Will Thailand's `Tiananmen' Derail The Go Go Economy?

Before Thailand's demonstrations turned nasty on May 17, analysts had jokingly dubbed them Asia's first yuppie revolt. Thousands of Bangkok's newly affluent--many even carrying mobile phones--were among the throngs that gathered daily for peaceful demonstrations starting on May 4. But two weeks later, after three days of the worst violence in 20 years, no one in "the land of smiles" is joking. Bangkok's smoldering government district looks like a mixture of the aftermath of Beijing's Tiananmen Square massacre and the Los Angeles riots. Streets are littered with charred hulks of fire trucks and smeared with the blood of dead and injured protesters.

Although the protests died down on May 20 at the urging of King Bhumibol Adulyadej, they will leave deep scars. Already there are signs of splits in the military. Several powerful generals have echoed the demonstrators' calls for the ouster of strongman General Suchinda Kraprayoon. And the massive participation of professional and middle-class Thais in the disturbances signals that they will no longer accept military rule quietly. "I think this is a revolution," said Amaraporn Thammakasakul, a 30-year-old Sony Corp. supervisor, as he watched a massive demonstration at Ramkhamhaeng University on May 19. "This has been building for a long time. We pay taxes, and the government uses them against us."

TOUR EXODUS. Meanwhile, what has been one of the world's hottest economies, growing at an annual average of more than 8% for the past decade, has received a severe jolt. Investors who thought Thailand's political development had kept pace with its economic advance are in deep shock. On May 19, stock prices plunged almost 10%--the maximum allowed in one day--before trading was halted. Hotels and airlines serving the travel industry report massive cancellations--threatening some $5 billion in annual revenues. Foreign bankers in Bangkok predict a sharp falloff in new projects, as the Japanese and other investors who have bankrolled the Thai economy since 1985 shift to safer climes--such as Malaysia and Indonesia. "This a major setback for investment that will linger beyond this year," says Miron Mushkat, chief Asian economist at Baring Securities (Hong Kong) Ltd.

While the government in Tokyo has kept quiet, Japanese companies are bound to get jittery. Japan's investment in Thailand had already been slowing because of the country's snarled phone lines, traffic jams, and shortage of skilled workers, which have driven wages up. But political stability, at least, had not been a big concern. Now, "investors are going to start reevaluating the investment climate in Thailand just as they did after Tiananmen," said C.H. Kwan, a senior economist at Japan's Nomura Research Institute. "Japanese investors want to diversify to frontier markets like Vietnam. This will accelerate the process."

In hindsight, it's clear the crisis has been brewing for some time. Thailand's well-to-do classes have mushroomed lately--and have grown discontented with corruption, inefficiency, and other drawbacks of military regimes. The army, however, views itself as the only institution with the efficiency and moral fiber to run the government--even though the system has, in fact, become flagrantly corrupt. Many of Thailand's frequent military coups, rather than being inspired by high ideals, have been power plays for access to kickbacks. Foreign investors complain that they routinely have to factor in an additional 5% to 6% for "commissions" on big projects.

HOOLIGAN TAUNTS. The seeds of the current turmoil were sown when Suchinda reneged on his promise to return Thailand to democracy, after toppling the elected government of former General Chatichai Choonhavan in February, 1991. Instead, his junta imposed a constitution that allowed Suchinda to install himself as Prime Minister. He further inflamed sentiment by bringing into his Cabinet certain politicians suspected of amassing huge ill-gotten fortunes under Chatichai. That move prompted a hunger strike on May 4 by Chamlong Srimuang, the charismatic governor of Bangkok--sparking demonstrations that have brought as many as 200,000 protesters into the streets. Rather than dispersing as usual at the first sign of armed soldiers, the crowds stood up to the military--despite heavy casualties and the arrest of 3,000 people, including many of the opposition leaders.

The military crackdown has been particularly brutal. Provoked by hooligans, who stormed through government buildings and tried plowing through barricades in commandeered buses, the soldiers shot fleeing demonstrators in the back and beat many more, before hauling them away. Estimates of the dead and wounded vary widely, but certainly such violence has not been seen in Thailand since 1973, when hundreds disappeared without a trace.

Reaction from Thailand's chief international backer, the U.S., has been muted so far. To protest the political violence, the U.S. suspended joint maneuvers with the Thai military that were to take place in a few days. American troops, however, will still perform so-called humanitarian activities, such as building bridges and schools, that were part of the exercise. Already, $60 million in U.S. aid had been cut off in response to the 1991 coup.

On May 20 the king--whose role is largely ceremonial--appeared on television with Suchinda and opposition leader Chamlong and urged them to work together to end the crisis. But the general's position now looks very tenuous. If he does not agree to step down, the protests might flare up again, and his fellow officers might be tempted to topple him. But whatever the short-term outcome, the Thai political game is unlikely ever to be the same again. The generals, who have dominated politics with coups and countercoups for some six decades, no longer have the field to themselves.

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