Goldman Sachs has also been actively participating in the auction of the assets of the 56 finance companies, which were closed down in the context of IMF’s bail-out package for the country.
Financial sources have indicated that hedge funds, apart from remaining active in the capital market, are now expanding their speculative investment wings into Thai enterprises, which are currently undergoing debt restructuring and internal engineering, in the prospect of good returns in the next few years. In view of the proclaimed successes of the ‘Amazing Thailand’ campaign, hotel, tourism and travel businesses are particularly attractive to them, they say. With respect to Goldman Sachs’ attempted takeover of the Bangkok Regent hotel, one of the sources said: “I think they have a good game plan for the hotel, which will be shaken up and get a new dress before being sold out five years from now.”
However, there is not only increasing nervousness within Thai tourism industry circles regarding the government’s liberalization programme. Resistance against globalization and the related national sell-off is on the rise in general. Under the headline “Anti-colonization mood can’t be ignored”, Imtiaz Muqbil wrote in his Bangkok Post ‘Travel Monitor’ column:
“With the fire-sale of regional hotels, airlines and tour operators about to start under the onslaught of globalization, a warning light has been sounded on the long-term implications of such move.” Referring to a recent international conference on globalization in Bangkok organized by the NGO Focus on the Global South, he said the “message was that every hotel or other such asset that is sold, especially when non-Thais take a controlling interest, will contribute bit by bit to the death of economic and political sovereignty in Asia.” He further stated: “As the side-effects of IMF chemo-therapy become more acute, there is a greater realization that globalization is not a panacea.”
Muqbil warned the tourism industry to beware for many reasons:
· “At the grassroots level, the feeling that Thailand is selling out to foreigners is gaining ground. Tourism is perhaps the most visible industry in terms of ownership by foreigners. Expatriates manage nearly all the major hotels, many of the tour operators and most international airline offices.
· Tourism has a high and as yet unmeasured leakage factor. Money leaves the country in the form of management fees, marketing, distribution systems, advertising, copyright and intellectual property fees, imports of expensive wines and meats, and via a host of other means.
· It is dominated by American icons, a situation that is likely to gain more steam as powerful, cash-rich US groups both advance globalization and take advantage of it to go ‘bottom-fishing’.”
Muqbil suggested that in view of this “process of colonization”, the tourism industry should play a major role in “trying to maintain the independence of Thailand and balancing the interests of global and local players”.