Thailand is currently experiencing the socioeconomic problem of a missing middle class. There is a great divide between the country’s highest earning and lowest earning groups. The country’s highest earning group is benefiting from increased connectivity through technology. Some members of the middle class have just emerged from poverty and are earning the majority of their income through labor. The lowest bracket in this group is feeling the most pressure about their future. In Thailand, the richest 20% make almost 60% of the income. The poorest 20% made only 4% of the income. This disparity has Thailand ranked last place amongst its neighbors. The disparity between the rich and the poor is similar to what was seen in Russia after the collapse of the Soviet Union. Slowly, Russia’s middle class is gaining in members. Economic policy reform has been painstakingly slow in Russia, but progress has been made. Analysts feel that policy reform in Thailand should focus largely on limiting monopolies and deterring corruption.
With that being said, just last week Thailand’s central bank announced that it would allow foreign bank expansion. This is part of the second phase of Thailand’s Financial Sector Master Plan. Basically, foreign banks currently operating a branch in Thailand would be permitted to become a subsidiary that can have up to 20 branches and 20 separate ATMs throughout the country. There are currently 15 foreign bank branches in Thailand, five of which are European, three are Japanese, and three are US banks. The central bank’s new policy aims to increase competition while enhancing the efficiency of Thailand’s financial system. This new policy adapted by Thailand’s central bank will make financial services monopolies fairly impossible.
With the new policy in place, foreign direct investment will have an easier time finding its way to Thailand. Better banking choices could also lead to expanding trade. Thailand could well see a great expansion in economic development with the next few years. This is a great time to consider investment in Thailand, especially with respect to financial services. The new policy will promote competition among financial firms. The iShares MSCI Thailand Market Index (THD) regularly maintains financial services as its top holding category. The fund sees a consistent growth pattern and holds a high return rating. THD could be just the fund to bet on Thailand’s economic development in response to policy reform.
Thailand is one of few markets in Asia that has yet to be fully tapped. Thailand’s central bank is on the right track. This emerging Asian market is set to become a financial powerhouse. This new policy will only speed the already growing progress in this direction. Thailand is an opportune hub for trade and commerce. This is a great time to get in on the ground floor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.