Yingluck Bets on Army Calm as Thai Strains Rise: Southeast Asia

As Thailand nears a showdown over the fate of former Prime Minister Thaksin Shinawatra, the exiled tycoon’s sister is banking on the army’s neutrality to avoid a repeat of 2008 protests that led to the ouster of a government.

Prime Minister Yingluck Shinawatra in an interview yesterday asserted her party’s parliamentary majority in backing moves to consider an amnesty for Thaksin, who was deposed in a 2006 coup and has lived overseas since fleeing a jail sentence in 2008. His opponents are mobilizing outside Parliament to block lawmakers from taking measures that would exonerate him.

“The army and the establishment are the ultimate arbiters,” said Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok. “Thaksin’s going to push - - what does the establishment do, army do? So far there has been some accommodation, but now it’s being tested.”

Rising tensions threaten to undermine domestic spending as Europe’s debt crisis and slowing growth in China damp demand for cars and electronics made in Southeast Asia’s second-largest economy. Thai exports unexpectedly fell in April, the fifth decline in six months, even after Honda Motor Co. and Western Digital Corp. (WDC) resumed output at factories shuttered by last year’s floods.

“If the politics get a little bit messy or unstable again, that will be quite dangerous for the Thai economy,” said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG. “You need very strong domestic demand in order to help support and pick up where exports leave off.”

Stocks Slide

Thailand’s benchmark SET Index (SET) fell 2.3 percent today, the biggest drop since Oct. 20, and has slumped 9.2 percent over the past month. The baht has declined 3.7 percent in that time, in line with Asia’s most-traded currencies.

Executives attending the World Economic Forum meetings in Bangkok this week along with Myanmar opposition leader Aung San Suu Kyi and Indonesian President Susilo Bambang Yudhoyono dismissed the long-term impact of Thailand’s political unrest. More than 100 people have died in street demonstrations since the 2006 coup.

“We invest for 20, 30 years,” said Gerard Mestrallet, chairman and chief executive officer of Courbevoie, France-based GDF Suez SA (GSZ), Europe’s biggest utility by market value. “The short-term political problems are not the ones we deal with. So we are confident in the future.”

Street Protest

About 2,000 protesters from the People’s Alliance for Democracy, whose yellow-shirted members helped oust two pro-Thaksin governments, gathered outside Parliament yesterday. Lawmakers are considering four draft bills that may wipe the slate clean on political charges since the 2006 coup, all of which would provide an amnesty to Thaksin.

Police intervened in Parliament two days ago after lawmakers from the opposition Democrat party tried to forcibly remove House Speaker Somsak Kiatsuranont, a member of Yingluck’s party who called for a debate on the draft laws.

Protesters blocked roads today before some ministers arrived, Thai PBS television reported. Information minister Anudit Nakorntab, who was already inside the Parliament building, was shown climbing through a gap in a steel fence and escaping on foot to avoid demonstrators. The session was postponed indefinitely because of the protest, Somsak said.

‘Tensions Heightened’

“We can’t deny that the political situation will affect the economy,” Finance Minister Kittiratt Na-Ranong said today. “With political tensions heightened, what I can do is try to maintain economic stability, including prices, foreign exchange and interest rates, to make the economy move forward.”

Former Prime Minister Abhisit Vejjajiva, who leads the Democrat party, said the draft bills were designed to benefit Thaksin, who stands to recover the 46 billion baht ($1.4 billion) of his family’s fortune seized by the courts in 2010. Two weeks after the ruling, his supporters started protests against Abhisit that shut down Bangkok’s commercial center and ended in a military crackdown and arson attacks.

The government “is trying to cover up the 46 billion baht and ignore the fact that this draft is related to financial issues,” Abhisit said on Blue Sky Channel, a broadcaster backed by his party.

Yingluck told Bloomberg yesterday that reconciliation was an “important issue” that would allow the country to move forward and increase political stability. She denied the moves were specifically about Thaksin and said her party received a “clear mandate” in last July’s elections to rectify injustices since the coup.

“Of course the reconciliation might not satisfy for all,” Yingluck said. “Reconciliation must be accepted by the majority of the people.”

Election Fraud

In 2008, the army ignored requests from a pro-Thaksin government to disperse Thaksin’s opponents after they took over the prime minister’s office and airports. They only dispersed after a court disbanded the ruling party for election fraud, allowing smaller parties to switch sides and support Abhisit in a parliamentary vote.

Yingluck, 44, has taken steps to appease the military and palace since taking office, continuing a crackdown on websites that disrespect the monarchy, meeting with Privy Council Chief Prem Tinsulanonda and donating family land to King Bhumibol Adulyadej, 84, who took the throne in 1946 and serves as Thailand’s head of state. Military leaders cited disrespect for the monarchy in justifying Thaksin’s overthrow in 2006.

“We work very closely and with respect for each other,” Yingluck said of her ties to the army. “Now the situation is different again because people learn enough from after the coup that it cannot move Thailand to anywhere.”

Coup Leader

Sonthi Boonyaratglin, who led the 2006 coup and is now a lawmaker, has proposed one of the bills that would allow Thaksin to avoid a two-year jail sentence for helping his wife buy land from the government that has kept him from returning to Thailand since 2008. Thaksin, who founded the country’s biggest mobile-phone company and served as prime minister from 2001 to 2006, has denied any wrongdoing.

An amnesty for Thaksin “will destroy the country’s legal system,” said Jirawat Naksawat, 33, who helped occupy the airports in 2008 and joined the anti-Thaksin protest yesterday with his wife and 18-month-old daughter after driving from his home near the Thai-Laos border more than 600 kilometers (373 miles) from Bangkok. “If the leaders ask us to enter Parliament, I will join on the front lines.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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