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OO RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHBK #3519/01 3361145
ZNR UUUUU ZZH
O 011145Z DEC 08
FM AMEMBASSY BANGKOK
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5257
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS IMMEDIATE
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RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI IMMEDIATE
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC IMMEDIATE 1012
RUEAIIA/CIA WASHINGTON DC IMMEDIATE

UNCLAS SECTION 01 OF 03 BANGKOK 003519 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/MLS, EAP/RSP AND EEB 
STATE PASS TO USTR 
TREASURY FOR OASIA 
COMMERCE FOR EAP/MAC/OKSA 
SINGAPORE FOR FINATT BAKER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PREL ETRD TH
SUBJECT: THAILAND: ECONOMY SUFFERS FROM AIRPORT SHUTDOWNS 
 
REF: A. BANGKOK 3505 (ARMY WANTS PEACEFUL DEMOCRATIC 
        SOLUTION) 
     ¶B. BANGKOK 3504 (STALEMATE LOOKING FOR A WAY OUT) 
     ¶C. BANGKOK 3492 (MOB SHUTS MAIN AIRPORT) 
 
BANGKOK 00003519  001.2 OF 003 
 
 
¶1. (SBU) Summary: As the anti-government protesters continue 
to blockade Bangkok's airports, tourism and other industries 
dependent on air cargo are getting clobbered.  Thai Airways 
alone reports losses of $14 million a day.  Tourism has long 
been a mainstay of Thai economic growth, and to the extent 
that the airport closure crisis drives away foreign visitors, 
the global economic crisis will hit Thailand more than need 
have been the case.  Most economists and trade observers, 
including Thailand's own government officials, had already 
predicted a difficult year ahead.  The government revised its 
projected growth rate for 2009 to two percent, while many 
private sector estimates are lower.  So far, the financial 
sector remains sound, with stocks largely unaffected and the 
Thai baht continuing a long-running gradual decline.  End 
Summary. 
 
¶2. (SBU) Comment: Ironically, by closing the airports 
(initially in an effort to prevent the return of the Prime 
Minister from the APEC summit), the anti-government 
protesters are attacking the upper-class and business 
interests which have been key supporters.  Nevertheless, 
business associations have yet to criticize the protesters 
directly, but have only rather meekly noted the extent of 
potential economic losses.  One key to crisis resolution will 
be whether the pain to the economic elites will dampen their 
political support for the protesters.  It has not happened 
yet.  End Comment. 
 
Immediate Blow to the Tourism Sector 
------------------------------------ 
 
¶3. (U) The most visible and immediate impact of the airport 
closures has been on the tourism industry, which was already 
weakened by Thailand's prolonged political stalemate and the 
global financial crisis.  Thousands of tourists, including 
many American citizens, remain stranded in Bangkok, searching 
for ways out of the country.  Thousands more, including an 
estimated 50,000 Thai citizens, remain outside of Thailand 
unable to enter the country as they had planned.  Hotel room 
occupancy, which according to industry contacts has already 
been down 15 to 20 percent this year, will decrease even 
further once the current stranded foreign occupants gradually 
find their way home.  This situation comes at the start of 
Thailand's peak tourism season, when millions of travelers 
were to have arrived over the next 2-3 months. 
 
¶4. (SBU) Perhaps with even more immediate consequences to 
Thailand's economy and image are the cancellations of 
business, NGO and governmental events, dealing a devastating, 
though hopefully short-term, blow to the convention trade. 
As one small snapshot, USG-related cancellations include the 
APEC New echnologies in Aviation Workshop (sponsored by the 
U.S. Trade and Development Agency and Federal Avation 
Authority) and an UN-sponsored International Workshop on 
Perfluorinated Chemicals that an Enironmental Protection 
Agency official was to char.  Embassy Bangkok has cancelled 
a U.S. militar conference for 60 attendees.  Contacts tell 
us hat the prestigious Asian Institute of Technology has now 
cancelled five conferences from late Novemer to December. 
Future events are being cancelle daily, and the speculation 
continues over whethr the RTG will postpone the December 
15-18 ASEANSummit, which will include heads of government 
from all over the region.  The RTG, the event's host,had 
already shifted the summit's venue from Bangok to Chiang 
Mai, in order to minimize the impac of anti-government 
protests. 
 
¶5. (U) The Bankof Thailand estimates that the tourism sector 
 
BANGKOK 00003519  002.2 OF 003 
 
 
accounts for almost $175 billion in annual revenues and that 
the airport shutdowns could cost $5 billion by the end of the 
year. More than 750 flights normally are scheduled to arrive 
and depart at Bangkok's new Suvarnabhumi Airport each day, 
while more than 200 flights take off and land at Bangkok's 
Don Muang Airport. Virtually all of these flights have been 
cancelled, though a few have been re-routed to smaller cities. 
 
¶6. (U) Deputy Prime Minister Olarn Chaiprawat predicted that 
the tourism industry could decline by as much as 50 percent 
because of the political crisis, resulting in the potential 
losses of one million jobs in hotels, restaurants, and tour 
operators. (Comment: These government estimates may be 
exaggerated in order to sway public opinion against the PAD 
protesters. End Comment.)  According to DPM Olarn, the 
government expects foreign tourist arrivals for 2008 to come 
in at 13.5 million in 2008, about one million less than 2007, 
and decline even further to six or seven million for 2009. 
Analysts at the Bank of Thailand separately predicted foreign 
tourist arrivals to fall by 3.5 million, if the airport 
shutdowns drag on through the year-end.  The press reports 
that Thai Airways, the country's national carrier, has 
estimated its immediate losses at more than $14 million each 
day the airports remain closed, according to the airline's 
Acting President Narongsak Sangapong. 
 
Longer the Crisis Lasts, Greater the Economic Impact 
--------------------------------------------- ------- 
 
¶7. (U) The current airport crisis comes just as the overall 
economy has turned south.  Finance Minister Suchart 
Thada-Thamrongvech had already revised the government's 
economic growth projections for 2009, cutting the estimate 
from 4.5 percent to 2 percent, a decline that the airport 
closures can only exacerbate.  Suchart added that the current 
political turmoil could cause losses of about $2.8 billion in 
this final quarter of 2008 alone.  Prior to the airport 
closures, the Thailand Development Research Institute, the 
premier Thai economic think thank, projected that economic 
growth for 2009 could fall below 1.9 percent.  TDRI President 
Nipon Poapongsakorn said on November 28 that these 
projections could fall even further should the airport 
closures be prolonged.  In its most recent reports (published 
prior to the airport closures), TDRI forecasted that the 
export and services sector would likely retract by 12.1 
percent in 2009, because of reduced global demand in light of 
the financial crisis. 
 
¶8. (SBU) In the medium- to long-term, the deepening political 
crisis will amplify the impact of the global financial crisis 
on Thailand.  It is too soon to predict overall losses to 
businesses and investors, but most estimates stretch into the 
tens of millions of dollars for each day the airports remain 
shutdown.  The Thai Chamber of Commerce estimates total daily 
losses for the export-driven economy at $85 million. 
 
¶9. (SBU) Many business groups are predicting gloomy days 
ahead for the Thailand's export and import sectors.  The 
Federation of Thai Industries, one of the leading business 
associations, estimated that the airport takeover is 
resulting in losses of up to $85 million per day.  According 
to our business contacts, the bulk of Thailand's exports are 
still leaving the country, with more than 90 percent of 
export cargo transported by shipping lines.  Some specific 
sectors, however, are hit with significant losses in the 
short-term, particularly agricultural exports -- perishable 
vegetables, fruits, and fresh cut flowers that depend on air 
cargo delivery. 
 
¶10. (SBU) Exporters are reviewing all of their options in 
order to move their products out of the country, including 
re-routing cargo through Penang, Chiang Mai, and Phuket.  The 
Thai Freight Forwarders Association reports that more than 
 
BANGKOK 00003519  003.2 OF 003 
 
 
1,000 tons of cargo is being re-routed through Penang each 
day, significantly increasing the logistics costs to Thai 
exporters.  Western Digital, the largest American employer in 
Thailand with more than 45,000 employees, told us that the 
company is shipping its computer hard drives overland to 
Malaysia as a short-term solution, but the additional 
logistics costs cannot be absorbed much longer without 
risking their price competitiveness. 
 
Financial Sector Weathering the Crisis 
-------------------------------------- 
 
¶11. (SBU) The airport closure has not yet affected the 
financial sector, according to several of our banking 
contacts.  The Stock Exchange of Thailand's (SET) index was 
up the week of November 24 and only on December 1 dipped into 
the red.  The head of trading at a large foreign bank 
explained that many foreign investors have already divested 
of Thai equities over the past year due to the ongoing 
political crisis, as seen by the decrease of the SET's value 
by over 50 percent this year.  The SET indexes could still 
decrease, especially if the stand-off at the airport is 
prolonged, but thus far Thailand has not had market panics or 
runs on the Thai baht. 
 
¶12. (SBU) Financial industry executives continue to point to 
the RTG's high level of foreign reserves (approximately $110 
billion) and the limited foreign exposure of private banks, 
explaining the overall strength of the financial sector. 
Like their colleagues in other business sectors, financial 
executives are most concerned about Thailand's long-term 
export and tourism competitiveness. 
 
JOHN