Forbes
Tina Wang
04.13.09
Thailand's economic fundamentals aren't bad. But that's little comfort amid the ongoing political chaos.
HONG KONG -- Economically speaking, Thailand could have been ASEAN's strongest link. It entered the global economic crisis with the least vulnerability: it isn't as addicted to leverage, exposed to the global trade slump, or too poor for a stimulus splurge. Instead, it descended into chaos, as leaders like Chinese Premier Wen Jiabao found themselves fleeing by helicopter from rooftops rather than working on healing battered economies this weekend, after mobs stormed the ASEAN summit in Thailand.
Escalating clashes between protestors and government forces continued to rattle foreign investors on Monday, as the country faces recession and an exodus of tourists. Some observers think the tolerance of the urban middle class for political chaos will shrink as the economic toll mounts and jobs weigh in the balance. But the military, police and Thai society remain too divided for any political stability to last. Meanwhile, the man at the center of it all, former prime minister Thaksin Shinawatra, is waiting on the sidelines to see if, or when, the four-month old administration will topple so that he can return.
"If the government cracks down more violently, the middle class in the city will agree, said Kitti Prasirtsuk, an associate dean on the political science faculty at Thammasat University, Bangkok. "That is my feeling. The middle class is now more and more impatient with the Reds' violence."
The hundred thousand protestors on the streets this past weekend and on Monday are "red shirts," or pro-Thaksin groups who want current Prime Minister Abhisit Vejjajiva to step down and another round of elections to be held. "Yellow shirts," or anti-Thaksin groups occupied government offices and the international airport last year, forcing out previous pro-Thaksin administrations.
With the country's transportation disrupted, foreign companies are now wondering how exports of electronics and pick-up trucks will get out, and will likely reduce orders until they're more assured of delivery. Then again, political instability should be no surprise for them, said one major investment banking analyst, who said there is no clear sign yet that foreign investors are abandoning their investments. "Nobody hoped for a quick recovery in the political situation. It's not good news, but it's not shattering news," he said.
Thailand has had four political turnovers and brief military rule since Thaksin, who still faces an outstanding prison term for corruption, was ousted in a peaceful coup in 2006. UBS forecasts Thailand's economy to contract by 5% this year. January exports fell 25.3%, from a year earlier. A fifth of Thai exports go to the U.S.
At the heart of the protests is not just an urban-rural or rich-poor divide but a battle of ideas -- between economic efficacy and democratic participation, Kitti said. Thaksin garners support from the poorer, rural areas in the country's north, as well as the slice of the middle class that thinks he could spawn higher economic growth and manage the country better. But a strong segment of society criticizes Thaksin and his governance for a lack of democratic integrity, Kitti said.
The military and police remain hesitant to use stronger force due to internal division. The head of the military is anti-Thaksin, though there is a pro-Thaksin group in the army, and the police is mainly pro-Thaksin. Government forces have thus far fired tear gas into the crowd and bullets above the crowd, though over 70 people have been reported injured.
Thailand's economic fundamentals aren't bad. But that's little comfort amid the ongoing political chaos.
HONG KONG -- Economically speaking, Thailand could have been ASEAN's strongest link. It entered the global economic crisis with the least vulnerability: it isn't as addicted to leverage, exposed to the global trade slump, or too poor for a stimulus splurge. Instead, it descended into chaos, as leaders like Chinese Premier Wen Jiabao found themselves fleeing by helicopter from rooftops rather than working on healing battered economies this weekend, after mobs stormed the ASEAN summit in Thailand.
Escalating clashes between protestors and government forces continued to rattle foreign investors on Monday, as the country faces recession and an exodus of tourists. Some observers think the tolerance of the urban middle class for political chaos will shrink as the economic toll mounts and jobs weigh in the balance. But the military, police and Thai society remain too divided for any political stability to last. Meanwhile, the man at the center of it all, former prime minister Thaksin Shinawatra, is waiting on the sidelines to see if, or when, the four-month old administration will topple so that he can return.
"If the government cracks down more violently, the middle class in the city will agree, said Kitti Prasirtsuk, an associate dean on the political science faculty at Thammasat University, Bangkok. "That is my feeling. The middle class is now more and more impatient with the Reds' violence."
The hundred thousand protestors on the streets this past weekend and on Monday are "red shirts," or pro-Thaksin groups who want current Prime Minister Abhisit Vejjajiva to step down and another round of elections to be held. "Yellow shirts," or anti-Thaksin groups occupied government offices and the international airport last year, forcing out previous pro-Thaksin administrations.
With the country's transportation disrupted, foreign companies are now wondering how exports of electronics and pick-up trucks will get out, and will likely reduce orders until they're more assured of delivery. Then again, political instability should be no surprise for them, said one major investment banking analyst, who said there is no clear sign yet that foreign investors are abandoning their investments. "Nobody hoped for a quick recovery in the political situation. It's not good news, but it's not shattering news," he said.
Thailand has had four political turnovers and brief military rule since Thaksin, who still faces an outstanding prison term for corruption, was ousted in a peaceful coup in 2006. UBS forecasts Thailand's economy to contract by 5% this year. January exports fell 25.3%, from a year earlier. A fifth of Thai exports go to the U.S.
At the heart of the protests is not just an urban-rural or rich-poor divide but a battle of ideas -- between economic efficacy and democratic participation, Kitti said. Thaksin garners support from the poorer, rural areas in the country's north, as well as the slice of the middle class that thinks he could spawn higher economic growth and manage the country better. But a strong segment of society criticizes Thaksin and his governance for a lack of democratic integrity, Kitti said.
The military and police remain hesitant to use stronger force due to internal division. The head of the military is anti-Thaksin, though there is a pro-Thaksin group in the army, and the police is mainly pro-Thaksin. Government forces have thus far fired tear gas into the crowd and bullets above the crowd, though over 70 people have been reported injured.
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