Thailand's north-east set to boom
STEEL girders jut from the low skyline of the Thai city of Udon Thani near the Laos border as workers lay cement for a new shopping mall, one of many illustrating a boom in the Thai economy beyond the bright lights of Bangkok.
The malls, factories and construction sites in Thailand's northeast are emerging alongside its farms as a potent economic fuel in one of Asia's top emerging markets.
The economic renaissance of "Isaan", Thailand's poorest and most populous region, has coincided with expansionary policies - from wage increases to farm subsidies - that are enriching an area at the heart of a "red shirt" protest movement that backed Prime Minister Yingluck Shinawatra in the 2011 election.
As a new middle class emerges, investors and companies are taking note. CLSA emerging-markets guru Chris Wood cites the region in explaining long-term bets on Thailand.
"There is a macroeconomic ramping up of the north-east," he said.
However, the potential may not be realised if a crucial 2.2-trillion-baht (S$90-billion) infrastructure programme becomes a casualty of the feuding between Ms Yingluck's ruling Puea Thai Party and its opponents.
But if the plan went ahead, as is generally expected, it would change the entire economic structure of the north-east, said Mr Rahul Bajoria, an economist at Barclays Capital.
"It's the next entry point for investors and consumers - if they link it up to China, it becomes the entry point to Thailand, not Bangkok," he said.
"But it's been difficult for the bureaucracy to execute programmes because they don't know who will be in power in a year or two."
Economic growth in the region reached 40 per cent from 2007 to 2011, against 23 per cent for the country and just 17 per cent for greater Bangkok. Monthly household income rose 40 per cent between 2007 and 2011, the biggest jump of any Thai region.
Interviews with businessmen and investment data suggest the trend is continuing.
The number of private investment projects in the north-east rose 49 per cent last year from that in the previous year, with the total amount invested more than doubling to US$2.3 billion, according to the Bank of Thailand.
"The north-east has a large population, a dense population, so the income is big," said chief financial officer Naris Cheyklin of Central Pattana Pcl, referring to the one third of Thailand's 68 million people who live there.
Politics explains part of what is going on.
Ms Yingluck's government brought in a nationwide daily minimum wage of 300 baht in January. In some Isaan provinces, that was an increase of 35 per cent, among the biggest gains in the country, on top of a nationwide 40 per cent rise in April last year.
Many workers, such as those building the 168 Platinum Mall in Udon Thani, are happy to return to the north-east for wages that are now on a par with Bangkok's.
Isaan should also profit as factories and distribution centres move in ahead of an EU-style Asean Economic Community (AEC) planned by Asean from late 2015 or 2016.
The AEC's East-West corridor, a motorway and infrastructure route for trade, will stretch from Vietnam's Danang Port through Laos, Thailand and Myanmar to the Andaman Sea, cutting through the centre of the northeast and its commercial hub of Khon Kaen.