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Paul Gambles
Co-founder of MBMG Group

 

Update January 30, 2016

A time for analysis, not panic

Don’t panic! DON’T PANIC! (starts to walk up and down excitedly)
– Lance-Corporal Jack Jones (played by Clive Dunn), Dad’s Army, BBC Television 1968-1977

Earlier this week a major UK bank told its clients to sell everything except high-quality bonds to avoid the effects of a looming global deflationary crisis. But is that really good advice?
RBS made the announcement whilst advising clients to be prepared for a ‘cataclysmic year’1 for markets. Andrew Roberts, the analyst responsible for the announcement, said that he’d already seen the bank’s red flags in the first week of 2016. He compared the mood in the markets with that of 2008 before the collapse of Lehman Brothers and the beginning of the global financial crisis (GFC), explaining that the bank thinks investors should be afraid.2

I’m not so sure. Usually in January I make forecasts for the year ahead. But 2016 looks more unpredictable than any year I can remember. There are very good reasons to believe that the global outlook may look gloomy at best for the medium-term but it’s quite another thing to forecast any decisive trend specifically within the next 12 months.
For that reason for the first time in my career, I’ve decided to hold back from forecasts, on the grounds that in such an environment quite frankly anything could happen, and instead try to explain just how to be ready for the best and worst case scenario and every possibility in between. That does not necessarily mean selling everything off in a wild panic.
Right sentiment but wrong statement
The RBS statement certainly made the headlines; but that kind of announcement concerns me because, if replicated by other large banks around the world, could cause widespread panic and thus hit prices in all kinds of markets – almost a self-fulfilling prophecy.
It’s fair to say that the reasoning behind the bank’s announcement may be sound. Central bankers have been talking up economic performance up in recent weeks, such as Fed Chair Janet Yellen’s claim of “considerable progress”3 in the US, as she raised interest rates by a measly 0.25% (if things are that good, why not go higher, Janet?). Yet it doesn’t feel like the world is recovering from the GFC.

In fact I’ve been explaining for some time that the global economy appears to be heading for another crisis potentially greater than the GFC because the real problem wasn’t identified in the first place. Many of the elements are there: plummeting oil4 and combined commodities markets;5 extremely low inflation in the Eurozone and the US;6 continuing high levels of private debt;7 and this time China is in no position to soften the blows, as it did seven years ago.8
It’s believed that the People’s Bank of China spent USD 500 billion to support the Yuan in 2015.9 RBS analysts reckon that the currency would need a devaluation of as much as around 20% to be reached before capital outflows from China start to ease, so that it could support the global economy.10 Central bankers haven’t thoroughly understood that private debt caused the problem and that have relied too heavily on China.
If we add non-economic factors such as war, global terrorism and environmental issues to the cocktail, it is clear that the world is facing some huge socio-economic challenges.
Individual investors
So what should the individual investor do? One thing that’s clear is that no-one should panic. After all, it’s not as if this scenario has crept upon us. Instead we should expect markets – and consequently portfolios – to be vulnerable to severe corrections.
How much you’re affected by dropping values of course depends on the nature of your investments. If you’re very exposed to risk assets, such as commodities, stocks or property, you could be in for a very nasty shock – I frequently analyse portfolios that are widely touted as being suitable for ‘typical investors’ (whatever that actually means) that our proprietary risk models indicate could fall by 60% or more.11 Needless to say, this realization comes as a huge surprise to investors but at least we’re able to give a ‘heads up’ on this, rather than investors finding out the painful way.
If, however, you’ve opted for a balanced asset allocation designed in a way bespoke to your own risk profile, time horizon and liquidity and currency requirements, then you’re likely to be much better positioned for the current turbulence.
I’m in no way suggesting investors close their eyes and hope for the best or saying that everything will turn out OK in capital markets in the long run (because that can sometimes be a very long run, longer than the life expectancy or patience of investors).
It’s important to be sure your assets are allocated, as much as possible, to meet your target risk-level with which you’re comfortable. As I have often remarked, investors can control how much risk is in their portfolios – that is an input. They can only influence the returns that they get as an output from their investments.
However, that doesn’t allow room for complacency - markets are movable targets and risk allocation should be analysed regularly by an independent expert. Risk of loss and correlations are not constant.
The point is to ensure decisions are taken objectively, without loyalty to a particular asset that, for example, may have done well in the past but looks like flagging in the future.
To give you a theoretical example: if someone has a retirement or education fee plan due to mature in 15 years’ time and its value has dipped by say 10% in the last six months or so, that is not necessarily cause for alarm and doesn’t mean that they should press the panic button and decide to get out immediately. That person should, however, be aware of his/her portfolio. They should ask whether they expected that kind of performance in these kinds of markets and how vagaries of the uncertain future that we all face might continue to impact the range of possible returns that they face. The key, even in today’s unpredictable times, remains that each investor still has the ability to control their investment risk.
Allow some tolerance
With that in mind, my recent advice has been to plan investment to allow the possibility that we might see far greater falling prices along the way whilst having solutions ready to allow for any possible scenario. Allowing for any possibility means a greater reliance on risk management and that may imply a need to lower return expectations.
Right now I feel that’s the way forward until we have a major event or a clearer picture that suggests a change in strategy. Sadly the one prediction that I will make is that too many professional and non-professional investors will get caught out by being unprepared for the challenges ahead. In any environment where almost anything can happen, the key is to take the steps to make sure that you’re not caught unawares.

Footnotes:
1 http://money.cnn.com/2016/01/12/investing/markets-sell-everything-cataclysmic-year-rbs/
2 ibid
3 http://www.ft.com/intl/cms/s/0/46a9001a-a424-11e5-8218-6b8ff73aae15.html#axzz3x0GN1DFs
4 St Louis Federal Reserve
5 http://www.bloomberg.com/quote/BCOM:IND
6 Eurostat and St Louis Federal Reserve
7 http://www.telegraph.co.uk/finance/economics/12093807/ RBS-cries-sell-everything-as-deflationary-crisis-nears.html
8 http://www.mbmg-investment.com/in-the-media/inthemedia/59
9 http://money.cnn.com/2016/01/07/investing/china-foreign-reserves-yuan-currency/index.html?iid=EL
10 http://money.cnn.com/2016/01/12/investing/markets-sell-everything-cataclysmic-year-rbs/
11 MBMG Prism proprietary risk models

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG Group cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

MBMG Group is an advisory firm that assists expatriates and locals within the South East Asia Region with services ranging from Investment Advisory, Personal Advisory, Tax Advisory, Corporate Advisory, Insurance Services, Accounting & Auditing Services, Legal Services, Estate Planning and Property Solutions. For more information: Tel: +66 2665 2536; e-mail: [email protected]; Linkedin: MBMG Group; Twitter: @MBMGIntl; Facebook: /MBMGGroup


Update January 23, 2016

Crowdfunding could be the key to successful funding

Whether you’re an entrepreneur, potential entrepreneur or someone who merely reads the business pages of the newspaper, you will probably have heard of crowdfunding.
Types of Crowdfunding
That’s because crowdfunding platforms, such as Kickstarter and GoFundMe, have helped individuals and small companies raise money to get their creative ideas or whizzbang technology to market. Two famous examples are actor/director Zach Braff’s campaign to partially fund his film Wish I was here, which set him up with USD 3 million in capital; and Pebble Technology Corporation, whose venture into the smartwatch market raised USD 10 million.1
However, this form of raising money is much more present in the global finance scene than just a couple of examples and it has evolved rapidly since musician-fundraiser ArtistShare first came to prominence in 2003.2 Perhaps one reason for its rapid rise is the fact that the platforms may be powered by modern technology but the concept has been around for centuries – the construction of the Statue of Liberty was funded in a similar way, with contributors receiving rewards including having their names printed in Joseph Pulitzer’s New York World newspaper.3
Start-ups of course need an initial investment to establish themselves; buy equipment; get that first service delivered or first batch of products; and build up brand awareness. It can take a long time to receive acceptance for a bank loan, if you get one at all given issues of collateral and high interest rates.4 Failing that, it can often prove difficult to access angel investors or venture capital funds if you’re new to the game. Thus a reward-based crowdfunding scheme may suit best as no real return is expected.
Equity-based crowdfunding gives investors and venture capitalists the opportunity to invest whilst spreading the risk with others. This model can be used for start-ups deemed as having the highest potential, as well as established SMEs needing capital to expand their business. This method not only gives the investor potential reward if the business is successful but also some say in the way forward.
If a company is at the stage where a traditional-style loan suits best, then there is debt crowdfunding. This covers different kinds of lending, including small bonds, invoice financing and peer-to-peer lending.
Peer-to-peer lending is where, rather than receiving rewards or a stake in the company, lenders receive interest paid on a loan. However, those lenders are not financial institutions, such as banks.5
Application to
Thailand
Crowdfunding is not just for tech start-ups in Silicon Valley. It can also be an ideal way for entrepreneurs in Thailand to get access to capital. The reality here is that whilst small and medium-sized businesses make up the majority of loan requests to banks, hardly any of them are successful. (See charts)

Source: Bank of Thailand

In fact, even though bank loans to SMEs increased by 67% between 2007 and 2013, 61.4% of those 2013 loans were short-term loans.6
The Asian Development Bank estimates that the SME credit gap in Asia is at least THB 41.4 trillion (USD 400 bn); and Thailand’s at THB 425 bn (USD 11.8 bn), with over 28% of all formal SME’s financed internally.7
These figures demonstrate a definite need for an alternative way to find investment. With a 100% year-on-year growth rate in Thailand for capital raised since 2012,8 crowdfunding appears to be filling that gap.
Acknowledging this, Thailand’s Capital Market Supervisory Board set out new regulations regarding selling securities over the internet in May 2015, designed to facilitate crowdfunding.9

Source: Bank of Thailand

The marketplace in Thailand may be embryonic but it is flourishing. There are already several platforms on the market. Equity crowdfunding platforms include Dreamaker and Sinwattana; and for debt crowdfunding there’s Satangdee, Sinwattana again and Beehive.
Getting it done
Now that crowdfunding is making headway in Thailand, it may seem easy to put your project out there and ask for investment. However, that would be an over-simplification of the whole process.
The old adage you only get one chance to make a first impression still applies, so you have to get the presentation of your idea spot on. Also, you need to know which type of crowdfunding best suits your business: are you willing to give up a share of the business? Do you have any attractive rewards to give? Do you prefer a loan-type arrangement? Finally, it’s vital to ensure that the offer is compliant with the new regulations and the policies of the crowdfunding platform.
That’s why it’s worth entrepreneurs consulting an independent expert who can guide them through the steps.

Footnotes:
1 http://www.businessweekme.com/Bloomberg/newsmid/190/newsid/917/The-Rise-of-Crowdfunding-in-the-Middle-East#cnttop
2 www.artistshare.com
3 http://www.libertyellisfoundation.org/statue-history
4 http://www.dreamakerequity.com/
5 http://www.investopedia.com/terms/p/peer-to-peer-lending.asp
6 OECD, Financing SMEs and Entrepreneurs 2015
7 ADB Working Paper Series on Regional Economic Integration
8 Dreamaker AIS
9 TorChor. 7/2558, TorChor. 8/2558 & KorChor. 3/2558
 

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG Group cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

MBMG Group is an advisory firm that assists expatriates and locals within the South East Asia Region with services ranging from Investment Advisory, Personal Advisory, Tax Advisory, Corporate Advisory, Insurance Services, Accounting & Auditing Services, Legal Services, Estate Planning and Property Solutions. For more information: Tel: +66 2665 2536; e-mail: [email protected]; Linkedin: MBMG Group; Twitter: @MBMGIntl; Facebook: /MBMGGroup


Update January 16, 2016

Enjoy the thrills by planning ahead

You may never consider planning your finances up there with bungee jumping, zorbing or parascending as an adrenaline-pumping pastime; yet it can enable you to do the more thrilling things in life.
Three-way budget
However much money we have and whatever the cost of living, it’s important to have some kind of financial plan in place. With that statement I may not exactly be, as the Spanish say, discovering America; yet in my experience, it’s something that people often overlook.
No matter how or where you record your budget, it’s important that it takes three elements into consideration: saving for tomorrow, budgeting for today and allowing for some fun.
Saving for tomorrow is self-explanatory; though it should take priority above all. In fact, it’s not a bad idea to consider putting money aside as a compulsory payment – like a tax bill. I call it the Pay Yourself First principle. That way there’s no temptation to eat into your savings to get your hands on that new 5G, voice-activated, 3D, cappuccino-making mobile phone. It’s vital to set clear objectives of how much you want in the savings pot by the end of a certain period. This enables you to stick to the plan even in the face of the greatest temptation.
In budgeting for today, we need to be sure that we’re being realistic. Setting out a plan to live off THB 200 a day may look good for your savings but it’s unrealistic. After all, one extra coffee could push you over-budget and once you’ve crossed the line, it’s not so easy to keep track. To avoid that scenario, it’s advisable to make provision for over-spending a little. I find it’s better psychologically to have spent less than anticipated, rather than over-spending on a tighter, less realistic budget.
Whilst I’m talking about financial planning, it doesn’t necessarily mean you have to implement a self-imposed austerity programme. Planning purely for the future could mean that we neglect the present – a pretty sobering thought. Of course, there must be room in the plan to live for today. Buying the above-mentioned phone, going sky-diving, going on a trip or doing something completely ad hoc is more pleasurable when you know it won’t ruin your wallet. So why not allow for those moments in your budget?
Planning to have fun
I suppose it shows my age when I talk about budgeting for ‘fun’. As a young man, that certainly wasn’t a consideration! Nevertheless, I’ve learnt from listening to clients over the years that a good financial plan avoids all sorts of problems, especially with couples.
As we get older, the amount of money we can potentially save reduces. This can become an intensifying pressure point in a relationship. A poll conducted by Harris Interactive1 showed that money fights are more prevalent among older couples than younger ones: 15% of couples between 18 and 34 said that finances triggered arguments; yet more than a third of couples aged 55 to 64 admitted to having “money fights.”
For that reason, it’s a good idea to agree on a financial plan as soon as possible. It should include the three budgets mentioned above, as well as a strategy for retirement planning.
That strategy should include how much return the couple require and what level of risk they agree to take to aim for that goal. It’s a common mistake to assume that risk only means volatility2 and therefore choose to invest in volatile or stable markets accordingly. Risk incorporates many more factors and measuring a suitable level is easier to achieve with the advice of an independent financial advisor, who works on a fee rather than commissions. This second point is important because it removes any hint of bias an advisor may have based on the commission he/she has with a particular fund management company.
An advisor should suggest an appropriate allocation of assets – what percentage of a portfolio should be placed in shares, bonds and currency, for example. By shares, that means in whole indexes – such as the S&P 500, SET 50 or FTSE 100 – rather than picking individual stocks. That’s because individual share pieces can fluctuate for all sorts of reasons, making it practically impossible to time when the best times are to buy or sell.
Reaching an agreement as to what to spend, what to save and where to invest money can be difficult. Experts suggest that the three key principles to this are: agreeing to disagree on certain aspects; maintaining a flexible approach to reach a compromise where possible; and to focus on the future, rather than dwelling on any past mistakes.3
I wouldn’t know about that but what is important is to stick to the basic plan, once it is in place. From that point, it can be modified as your circumstances and the performance of your portfolio change.
Get the kids on board
In the name of further domestic harmony, if you have children it could well be worth teaching them about finance too. This could avoid arguments over how they want to spend your money. It also encourages them to save part of their future income so they can accumulate interest over the years. This kind of education isn’t always taught at school and, in any case, may be easier to learn by following your example in day-to-day life. That means installing Pay Yourself First; setting out which expenses take priority; distinguishing between things they want and things they need; explaining that the idea behind saving is not just to buy something bigger; introduce them to charities; and, if they’re older children, get them to put together a list of assets, liabilities and net worth.
Planning finances in such a way means we’ve done the groundwork and we can get on with life without having that nagging feeling that we’re constantly putting something off until later.
Footnotes:
1 http://www.cnbc.com/2015/12/03/how-to-avoid-money-fights.html
2 http://blogs.reuters.com/james-saft/2014/09/10/never-confuse-risk-and-volatility/
3 ibid


Update January 9, 2016

Robo-Advisors: What are your objectives?

Robo-advisors seem to be the talk of the financial world at the moment. Type the term into an internet search engine and you’ll see scores of articles on the subject. They also seem to be a major theme of just about every conference in the advisory sector nowadays.1 But what are they and do they work?
A growing market
Automated investment advice platforms – or robo-advisors – are websites on which you log in, answer some questions about your financial situation, objectives and priorities. Then, on payment of the fee, the system uses algorithms to give you advice on how and where to invest.
The upside to these websites is that they are relatively easy to use and offer tools to build and manage a diversified investment portfolio.2 To see how your investment is doing and manage it accordingly, all you have to do is log on to the website and click to the right page. With the machines doing the calculations, this can cost a lot less than the services of a human advisor.
With those advantages, it may seem like we are in the midst of a revolution in the investment advice sector. In fact, 2014 appeared to be the breakthrough year for robo-advisors, as each quarter saw new websites raise increasingly larger sums of money.3 By the end of January this year, the largest of these, Wealthfront, raised USD 130 million.
Hasta la revolución?
Not bad; yet this is actually miniscule when you compare it with the big players, who spend more than double that figure on marketing alone.4 Collectively, robo-advisors managed less than USD 20 billion in assets at the end of 2014;5 whereas, by the end of June this year, total retirement assets in the US were up to USD 24 trillion. So if a revolution is rally on the cards, it hasn’t happened yet.
Of course that doesn’t mean it never will – one market analyst6 forecasts that robo-advisors will manage USD 300 million by the end of 2016 and USD 2.2 trillion in the US by 2020.7 One other sign of a product making an impact is when the big players buy the smaller ones to use their technology – in some cases, this has already happened.8
Meeting investors’ needs
Nevertheless, there is a danger that investors use these websites as a replacement for other investment strategies. Somewhere up to 94% of the difference in portfolio performance is driven by asset allocation.9 That means looking at which kind of asset to own (the proportion of stocks, bonds, cash etc.), as opposed to stock picking (whether to own shares in particular companies, when to sell them to maximise returns). There are many people in the investment sector who do not focus on asset allocation10 – thus not tracking that 94%. As robo-advisors offer advice on the premise that investors want to manage their own portfolio, they merely continue this misallocation of resources and could even be driven by conflicted interests.
Robo-advisors then recommend portfolios using little basic knowledge of their situation: some only ask four questions to determine risk tolerance and financial objectives.11 Consequently they have no idea why you’re investing and what your priorities are. Financial planning is something which is constant – it has to adapt to your life, so your plans and needs may change overnight; yet you’ve already answered the four questions.
Not only do investors’ lives change but the markets move too – and for many different reasons. Many robo-advisors use modern portfolio theory12 – i.e. attempting to maximize return against a given amount of risk. The problem is that they define risk as volatility, which in reality is just one element of risk and doesn’t show the whole picture. For example, private equities show little volatility because their prices are only published occasionally – in between reporting periods, who knows what is happening to the company.
As well as volatility, modern portfolio theory also relies on historical returns. Whilst a retrospective look can help us understand the future, it can by no means forecast it. After all, economic environments change all the time: for example, central bank interest rates may go up, certain sectors may bubble or nosedive – none of these can be predicted accurately.
Also, the danger with a retrospective view is the tendency for investors to act emotionally. For example, if everyone else is selling, an investor may feel the pressure to do so when it could be better to hold on. Similarly, if a particular investment is showing signs of peaking, people may be inclined to hold onto it because it has done so well to date, whereas it may be the perfect time to sell.
It may come as no surprise that, as someone who these websites are attempting to replace, I don’t expect robo-advisor websites to dominate the sector in the near future.
However, I try to take a neutral approach to new market developments and I take pride in the fact that I’m open to new technologies. The thing about robo-advisors, though, is that the technology isn’t new. The platforms may be sleeker, look hyper-sophisticated and be more user-friendly nowadays but they are merely a repackaging of old unexciting software based on stock-picking. Essentially they are piggy-backing a failed approach to investment. I’m surprised there isn’t anything more sophisticated available which offers more added value to investors, at which we can all say ‘wow’.
To me, investment advice isn’t like booking a flight, ordering a book or other things we tend to do online nowadays. It is a service which is tailored to the individual, depending on every aspect of that person’s financial profile. Not only that, to deliver the best service the advisor needs to get to know the client in order to spot opportunities which may fit into the client’s ever-changing goals and priorities. That’s the added value a human advisor can offer, which a software programme cannot.

Footnotes:
1 http://www.cnbc.com/2015/10/19/is-the-future-for-robo-advisors-bright-or-a-bust.html
2 ibid
3 http://techcrunch.com/2015/01/27/will-2015-see-the-death-of-the-robo-advisors/
4 http://www.ft.com/intl/cms/s/0/8832a6d4-5b05-11e5-a28b-50226830d644.html#axzz3sNa2Dhr3
5 Corporate Insight
6 A.T. Kearney http://www.bloomberg.com/news/articles/2015-11-06/a-money-managing-robot-is-about-to-join-bofa-s-thundering-herd
7 http://www.advisoryhq.com/articles/best-robo-advisors-comparison-reviews-ranking/
8 http://fortune.com/2015/08/26/blackrock-robo-advisor-acquisition/
9 https://blogs.cfainstitute.org/investor/2012/02/16/setting-the-record-straight-on-asset-allocation/
10 http://info.financialexpress.net/feinsight/how-to-judge-your-multi-asset-fund
11 http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/09/30/3-reasons-why-robo-advisors-may-not-be-for-you
12 http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/09/30/3-reasons-why-robo-advisors-may-not-be-for-you


Update January 1, 2016

Uruguay: an example for Thailand?

As the Thai government pours money into alternative energy, an encouraging example is emerging from an unlikely place: South America.
Back in June 2015, Thailand’s Ministry of Energy embarked on plans to greatly reduce the country’s reliance on imported fuels. It implemented the Alternative Energy Development Plan (AEDP), with the aim of a 170% increase in alternative energy capacity by 2035.1
A quick walk through the streets of Bangkok during rush hour makes that plan look ridiculously ambitious; yet there is an impressive example some 17,000 km away, in Montevideo.
Uruguayan
turnaround
In 2000, oil was Uruguay’s biggest import – representing 27% of the country’s total. That number one rank now belongs to wind turbines. Ramón Méndez, Uruguay’s head of climate change policy, claims that 94.5% of the country’s electricity today comes from renewables.2
According to Méndez, Uruguay’s success has come through clear decision-making, a supportive regulatory environment and a strong partnership between the public and private sectors. In other words something that, with political will, practically any country can replicate.3
“What we’ve learned is that renewables is just a financial business,” Méndez says. “The construction and maintenance costs are low, so as long as you give investors a secure environment, it is very attractive.”4
This shift has kick-started major investment in renewable energy and liquid gas in Uruguay. Over the last five years such investment has risen sharply to USD 7 bn (THB 252 bn) which represents 15% of the country’s annual GDP.5 Consequently, this nation of just 3.4 million people is a pioneer amongst Latin American countries with five times the average investment rate in the region and three times the global share6 recommended by climate economist Nicholas Stern.7
One of the reasons for such high levels of investment in renewables is that the state utility company guarantees a fixed price for wind energy for 20 years. Maintenance costs in wind farms are low and stable, meaning that a profit is guaranteed. Consequently, there’s huge demand from foreign companies for windfarm contracts. This is pushing down bids and has cut electricity generation costs by over 30% since 2012.8
Along with wind power, a developed hydropower industry, as well as an increased biomass and solar energy sectors, renewables today make up 55% of Uruguay’s total energy mix. In fact mix is the critical word here: whilst other small countries such as Paraguay, Bhutan and Lesotho rely heavily on hydropower and Iceland is geared towards geothermal energy, Uruguay’s renewable energy sources are more varied. This makes the country less vulnerable to changes in climate.
Is this achievable in Thailand?
That 55% figure includes transport fuel and compares incredibly well with the global average of 12%.9 Thailand’s latest energy consumption figures (2013) are below even that: renewables make up just 11.3% of the country’s overall energy consumption. The AEDP targets renewables to make up 25% of the country’s total consumption by 2021.10
Whether this is achievable depends on how realistic the ministry’s calculations are in the first place. If they are, the proposals need to be implemented consistently. If that happens, then why not? Uruguay’s example shows that success is not reliant on great technological innovation – nuclear power isn’t used in the South American country’s energy mix and no new hydroelectric power has been added in over twenty years, for example.11
One great asset which Thailand has, of course, is the sun. In 2014, 17% of the country’s renewable energy came from solar power. The AEDP aims to raise this to 30%, as well as replicating Uruguay’s guaranteed price example using a feed-in tariff programme, encouraging new companies as well as existing suppliers.12
In August 2015 Bangkok-based Superblock opened a mega-solar power plant in Northern Thailand and oil retailer Bangchak Petroleum has also developed its solar power capabilities. Chinese and Japanese companies are also investing: Trina Solar is constructing a solar panel and cell production plant in Rayong and Yingli Green Energy Holdings has announced plans to do business in the whole range of solar power business. Meanwhile Japanese firm Nippon Steel & Sumikin Bussan has constructed a mega-solar plant in Ayutthaya.13
This may be good news but it’s also worrying that headlines regarding renewables in Thailand have been dominated by solar power alone. Uruguay’s example shows a healthy mix and it was therefore encouraging to see that GE Renewable Energy announced in early December 2015 that it has signed a contract to supply wind turbines in northern Thailand. That alone will generate enough energy to power around 36,000 homes for a year.14
Putting all this together, it looks like Thailand is making important steps towards following Uruguay’s example. However, 20 years is a long road – a lot can happen in any country during that time and history has shown us that Thailand is certainly no exception.
Montevideo’s case at least provides an example of how energy generation can be cheap for consumers, profitable to corporations, whilst ensuring a sustainable– in both senses of the word – future for renewable energy.

Footnotes:
1 International Energy Agency
2 http://www.theguardian.com/environment/2015/dec/03/uruguay-makes-dramatic-shift-to-nearly-95-clean-energy
3 ibid
4 ibid
5 ibid
6 http://www.theguardian.com/environment/2015/dec/03/uruguay-makes-dramatic-shift-to-nearly-95-clean-energy
7 Stern, Nicholas The Global Deal: Climate Change and the Creation of a New Era of Progress and Prosperity, Public Affairs US (2009)
8 http://www.theguardian.com/environment/2015/dec/03/uruguay-makes-dramatic-shift-to-nearly-95-clean-energy
9 ibid
10 Thai Ministry of Energy, July 2015
11 http://www.theguardian.com/environment/2015/dec/03/uruguay-makes-dramatic-shift-to-nearly-95-clean-energy
12 http://asia.nikkei.com/Business/Trends/Thailand-becoming-a-mega-solar-power
13 ibid
14 http://www.sunwindenergy.com/wind-energy-press-releases/ge-renewable-energy-signs-60-mw-wind-deal-thailand

Please Note: While every effort has been made to ensure that the information contained herein is correct, MBMG Group cannot be held responsible for any errors that may occur. The views of the contributors may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.
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