Published on December 20, 2008
Thailand and International Accounting © 2007 Jesse Kedy
Overview I. Demographics II. Economy, FDI, and Terms of Trade III. Tsunami IV. Leadership V. Thai Airways VI. Southwest Airlines VII. Accounting Differences © 2007 Jesse Kedy
Demographics Population: 65 million Mostly rural (82% in provinces) Biggest city: Bangkok (about 6 mil.; 50% of GDP) Ethnicities: - Thai 75% - Chinese 14% - Other 11% Major Religions: - Buddhist 94.6% - Islam 4.6% © 2007 Jesse Kedy
Economics Developed infrastructure Free-enterprise economy; pro-investment policies GDP/ capita: $8,300 (PPP) Economy growth: -2003: 6.9% -2004: 6.1% -2005: 5% © 2007 Jesse Kedy
Economics (con’t) Unemployment: 1.4% (2005) By sector: Labor GDP Agriculture: 49% 9.3% (40% in 1980) Industry: 14% 45.1% Services: 37% 45.6% Poverty rate: 10% Income disparity (Gini): 43.2 © 2007 Jesse Kedy
Gini Coefficient since WWII Income Disparity (0 = Perfect Equality; 100 = Perfect Inequality)
World Map, Gini Coefficient
Foreign Direct Investment World's 4th most attractive nation for FDI (2004-2007) (after China, India, and the US) FDI During Asian Economic Crisis: © 2007 Jesse Kedy
Declining Terms of Trade Export Revenue Growth Import Costs Increase Source: http://www.nesdb.go.th/econSocial/macro/outlook_data/econ_outlook_q2_48/q22548_press_eng_colour.pdf © 2007 Jesse Kedy
26 December, 2005: Tsunami © 2007 Jesse Kedy
Impact 8,500 dead Massive destruction of property in southern provinces of Krabi, Phangnga, and Phuket High oil prices, weak demand from Western markets, severe drought in rural regions, decline in tourism, lower consumer confidence © 2007 Jesse Kedy
Leadership: Thaksin Shinawatra Shin Corporation Thais Love Thais “Anti-corruption” campaign Rural Populism at the Expense of Upper-class Prime Minister since 2001 © 2007 Jesse Kedy
Leadership: Thaksin Shinawatra (con’t) Thaksinomics - Subsidized universal health care - Village-managed development - Low-cost universal access to funds HIV medication - Low-interest agricultural loans - Privatized Oil & Gas GOES - Infrastructure development in rural areas Who would these policies appeal to? © 2007 Jesse Kedy
Thaksin: Results Controversy 1997 Economic Crisis PM or Domineering CEO? “Thailand’s savior” Insider knowledge (1997) IMF loan 2 years early Near conviction – GDP/ capita up 49% concealing business Overall GDP up 45% assets (2001) Balanced budget Bribery? Refused Tsunami Aid $667 million in tax savings “Thailand is strong enough to cope…” © 2007 Jesse Kedy
Thai Airways (THAI) History Formed in 1951 as a national airline Rapid growth early on Present Thailand’s biggest airline Several operations (especially Cargo Division) Fleet: 87 Aircraft (mixed) 72 destinations in 37 countries © 2007 Jesse Kedy
…Thai Airways Risks Tourism Recovering Rising Fuel Prices Foreign Currency Exchange • Revenue in 40 Currencies Investments • New Aircraft • Suvarnabhumi Airport (new operations base) © 2007 Jesse Kedy
Southwest Airlines (LUV) Incorporated in Texas in 1967 Focus: Short, High-Frequency Flights Fleet: 445 Boeing 737 aircraft 61 destinations in 31 states Biggest US Carrier (Domestic Flights) Lowest Operating Costs of all Major Airlines 1. Single Aircraft Type 2. Point-to-Point Route Structure 3. Dedicated employees © 2007 Jesse Kedy
Differences in the Detail Examples Thai Air Southwest Pages per statement 2 1 CF, Operating Activities 26 Items 10 Items Non-Current Assets 14 items PP&E Non-Current Liabilities See Handouts Accountability “The accompanying notes “See are an integral part of accompanying these financial statements.” notes.” © 2007 Jesse Kedy
Comparing Financial Statements Most differences based on THAI’s statements being more detailed. Why? Wouldn’t an American company be subject to stricter accounting standards than a Thai company? 1. Internationalvs. Domestic Airlines 2. Additional Risks (FX, Fuel, Tourism, Investments) 3. Global Investors (demand more information) 4. US Financial Markets – more popular © 2007 Jesse Kedy
Questions??? © 2007 Jesse Kedy
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