While the world’s attention was fixed on the terror in Mumbai, a potentially much graver threat to global prosperity was unfolding in Thailand, where the nation’s lengthy constitutional crisis reached its endgame. The occupation last week of Bangkok’s airports by armed protesters effectively severed the country from the rest of the world, endangering not just Thailand's economy, but America’s, as well.
Bangkok is the nexus of Southeast Asia, and Thailand is one of the world’s largest makers of computer components. The longer the airports were closed—passenger flights won’t resume until December 15—the greater the chance the worldwide manufacture of computers would come to a screeching halt less than a month before Christmas, possibly triggering another global markets crash. As of today, the protests have ended and the siege has lifted, but Thailand’s recovery will read CANCELED for years to come.
While India frets about the long-term damage (if any) to its economy in the wake of the attacks, PAD was able to wreck Thailand’s in less than a week.
Supporters of the Bangkok establishment-linked People’s Alliance for Democracy (PAD) had braced for a “fight to the death” to overthrow the democratically elected government of Prime Minister Somchai Wongsawat, the brother-in-law of former prime minister Thaksin Shinawatra, who was ousted by the army in a 2006 coup. Armageddon was postponed Tuesday by Thailand’s highest court, which banned the prime minister from politics and disbanded his ruling party after it was found guilty of electoral fraud. PAD protesters had occupied his offices since August, but it wasn’t until they seized both Suvarnabhumi International—Bangkok’s gleaming passenger hub—and its domestic airport that PAD was able to wrap its hands around the country’s neck and squeeze.
While India frets about the long-term damage (if any) to its economy in the wake of the attacks, PAD was able to wreck Thailand’s in less than a week. If nothing else, the shutdown was a catastrophe for Thailand’s tourism industry, which now expects losses of $4.2 billion this year. An estimated 300,000 foreigners are still trapped inside the country, and 2 million others are busy canceling plans to visit. The number of visitors next year is expected to fall by half. Thailand is also one of the world’s largest exporters of rice, sugar, and flowers—including orchids, which are wilting on the stems at a rate of more than $2 million in losses each day. Add it all up, and GDP growth is expected to fall from 5 percent this year to less than 1 percent in 2009, the lowest in a decade.
The full repercussions have yet to be felt. Bangkok’s ambitions to be the business and manufacturing hub of the region may have suffered a fatal blow as multinationals pull up stakes or look elsewhere for a more reliable base of operations. The triple blow to Thailand’s tourism, manufacturing, and export industries might ultimately reverse two decades of economic gains, leading to further instability in the region—all because the airports were closed.
Most troubling of all was the swiftly compounding disruption to global commerce. Airliners carry $3 trillion in world trade annually, more than a third of all trade by value. Nearly all valuable, lightweight goods like electronics or perishables (like orchids) now travel by air. Hubs like Suvarnabhumi have become nodes in a physical Internet of cities and supply chains. And unlike the actual Internet, it is exceedingly difficult to route air traffic around disruptions as severe as the grounding of an entire nation. Worse, Suvarnabhumi is the biggest such node in Southeast Asia and one of the busiest in the world, handling 100,000 passengers and 3 percent of all global cargo each day. What makes this especially worrisome is Thailand’s critical role in the computing industry.
The country’s embrace of low-cost electronics manufacturing helped it recover from the Asian financial crisis a decade ago. Components made in Thailand subsequently made their way into everything from the iPod to Google’s all-knowing servers. Fujitsu, Seagate, Philips, and LG employ 200,000 Thais in their factories there, counting on Bangkok’s aerial connectivity to keep their customers’ just-in-time assembly lines humming in China, Taiwan, and Japan. To keep costs down, manufacturers like Dell, HP, and Lenovo rarely keep more than a few days’ inventory of spare parts on hand. The longer the grounding of Bangkok lasted, the greater the chance they would run out of the disk drives and semiconductors made in Thailand. Once that happened, global assembly lines would stop, the losses would mount, and the entire industry would begin convulsing. Electronics firms there are losing 1 billion Thai baht ($28.5 million) a day while they wait for the airports to fully reopen, and 30 factories have closed at least temporarily.
The worst-case scenario was a manufacturing freeze on par with the one in the credit markets after Lehman Brothers’ collapse in September, leading to huge losses, a plunge in stock prices, and quite possibly a crash in technology-heavy indices. Such shocks are not unheard of—a 1999 earthquake in Taiwan shut down its semiconductor factories for a week, triggering steep declines in the stock prices of Dell, HP, and Apple. The closing of American airspace after 9/11 caused major operational disruptions at Intel, Cisco, and IBM. That lasted only four days. The standoff at Suvarnabhumi has lasted more than a week, although cargo planes have at last been cleared to land.
The world appears to have dodged a bullet in Thailand, but its crisis sends a clear and trenchant message at a time when the future of air travel and globalization are both in doubt: Airports are the most critical pieces of infrastructure for any nation hoping to compete in a just-in-time world, and they must be protected and cultivated as such. To treat them otherwise will be at their own economic peril. And at ours.
Greg Lindsay is a contributing writer to Fast Company magazine. John D. Kasarda is director of The Kenan Institute of Private Enterprise at the University of North Carolina, and a founding trustee of the Kenan Institute Asia in Bangkok. They are the authors of the forthcoming Aerotropolis , to be published by Farrar, Straus & Giroux.