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Investing in Thailand...

Updated On: Mar 08, 2010

... applying the black thick grease of corruption is no longer acceptable

When you read this, I will be in Bangkok, a week after the court judgment found former Prime Minister Thaksin Shinawatra guilty of corruption.

Many speculate not only about Thaksin and his red-shirt supporters but also about Thailand's future.

With such intensely divided politics, there is no neutral opinion or consensus about the best way forward. What seems clearer is that the court decision and surrounding controversies hold out lessons for foreigners.

It was, after all, the sale of Shin Corporation to a foreign company - Temasek Holdings of Singapore - that triggered the popular backlash. This set the context for the coup against Thaksin, the probe into his business dealings and to the corruption charges.

While this is a high-profile case, foreign investors must realise that not only in Thailand but also across the region, political and social norms are shifting that affect cross-border business.

In this context, the Thaksin case shows investments are never purely commercial, when they are large, high profile and involve foreigners.

Whether it is Thailand, Indonesia or other Asian countries, nationalism is evident. Foreigners must take sentiment into account, even when policies seem open to investment, and even if they are fellow Asians.

Connected to this, the bare observance of the law may not be enough. Even when legalities are observed, the law-making process itself can be faulted. In Thaksin's case, while he claims to have observed the letter of the law, the court judged that he had abused power to make the laws to favour his own company.

A third lesson is that a new norm against corruption has emerged. Even premiers, presidents and the largest tycoons can and have been investigated. It is not just the Thaksin case but others in Indonesia, Vietnam, South Korea, Taiwan, China and elsewhere. Choose your partners carefully.

Not all cases will be prosecuted, however. In many cases, complaints come only after regimes change and power shifts. There is not always an even-handed process in deciding who to charge. Understanding the power dynamics is as importantas profit and loss.

In these circumstances, foreign investors face something of a dilemma. They cannot bribe. Yet they cannot depend on the system in many of these countries to be easy, even-handed and efficient. There remains scope to permit or deny a licence or to expedite or delay approvals.

Given these uncertainties, some investors will avoid such emerging markets. But if they simply wait and see, they will lose out on many opportunities. They should recognise that investing in emerging markets can bring rewards if risk is well managed.


Gaining access to decision-makers for private persuasion and lobbying can be an effective strategy. You cannot bribe. But know who, and not just know how, still matters.

Secondly, beyond the existing decision-makers, the investor should widen networks among different groups and influential voices in the community. In an increasingly democratic society like Indonesia, this includes media and non-government organisations, as well as different political factions and parties.

Even more broadly, the investor can and should consider engaging with the community through corporate social responsibility and philanthropy.

Temasek, for example, has started a substantial foundation to support assistance projects in many countries and this has been generally well received.

The Banyan Tree group is another well-recognised example of doing good while making profits. Not all investors can or need follow on the same scale but being seen to be a good corporate citizen has value.

Politics and society are much more complex and fast-changing now; not only in Thailand but also in Indonesia, Malaysia and many other countries. Observing the law is, of course, necessary but this itself will not always be sufficient protection. Applying the black thick grease of corruption is no longer acceptable or safe. But there are still ways in which investors can legitimately and effectively manage the political and regulatory risks in regional business.

Simon Tay
About the author: 

The writer is chairman of the Singapore Institute of International Affairs, an independent think-tank with corporate members, many of whom do business across Asia.

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