What price protectionism?

Post - Articles by David Wade, Tropical Homes

I am writing this column from Riga, the capital of Latvia. This was one of the first break away states from the former Soviet Union and is a small coastal country next to Estonia and opposite Finland.

Considering its relatively recent independence from the former Eastern European Communist bloc, Latvia is flourishing. What is more, there is a property boom to match. So it is interesting to compare this tiny country, finally free from centuries of totalitarian rule, with the land of the free itself – Thailand.

Despite having a population of a mere 2.3 million, Latvia has embraced foreign investment and actively encourages overseas property buyers, while Thailand – at a time when its legislators ought to be considering the relaxation of prevailing land laws – has chosen now of all times to enforce those laws more rigorously.

What good purpose will this serve? The Phuket Land Department recently published record revenues as a result of new registrations. As many of these purchases will have been made by Thai companies that will almost certainly have part-foreign ownership, we can expect this revenue to dive over the next few months as the absence of registrations takes affect.

So who is gaining from the enforcement of the existing laws? Certainly not the Thai people. Phuket is a mecca for foreigners wanting to own a little piece of it. And I mean a little piece.

Take a look at the island as a whole and the percentage that has part-foreign ownership is minute. Look beyond Phuket and foreign investment is microscopic. Just drive from Phuket to Krabi and you see a land that is so underdeveloped you have to ask yourself: what are the Thai authorities afraid of?

Foreign investment is good for a country – any economist worth his salt will affirm this. In England, our most celebrated department store – Harrods – is owned by an Egyptian and large swathes of our countryside are owned by Arabs, Indians and Pakistanis. But, as an Englishman, I say “So what?”

The British, in turn, are the biggest purchasers of overseas properties in the world. And this has helped make a lot of Thais, who had previously carved out a living breeding pigs or gathering rubber, very wealthy. So wealthy, in fact, they are not even aware of it.

The first land plot I ever went to see on behalf of a client was 25 rai in the south of the island. As I was shown the land it transpired that about 30 rai adjoining this plot had already been sold by the same Thai family to a couple of large hotel groups. The average price per rai for this land was then six million baht.

As we walked the land, which was overrun by wild pigs, we came across a large run-down wooden building on stilts right at the centre with an old lady cooking on a large pot over an open fire.

Showing concern, I asked what would become of her if the land was sold. I was assured replied that there would not be a problem - she was the owner. A multimillionaire in any currency.

So who and what are the authorities protecting? There are countries all over the world that have already realised the advantages of allowing foreign ownership of land and property.

The larger economies of the West saw the wisdom of this many moons ago, while the emerging economies have grasped at the opportunity of foreign investment –often after a brief but exciting affair with it.

A lot has been said about Dubai already, and there are obvious comparisons with Latvia of a country expanding fast and feeling the huge economic benefits of foreign investment and property ownership. I say obvious because Dubai is also a tiny country, with just a million souls, that was almost entirely reliant upon its natural resources for income.

Now it has another major source of foreign exchange earnings. I can see why a small country with little wealth or land might be concerned about being bought up in its entirety by foreigners, but that does not apply in Thailand.

Thailand has the potential to be the greatest country in Southeast Asia. Latvia while never likely to become one of the great countries of Europe, will one day be able to offer its citizens a lifestyle they would never have dreamed of a couple of decades ago. Come to think of it, it has accomplished that already. I have never seen so many S Class Mercedes in one place.

I hail from a part of England close to a town where the football club has just been bought by a Latvian businessman. He is looking to inject 30 million Pounds Sterling into the club in the first year. I guarantee there will be no complaints from the fans because of this foreign ownership.

By David Wade, Tropical Homes
(2006-09-04 15:41:51)