The military coup in Thailand that deposed Prime Minister Thaksin Shinawatra caused minimal immediate disruption of retailing and manufacturing for the 12th-largest apparel and textile importer to the U.S.
The situation is uncertain, however, and future orders and the prospects for a free trade agreement with the U.S. are in limbo.
This story first appeared in the September 21, 2006 issue of WWD. Subscribe Today.
Gen. Sondhi Boonyaratkalin, who took control of the country of 65 million people, said in Bangkok on Wednesday that democracy may not be restored for at least a year. An interim government to write a new constitution is to be named within two weeks, and elections are to held sometime around October 2007. Sondhi pledged allegiance to Thailand’s King Bhumibol Adulyadej, who has been on the throne for 60 years.
“They’re all waiting for the king to proclaim his vision of what should take place in Thailand,” said Rick Darling, president of Li & Fung USA. “The population is extremely loyal to the king.”
Thailand is an important sourcing country and hub for Li & Fung, which employs about 500 people in the Bangkok area and has had a presence in the country for more than 30 years.
Thailand reported apparel and textile shipments to the U.S. of 1 billion square meter equivalents, valued at $2.2 billion, for the year ended July 31. Already facing tough competition from China, Thailand has a 2 percent share of the import market that could be threatened if the takeover turns violent.
“We don’t see any real disruptions,” Darling said. “Certainly, no disruptions in the short term and, frankly, we don’t think there will be any real disruption in the long term.”
The leaders of the coup declared a national holiday on Wednesday, but many businesses stayed open as banks, government offices, the stock market and schools shut down. Tanks and soldiers were stationed at some key locations. Thailand’s currency, the baht, had its biggest one-day decline in three years.
“We’re disappointed in the coup,” White House press secretary Tony Snow said. “We hope those who mounted it will make good, and make good swiftly, on their promises to restore democracy….Once you have democracy restored, we’ll also be in a position to move forward on a free trade agreement.”
Thaksin, who was in New York on Tuesday to address the U.N. General Assembly when the military toppled his government, has been embroiled in a controversy since January when his family’s tax-free sale of a telecommunications company raised allegations of corruption.
A spokesman for the Thai Garment Manufacturers Association said the coup was generally welcomed by business.
“It may actually be better for the economy,” the spokesman said. “With Thaksin gone, there will be no hidden agenda.”
A U.S.-Thailand trade pact would eliminate tariffs between the two countries, making it more cost-effective to import from Thailand.
“They need a politically stable environment for people to be comfortable sourcing there,” said Mark Jaeger, senior vice president and general counsel at Jockey International. “Long term for the apparel business, they need to have better ties with the U.S., including a free trade agreement.”
Street and pedestrian traffic in Bangkok was light on Wednesday. The Siam Paragon shopping center hired an additional 100 security guards, a spokesman said. The center opened as usual at 10 a.m. and mall management left it to individual tenants to decide if they would open.
“We made security tighter to make sure everything is on the right track,” the spokesman said.
The mall aquarium, Ocean World, was closed, though the department store and food court were open.
The upscale Gaysorn Shopping Center was closed, and management could not be reached for comment.
The U.S. embassy urged Americans in Thailand to “avoid any large gatherings and exercise discretion when moving about the city.” The embassy said it’s not advising U.S. citizens to leave, but said Americans planning to travel there “may wish to carefully consider their options … until the situation becomes clearer.