Scam Centers Behind Thailand's Strangely Strong Baht?

(MENAFN- Asia Times) Thailand's baht was the second-best performer in 2025, rising nearly 10% against the US dollar, a surprising appreciation that is out of step with the kingdom's underlying financial and economic fundamentals.

Observers and analysts have offered various explanations. The leading theory suggests that gold's record performance in 2025, up some 67% year over year, may be the cause, since Thailand is a major gold trading center where transactions are often denominated in baht. The theory holds that gold buyers purchase baht, driving up the currency's value in the process.

The Bank of Thailand and Ministry of Finance have explicitly identified baht strength as a problem requiring a solution. To discourage inflows, the BoT this week instructed banks to declare any foreign currency transactions above US$200,000. MoF, meanwhile, is considering a new tax for online gold transactions.

Of course, a strong currency isn't always problematic. Strength can be expected when an economy is performing well, as investors enter the market and buy local currency to pursue local investment opportunities. Higher global demand for the local currency, as a rule, increases its value.

But the Thai economy is not performing well, and not by a long shot. GDP growth is anemic, slowing to 1.8% year over year in the third quarter, and has been for years. Interest rates are low and thus unattractive to international investors chasing yields. Both household and public debt are worryingly high.

The pain caused by an overvalued baht is widespread. A strong baht makes imports cheaper, weakening relative demand for locally produced competing products. This lower domestic demand weakens the local economy.

A strong baht also hurts Thailand's millions of farmers. Agricultural products often have low profit margins, and in a highly competitive global environment, an overvalued currency can mean the difference between profit and loss. This also applies to Thailand's already beleaguered export-oriented manufacturers.

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Moreover, the crucial tourism sector is also suffering from the strong baht, which drives up the cost of lodging, transportation, goods and dining for foreign currency-spending visitors. Arrival numbers have fallen nearly 10% from last year as tourists opt to visit regional competitors. Visitor numbers are up nearly 20% this year in Vietnam, and almost 15% in Malaysia, for instance.

All in all, the baht is not surging because the Thai economy is strong. A strong currency in such a weak economy thus calls for deeper scrutiny, as the harms and distortions it may be causing are broad and deep. So why is the baht so overvalued?

The answer may lie in recent, seeming unrelated headlines. Scam centers in neighboring Cambodia and Myanmar -known for stealing tens of billions of dollars annually from people worldwide, including Thai citizens -have recently become a hot-button political issue in Thailand amid allegations of high-level political involvement that caused a deputy finance minister's resignation.

Experienced investigative journalists operating from Singapore have published detailed reports linking Cambodian scam center revenues to capital inflows and money laundering in Thailand. The reports claim that controlling stakes in a major Thai energy company and a major Thai finance company were illegally purchased with these massive flows of funds. They have also identified major Thai banks as conduits for the ill-gotten funds.

The reporters, Bradley Hope and Tom Wright, formerly of the Wall Street Journal, are the same journalists who detailed the extraordinary 1MDB scandal in Malaysia in their book,“Billion Dollar Whale.” The volume is a sobering look at the shocking ease with which international criminals can move billions of dollars of stolen funds around the world and is highly relevant to Thailand's current scam center predicament.

Wright and Hope have examined the money flows from just a modest slice of a much, much larger pie. Even then, the figures they detail amount to billions of illicit dollars flowing into Thailand. The stolen assets are usually originally held by scam gangsters in the form of cryptocurrency, which must be converted (laundered) into a fiat currency, such as the baht, in order to be spent globally.

If Wright and Hope's reporting is correct, this has driven enormous purchases of Thai baht, which could explain the currency's unusual appreciation. How much of the baht's inflated value is due to these illicit flows? That's difficult to calculate exactly, given the scarcity of reliable public data.

“But it's certainly something, and this aspect deserves to be in the conversations and analyses of policymakers in the region,” says renowned Australian economist and finance expert Sean Turnell, currently a senior fellow in the Southeast Asia Program at Australia's Lowy Institute think tank.

Moreover, the scam gangsters -typically Chinese organized crime groups and their local enablers -are known to be well networked with each other. Successful practices have spread quickly among them. A process that laundered vast amounts of cryptocurrency from Cambodia into Thai baht has likely been replicated by other gangsters in Cambodia, as well as those operating in nearby Myanmar and Laos.

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It's possible that the scale of inflows to Thailand is much larger than even Wright and Hope might have imagined. So, are scammers and their criminal brethren responsible for the overvalued baht and the damage it is doing to the underlying Thai economy?

Of course, for these illicit flows to truly affect the baht's value, the funds must stay in baht. If they are converted to baht and then immediately converted into other currencies, the baht would be sold almost as quickly as it is bought. But as Wright and Hope appear to have shown, a lot of that money is indeed staying in Thailand, invested in Thai companies and flowing from Thai bank accounts into real estate and other purchases.

A final driver of the baht's strength could be that it is perceived as a regional“safe haven.” But with such a substantial proportion of mainland Southeast Asia's fund flows coming from the vast scam industry, being perceived as a“safe haven” by organized criminals is hardly the vote of confidence that Thailand and its financial system want or need.

The vast and illicit money flows into Thai baht raises uncomfortable questions for Thai politicians, bureaucrats, financiers and law enforcement authorities. But to protect the integrity of the Thai banking and political system, these questions need answers. The well-being of millions of ordinary Thais depends on it.

Larry Dohrs is a retired economist and observer of Southeast Asian affairs.

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