VZCZCXRO5499
PP RUEHCN RUEHDT RUEHHM
DE RUEHCHI #0098/01 1940947
ZNR UUUUU ZZH
P R 130947Z JUL 09
FM AMCONSUL CHIANG MAI
TO RUEHC/SECSTATE WASHDC PRIORITY 1097
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEHCHI/AMCONSUL CHIANG MAI 1179

UNCLAS SECTION 01 OF 03 CHIANG MAI 000098 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR ECIN EFIN ELAB PGOV SNAR SMIG SOCI TH
SUBJECT: LOWER NORTH ECONOMIES CONTRACTING; POLITICAL DIVIDES 
PERSIST 
 
REF: 08 CHIANG MAI 72 (AS PRICES RISE, NORTHERN RICE BOWL EXPANDS) 
 
CHIANG MAI 00000098  001.2 OF 003 
 
 
Sensitive but Unclassified; Please handle accordingly. 
 
------------------------------ 
Summary and Comment 
------------------------------ 
 
¶1.  (SBU) The economy in Phitsanulok remains stable, providing a 
solid economic foundation for the region, despite the global 
economic crisis causing many workers to return to the lower 
north.  Although the agricultural sector in the region's 
economic hub of Phitsanulok is reportedly accommodating 
returning workers, villagers who travel seasonally as unskilled 
workers to Bangkok report the impact of the economic crisis is 
limiting opportunities there.  While the crisis' impacts on 
divergent socioeconomic communities in the lower north vary, it 
does not appear to be exacerbating the existing political 
divide.  Like elsewhere in the north, personal relationships and 
cash payouts rather than political ideology determine how locals 
vote, red or yellow. 
 
¶2.  (SBU) Comment:  While the global economic crisis is 
certainly having some impacts in the lower north, the real 
economic challenges that villagers face are long-term problems, 
such as lack of access to irrigation and steady government 
financing of local projects.  With less access to capital, 
poorer locali,ties are generally still loyal to the former 
Thaksin administration that supported such rural development 
initiatives, though money and personalities are the main 
motivators for voters in this region.  If recent stimulus 
efforts to finance infrastructure projects across the country by 
current Prime Minister Abhisit are well received in the lower 
north, red shirt loyalty in the region could decline. End 
Summary and Comment. 
 
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Despite Crisis, A Resilient Lower North Economy 
--------------------------------------------- --------------- 
 
¶3.  (U) Although the economic crisis is negatively affecting 
some parts of the lower north, the local economy is generally 
resilient, businessmen and villagers in Phitsanulok Province 
told econ staff during a June 24-26 trip.  Phitsanulok city is 
primarily supported by currently stable economic sectors such as 
agriculture, education, and health care. Phitsanulok is 
considered a hub for the lower-north in each of these sectors 
providing consistent incomes that fuel the local economy.  In 
semi-rural parts of the province, farmers reported that they are 
content with current agricultural prices and are not constrained 
by the global crisis. 
 
¶4.  (U) The primary effect of the crisis in the lower north is 
an increase in labor supply due to laborers returning home after 
being displaced from the suffering export-oriented sectors based 
in the Bangkok area.  However, even this added supply of workers 
remains a manageable issue.  The labor-intensive agricultural 
industry, for example, appears able to absorb returning workers 
as long as they are willing to perform manual labor and the 
farming community they live in has sufficient access to 
irrigation systems to expand their production. 
 
--------------------------------------------- --- 
Policy Efforts Maintain Stable Economy 
--------------------------------------------- --- 
 
¶5.  (U) Phitsanulok villagers expressed appreciation for the 
government's price floor on rice, a policy the farmers believe 
allows the region to adapt to the changing economic environment. 
 Presently, farmers are guaranteed a minimum price of 9,500 THB 
(280 USD) per metric ton, while the market price is 
approximately 9,000 THB (265 USD).  Farmers still complain that 
the price guarantees cannot compare to last year's high 
commodity prices, which peaked at 14,500 THB (425 USD) per 
metric ton (reftel).  Moreover, farmers continue to comment that 
profits are low due to the high prices of inputs such as 
fertilizer and pesticides. 
 
¶6.  (U) Other nationwide stimulus policies have lessened 
economic burdens in the urban parts of the lower north.  The 
recent stimulus package provided a 2,000 baht ($59) one-time 
payment to each employee of a formal business who registered for 
social welfare and made less than 15,000 THB (442 USD) per 
month.  Even though the largest factory in the city had a round 
of layoffs and wage cutbacks, its workers received the handout. 
Also, the central government is trying to improve human capital 
through low skilled workers by providing job training for 
workers returning to the region.  Each trainee receives room and 
board as well as 50 baht (1.50 USD) per diem per day. 
 
¶7.  (U) One village headman near Phitsanulok city stated that 
 
CHIANG MAI 00000098  002.2 OF 003 
 
 
the central government is now supporting new initiatives at the 
local level that provide farmers with machinery and training to 
manufacture organic fertilizer.  These initiatives 
simultaneously allow locals to decrease their demand for 
expensive chemical fertilizers, while raising local demand for 
labor to produce the organic fertilizer (balancing off the labor 
supply increase caused by returning laborers).  Although the 
village headman was concerned about accommodating all of the 
young laborers coming back to his village after being laid off 
in Bangkok, he seemed confident in providing these needy 
citizens with work through these new development initiatives and 
the generally labor intensive agriculture sector. 
 
--------------------------------------------- -------------- 
-------------------- 
In (Yellow) Urban Areas, Democrats Get Credit for Econ Strength 
--------------------------------------------- -------------- 
-------------------- 
 
¶8.  (U) Due to the stimulus initiatives, villagers residing in 
agricultural, suburban communities of Phitsanulok stated that 
they were not concerned about the economic crisis and that they 
are more than capable of surviving on what they have now, a 
philosophy they associate with King Bhumibol's "sufficiency 
economy" concept.  Moreover, many communities consider farming a 
way of life, and, no matter what the economic situation, they 
would plant rice regardless. 
 
¶9.  (SBU) Acceptance of the current economic environment in 
Phitsanulok is most evident among supporters of current Prime 
Minister Abhisit and the Democrat Party-led government, most of 
whom reside in Phitsanulok city and the immediate surrounding 
area.  Businessmen and middleclass locals said they are also 
pleased with Abhisit's performance because they believe their 
tax payments will be funneled into more business-friendly 
policies, rather than into subsidies that benefit farmers. 
However, businessmen said they remain frustrated with the 
airport closures in late 2008 that damaged investor confidence 
in the Thai market. 
 
 
--------------------------------------------- -------------- 
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In Remote (Red) Areas, Economic Hardship is Nothing New 
--------------------------------------------- -------------- 
------------- 
 
¶10. (SBU) While urban and suburban areas of the lower north are 
coping economically, poor rural villages with minimal levels of 
economic development are still struggling, though their barriers 
to income generation are long-standing problems that predate the 
economic crisis.  Growth under former PM Thaksin fueled 
development initiatives in these rural communities, an era which 
is still fondly remembered here.  With an unstable political 
environment and worsening economy, the current government, 
however, cannot or, some would say, will not support the 
countryside's development the way Thaksin-centric political 
parties have.  The backlash against this perceived lack of 
central government support is evident by the red shirt protests 
around Thailand as well as the comments by villagers in the 
hinterland of Phitsanulok. 
 
¶11. (SBU) Interviews with villagers in the outlying sub-district 
of Suan Mieng indicate that not all of Phitsanulok province is 
faring well during this economic downturn.  One sub-district 
organization official stated that administration revenues that 
fund the local government and development initiatives were cut 
from around 11 million THB (324,000 USD) in previous years down 
to only 3 million THB (88,500 USD) in 2009.  This 72 percent 
decrease in operating revenue halted almost all local 
development initiatives and reduced opportunities for 
employment, which were already bleak due to a lack of access to 
irrigation.  Farmers can harvest rice, cassava, or corn only 
once a year here, so income is already much lower, while 
transportation costs are higher.  Falling commodity prices 
further exacerbate the situation as these villagers survive only 
on what they produce.  Furthermore, villagers in this rural area 
do not benefit from the government's rice price guarantee 
program because farmers cannot produce during the dry season 
harvest (when guaranteed prices exceed market prices) due to the 
lack of an irrigation system.  Instead, villagers travel to 
Bangkok during the dry season to work as street merchants. 
However, those jobs are not as profitable due to the economic 
crisis, they said. 
 
¶12. (SBU) The economic hardship of these rural locales generally 
translates into support for Thaksin and the redshirt movement. 
For example, one prominent villager stated that Abhisit's 
administration is only concerned about helping the businessmen 
and people who already have money.  This villager spoke of 
 
CHIANG MAI 00000098  003.2 OF 003 
 
 
agricultural middlemen and rice mill owners who benefit from 
government subsidies and stimulus, while the typical farmer 
received no benefits and was left to fend for him or herself. 
Additionally, since this sub-district did not have any 
registered businesses, the government stimulus of 2,000 THB (59 
USD) did not reach any of the local people.  This local leader 
was exceptionally angry, believing that his community would not 
receive many benefits from the central government's economic 
stimulus investment plan. 
 
¶13. (SBU) Since this village is not receiving many central 
government benefits, many needy villagers are either selling 
their land to outsiders or borrowing from the local community 
fund, which has performed well over the past few years and 
earned interest.  Land sales are at an all time high in this 
community, as locals see more opportunity to work in Bangkok 
despite the economic crisis and sell their land off to people 
from the South who come up to plant rubber trees (septel), 
leaving them without almost any assets at all.  Moreover, it is 
expected that as villagers borrow from the community fund, 
interest returns will decrease while the returns from the loan 
will be lower as commodity prices are low and the risk of 
investing is greater during the economic crisis. 
 
¶14. (SBU) Due to the lack of job opportunities in this 
community, many of the locals leave to go find work in Bangkok 
or other countries.  A number of villagers we spoke with stated 
that after the rice planting season, they will go back to 
Bangkok to sell coffee or grilled food stuffs, or work on any 
remaining construction sites.  Also of note is that villagers 
from this community said that they would attend both red and 
yellow shirt rallies as both would pay between 500 to 1,000 THB 
(15-30 USD) a day and provide meals.  Our contact noted that the 
yellow shirts (of the People's Alliance for Democracy) pay more 
than Thaksin's red shirts for participating in Bangkok protests, 
indicating that, although Thaksin is still revered here, poor 
villagers are indifferent to the ruling coalition and are most 
concerned with personal welfare instead of political ideology. 
 
¶15. (SBU) Due to the economic downturn, jobs in Bangkok are less 
plentiful while low skilled labor positions offer lower wages, 
according to Phitsanulok villagers who travel there for work. 
This has led the most desperate to engage in more risky 
businesses.  Our contact noted that drug sales and abuse are on 
the rise in his hometown.  He stated that many young adults, 
whose parents are away working in Bangkok or other countries, 
will travel to the Thai-Burmese border to purchase 
methamphetamine type stimulants (yaa-baa) to sell in the village 
at a profit and to consume.  So not only are youth disadvantaged 
with a lack of job opportunities, but village leaders are 
concerned that a rise in drug use will further eat up whatever 
money they do have and destroy their opportunities for the 
future. 
 
¶16. (U) This cable was coordinated with Embassy Bangkok. 
ANDERSON