CP Group founder and chairman Dhanin Chearavanont in a file photo. Image: Twitter

BANGKOK – On a Covid-19 darkened alley, a 7-Eleven convenience store burns brightly in the night.

Thailand’s coronavirus lockdown has shuttered all variety of businesses, but 7-Eleven, Family Mart and other modern franchised stores controlled and operated by major Thai conglomerates were allowed to keep the lights on as essential services, significantly while many traditional small entrepreneur-run shops were forced to go dark.

7-Eleven in Thailand is owned by the Charoen Pokphand (CP) Group, the nation’s leading conglomerate founded by the Chearavanont family, the kingdom’s wealthiest business clan. Family Mart is run by Thai retail giant the Central Group. Both, by all accounts, did brisk business while others were forcibly locked down for health reasons.  

As Thailand loosens its lockdown, it’s not clear how many of its small and medium enterprises (SMEs) will ever re-emerge from the viral devastation. Thailand’s top “five family” conglomerates, on the other hand, are cashed up to seek opportunities in crisis across the nation’s now cash-starved and indebted corporate landscape, analysts say.

Those “five family” firms, namely the CP Group, ThaiBev, Central Group, King Power Group and Boonrawd, among others, backed ex-coup maker, now elected Prime Minister Prayut Chan-ocha’s 2019 election campaign, support seen as payback for regulatory favors and concessions granted during his 2014-19 coup regime.

Prayut has won certain plaudits for his containment of the kingdom’s viral outbreak, which has been comparatively mild with just 2,989 cases and 55 deaths. The verdict on his pandemic management, however, will be largely decided on how he steers recovery in what is expected to be one of Asia’s worst pandemic-hit economies.

Prime Minister Prayut Chan-ocha is flanked by CP Group chairman Dhanin Chearavanont (2nd R) and ThaiBev founder billionaire Charoen Sirivadhanabhakdi (L) at Government House in a file photo. Photo: AFP Forum/Chanat Katanyu

Enter the “five families” into the picture. In a leaked letter, Prayut called on Thailand’s 20 richest billionaire tycoons for proposals and plans to revive the economy and help the needy amid reports at least seven million Thais have already become unemployed. “I want all of you to do more,” the former army commander wrote.

Critics have argued his government should do more as Thailand’s Covid-19 relief measures already appear to be missing the mark, with as many as 23 million desperate Thais applying for “Nobody Left Behind” branded cash handouts, a program policy-makers initially designed for only four million or so of the kingdom’s lowest earners.

That criticism could mount as Prayut looks to big, not small, companies to restore the virus-hit economy back to health. It’s a potentially perilous path as the premier’s coup era reliance on the “five families” saw economic growth stagnate and poverty rise, from 7.2% in 2015 to 9.9% in 2018, while their holdings, enterprises and profits rapidly grew.  

Read: Thailand’s ‘five families’ prop and imperil Prayut

That’s, of course, not how “five family” patriarchs see it. CP Group founder and senior chairman Dhanin Chearvanont responded to Prayut’s letter by highlighting 700 million baht (US$23 million) in “donations” his company has made to its own Covid-19 programs, including the establishment of a surgical face mask factory.

Dhanin said his CP Group has more Covid-19 alleviation in the pipeline, including a scheme to boost farmer incomes, an online learning project, and plans to develop virus test kits, research and medicine. He said the group has retained all of its staff, including at 7-Eleven convenience stores, and created more new jobs in March.

Central Group said it had earmarked 2.3 billion baht to support economy, including funds to buy farmer and SME goods for sale in its various stores. Other “five family” business patriarchs did not make public their replies to Prayut’s call for help. None of the “big five” companies responded to Asia Times’ emailed request for comment for this article.  

Central Group chief executive officer Tos Chirathivat next to a model of the Central Embassy shopping mall. Photo: Facebook

Some analysts saw the government’s surprise lockdown ban on booze sales, initially scheduled to run through May 31 but inexplicably lifted on May 2, as a not-so-delicate strong-arm message to liquor and beer duopolist ThaiBev to dedicate more future resources to the local economy and less to a recent asset-buying spree abroad.  

But striking a corporate balance between helping and profiting will require delicate handling and deft messaging in what is already one of Asia’s most unequal societies, a wealth gap that will inevitably widen with Covid-caused SME bankrupticies and unemployment. SMEs usually employ some 60% of Thailand’s 39 million workforce.

An unknown number of the kingdom’s three million SMEs are now teetering on the brink of bankrutcy, business and financial analysts estimate. Fitch Ratings said in a report that 62% of Thai companies had “low” rating headroom, meaning they were perceived by the ratings agency as overleveraged, before the virus crisis struck.   

Analysts say it is difficult to predict how far Thailand’s economy will fall, particularly without any big state bailouts of companies and markets in sight. Last month, the Bank of Thailand caught many analysts off-guard by predicting a deeper -5.3% plunge in this year’s GDP than most big investment banks were projecting at the time.  

Read: Fever pitch call for change in viral Thailand

Private analysts have focused on the pandemic’s more measurable impact on tourism, which usually contributes 20% of GDP but has collapsed with Covid-19 closed borders and shuttered hotels. Fewer have predicted how the crisis could infect the more opaque property sector, which was showing signs of ill-health even before the plague.

A hotel and resort building spree, fuelled by rosy projections of ever-rising tourist arrivals, largely from China, now looks particularly vulnerable in sight of a looming global recession and already shifting perceptions about the safety and desirability of globe-trotting leisure travel, a now well-established source of Covid-19’s lethal spread.

It’s not transparently clear which Thai banks are most exposed to the suddenly beleaguered hotel segment. What is clear is that Krung Thai, Thai Military and Kasikornbank all have big exposure to SMEs, hundreds of thousands of which are at risk of collapse after weeks without revenues and scant prospects for a quick return to business-as-usual.

A white-faced mannequin at Bangkok’s deserted Siam Square shopping area on March 18, 2020. Photo: AFP

Fitch Ratings notes that bank bad loans were on a “gradual negative trend” for many years up to 2020, and that the industry now faces an “escalation” of non-performing loans (NPLs) with the repayment capacity of weaker borrowers, namely SMEs, “particularly vulnerable” to a prolonged economic downturn.

Those looming NPLs, some investment analysts suggest, may have motivated Kasikorn Bank’s long-time, founding family chairman Banthoon Lamsam’s recent decision to retire, notably before the inevitably messy business of seizing collateral assets from virus crisis-hit SME borrowers and reselling them to liquidity-rich big corporates.

To be sure, Thailand’s “five families” and other billionaire clans have also taken Covid-19 hits, measured in declines disclosed in a Forbes wealth list published in early April. The CP Group’s Chearavanont family has seen their net worth dip US$2.2 billion from $29.5 billion in 2019 to $27.3 billion at present, according to Forbes.

The Chirativat clan has been harder hit due to its Central Group’s high exposure to locked down hotels, malls and resorts, falling from $21 billion in 2019 to $9.5 billion. ThaiBev’s founder Charoen Sirivadhanabhakdi has seen his wealth slip from an estimated $16.2 billion last year to $10.5 billion, according to the same Forbes rating.    

Still, they all had plenty of capital cushion. Credit Suisse, an investment bank, claimed in its global wealth report released in late 2018 that Thailand was the “most unequal” economy in the world. The report claimed that 67% percent of the nation’s wealth is held by 1% of the population in 2018, rising rapidly from 58% in 2016.

As such, the “big five” will be among the few cashed-up Thai buyers for the massive amount of distressed assets Thai banks will need to recycle on to the market, likely at fire sale prices, to maintain their own balance sheets and financial health. The “big five”, analysts note, are already among the banks’ biggest, best and most trusted customers.

One strategist at an Asia-focused private equity fund foresees opportunities for the Chirativat clan to consolidate their position in the high-end tourism sector, the segment expected to recover fastest after the pandemic, by buying financially distressed boutique properties on prime real estate that could potentially be developed into tall tower hotels.

7-Eleven convenience stores have proliferated across the kingdom, giving the CP Group a strong foothold in provincial economies. Photo: Facebook

Another analyst at a Western investment bank sees property crisis opportunities for the CP Group to extend its 7-11 convenience store push even deeper into the provinces and on prime Bangkok real estate. In March, CP Group flexed its rich capital position in a US$10.6 billion agreement to buy for Tesco Holdings retail outlets in Thailand and Malaysia.

ThaiBev, which grew super rich over the decades through cornered market booze sales, has recently moved in a big way into property development, including construction now underway for the largest mixed use development ever built in Bangkok. The company could likewise leverage the crisis to extend its ever-growing land bank, the analyst says.

Still, the “five families” will not be able to absorb the vast amount of distressed assets expected to soon come under banks’ auction blocks. That, some suggest, could open the way for Chinese buying, particularly as previously favored and open US and Australian markets close due to Covid-19 and wider eco-strategic tensions.

The CP Group is known to have top-tier political connections in Beijing and has facilitated Chinese investments and other ventures in Thailand. So, too, has ThaiBev, including in provincial property deals, according to one due diligence investigator. But any perceived as opportunistic Chinese impaired asset buying will carry risks, particularly with cries rising in the West for China to pay “reparations” for the damage and loss caused by the virus.

Thai social media is abuzz with anti-China sentiment, with many netizens blaming China for the pandemic and thereby Thailand’s economic collapse. It’s not clear that renewed waves of Chinese tourists – despite the hotel-filling, yuan-spending stimulus – would be as warmly received as previously so soon after the virus crisis.

Prayut will thus need to carefully calibrate how much he relies on the “five families”, and how much on China to revive the economy in the months and, if he survives politically, years ahead. The political opposition is already launching broadsides that the government is not doing enough for unemployed workers and capital-starved SMEs.  

Many Thais associate “big five” businesses with convenience, modernity and, indeed, even “Thainess.” Their various enterprises are woven deeply into the national fabric. But the “five families’” domination of the Thai economy will likely never have been more visibly apparent than in the consolidation to come after the plague.