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September 24, 2017

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Thailand 'cronyism' tops list of concerns among global investors

BANGKOK -- World-renowned investment guru Marc Faber says cronyism is a concern for an investor like himself as the Thai government has appointed people connected to former Prime Minister Thaksin Shinawatra.

"I think that, to be quite honest. I as an investor, it concerns me that, for instance, the government appoints principally people connected to Mr. Thaksin for, say, Thai (Airways) International," he said.

"As an investor, to me it sounds very strange that people who run large companies are appointed by the government and that the government then favors people that are supportive of them. There is still a lot of so-called cronyism. In other words, I have political power and you're a businessman or you are someone who was at the party before and I give you a good job and the position of power," he said.

The Swiss investor and publisher of the "Gloom Boom & Doom Report" newsletter was speaking at his home in Chiang Mai in an exclusive interview with The Nation Group. Faber also criticized the Yingluck Shinawatra administration's multibillion-baht rice-pledging scheme, saying any price-support mechanism could basically distort the free market and lead to unintended consequences.

"Rice is not endemic to Thailand. Rice is a commodity traded all over the world. If the price should be fixed, it should be fixed all over the world," he said.

Nonetheless, Faber said he was "reasonably positive" about the future of Thailand, where he has resided since 2000 and has invested in some properties and Thai stocks.

"Thailand is unlikely to be a dynamic economy. It's not going to be like South Korea or Taiwan. In the long run, it could easily grow at 4-5 (percent) per annum for the next 10-20 years unless the whole global economy collapses.

"It's like in the U.S. ... tension between the Democrats and the Republicans are very high ... they just can't agree on anything. In Thailand, I don't know ... the red shirts, the yellow shirts ... both have probably some good and bad points. There is still too much corruption," he said.

Regarding his view on the global economy, Faber said he believed the Chinese economy was currently growing at a maximum of 4 percent annually and the world economy overall was decelerating dramatically.

Nonetheless, Faber said the stock, gold, bond, currency and real-estate markets were different stories from the official economic figures since central banks would keep printing out money. This money has largely flowed to rich people while the lower middle class and poor have suffered from a higher cost of living.

Faber suggested that the average investor split his or her portfolio equally among stocks, property, gold, and corporate bonds.

"The purchasing power of money has depreciated a lot, and maybe the gold is still cheap. I will never sell my gold," he said.

Faber said the entire financial sector was vulnerable to a setback and a "systemic failure" would occur sooner or later.

"Now I happen to believe if you have money on deposit in Thai banks, it's much safer than if you have deposits with Citigroup, UBS, Royal Bank of Scotland and so on, because Thai banks don't have huge derivative portfolios. JPMorgan, they have trillions of dollars in derivatives. Nobody knows how to value this 'garbage.'"

Faber said Thai property was still reasonably priced when compared with real estate in other parts of the world. He said he had invested in some Thai stocks including Bumrungrad International Hospital, Bangkok Dusit Medical Services, CP All, Charoen Pokphand Food, and some companies related to telecommunications and real estate.

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