Can Thai Junta Convince Investors It Knows What It's Doing?by and
Military government working on country's 20th constitution
Foreign investment slumps 78 percent as economy stagnates
Thailand is waiting for a new constitution, waiting for the restoration of democracy, waiting for the succession in its monarchy, waiting for an economic recovery and waiting for rain.
While the junta says it is taking the time and steps needed to unify the Southeast Asian country’s polarized political factions, overseas investors have voted with their feet. Applications for foreign direct investment slumped 78 percent in the first 11 months of 2015. Exports have fallen for three straight years.
“The turnoff of the coup-appointed military junta just makes it easy to write off Thailand for direct investment in the near term,” said Andrew Stotz, chief executive officer of Bangkok-based A. Stotz Investment Research and former head of Thailand research at CLSA Ltd. “The economy has never been the key focus of the junta.”
After years of street demonstrations, junta leader-turned Prime Minister Prayuth Chan-Ocha preaches unity in his weekly TV show, "Returning Happiness to the People." His long sermons range from strawberry farming to the moral responsibility of youth. Prayuth, who granted himself amnesty for overthrowing an elected government, presents himself as a reluctant leader who must save the nation from itself.
"I am a soldier," he said on Jan. 15. "I was taught to fix the nation’s problems, make sacrifices to protect our sovereignty. Sometimes I ask myself who I protect this land for, when people I protect are fighting each other."
By the administration’s own measure, the public supports him. A recent nationwide poll of 2,700 people by the National Statistical Office found the government had a 98.6 percent approval rating, according to the Bangkok Post, albeit down from a 99.3 percent figure that was reduced after being mocked on social media.
“It’s partly self-deceiving to legitimize their existence, and partly their loss of touch with reality,” said Puangthong Pawakapan, an associate professor of international relations at Chulalongkorn University in Bangkok. “The junta leaders do not see how people now are worried so much and struggling with economic hardship.”
Government spokesman Sansern Kaewkamnerd said officials were working to shore up the economy, including accelerating budget spending, pushing investment projects and launching stimulus measures for farmers and small businesses. Growth in Thailand is projected by the World Bank to slow to 2 percent this year.
“We have to ask those critics whether they’ve managed the economy before or they just criticize," Sansern said in an interview. "We should distinguish between those critics and those who work on the job.”
Most of the political turmoil and the dozen military coups since democracy was introduced in 1932 revolve around trying to create a political system that ensures the army and historical ruling elite retain a grip on how the country is run.
To that end, the junta is drafting the nation’s 20th constitution. It’s not going well.
The first draft was rejected in September by the junta’s reform council, who feared it could lead to more protests. A new committee is due to complete a second attempt in March. Prayuth has promised to hold a referendum on the charter, but said if voters reject it he may just pick another.
“Our efforts in drafting this charter are to prevent the problems we had to undergo in the past,” Prayuth said on his Jan. 8 TV show. “We want the people to live and prosper peacefully, and not remain deeply divided as politicians fight for power.”
Problem is, politicians fighting for power is the bedrock of a democracy.
“One thing that I think is missed in Thailand is about this idea of unity,” said Stotz. “The goal should not be unity, but rather creating and following a robust framework for politicians to fight it out.”
That balance has eluded Thailand for decades, producing a stop-start economy that gets derailed by politics. When the military took over in May 2014, it ended more than six months of unrest.
“The main achievement of the military was achieved within 24 hours,” said Korn Chatikavanij, a former finance minister and a member of the Democrat Party, whose supporters largely cheered the coup. “Subsequent to that they haven’t achieved much. But then I never expected much.”
Prayuth promised to hold an election in late 2015 but pushed that back because of a delay on the charter. The latest timetable calls for an election in mid-2017.
Several factors could upset that schedule. The draft charter could be rejected again. The junta could change its mind. Public protests could reignite. Or the king could die.
Discussion of the royal succession is taboo in Thailand and criticizing the monarchy is a criminal offense. King Bhumibol Adulyadej is 88 and has been in Bangkok’s Siriraj Hospital since May 2015 after a series of lung infections.
"I don’t believe Thailand will have an election until the succession is completed and the throne is stable,” said Puangthong at Chulalongkorn University. “This is the main objective of the 2006 and 2014 coups. If the king passes away -- the mourning period will be at least one year. The junta will use it to condemn any politicians demanding an election."
Meanwhile, voters on both sides sit and wait. While they may not approve of the military running the country, there’s little sign that discontent will spill onto the streets again.
"The public has not reached a tipping point,” said Ambika Ahuja, a London-based analyst with the Eurasia Group. “While the regime has done little by way of reforms or growth-positive policy delivery, the dissatisfaction isn’t enough to propel change in leadership.”
Opponents of military rule, such as a group known as the Red Shirts, may disagree. The Red Shirts backed Thaksin Shinawatra and his sister Yingluck, whose parties have won every open general election in the country since 2001. Both were ousted by coups.
While Thaksin fled abroad to avoid a a jail term for corruption, his sister faces 10 years in prison over allegations she mismanaged a rice-subsidy program. The siblings say the charges are politically motivated.
Since the coup, the junta has stepped up prosecutions of people accused of disrespecting the monarchy. Rights groups say the law can be used to target political opponents, with cases now heard in military courts that have meted out record sentences.
Than Rittiphan, 23, a student of international relations at Ramkamhaeng University in Bangkok and a member of the New Democracy Movement, which opposes military rule, says his friends have been arrested, harassed, beaten and charged with various crimes -- including insulting the king’s dog.
The new constitution will ensure that “the military can step in and try to interfere with politics any time they want,” he said. "They’re going to try to make sure that the old power like Thaksin or Yingluck or the Red Shirts will not get into power."
Still, China’s slowdown and an El Nino-induced drought have ratcheted up economic hardship, especially for the poor.
Rice prices have slumped due to bloated stockpiles, hurting the rice-growing northeast, the powerbase of the Shinawatras. In the south, home to many of the Shinawatra’s opponents, the junta has fallen back on the ousted government’s playbook and begun buying rubber directly from farmers to boost prices.
Farm subsidies have been restarted, and Prayuth drafted in former Thaksin ally Somkid Jatusripitak as deputy prime minister and economic chief.
For much of Thailand, business goes on, sometimes despite government measures. The junta promised to clear Bangkok’s streets of illegal vendors, but many food stalls are still there. Infrastructure projects plod on, and the popularity of Thailand among Chinese tourists following the 2012 hit film “Lost in Thailand,” has sent visitor numbers to a record. That’s even as exports to China fell 9.5 percent on year in December.
“Despite such a challenging economic environment in Thailand, you might be surprised to see that there are quality stocks delivering strong earnings growth,” said Soo Hai Lim, a Hong Kong-based money manager at Baring Asset Management Ltd., noting opportunities in tourism and healthcare.
That may not be enough to offset concern that Thailand is falling behind its neighbors.
“If you were a foreign investor, you look at the demography, you look at the educational standard, you look at the natural resources, you look at the size of the domestic market, do you go to Vietnam or do you come here?" Korn said. “There are so many challenges to our competitiveness. Unless we have a government that appreciates this soon we’re going to be leaving it too late."
Opponents of the coup say only a return to democracy will bring back investment and return the focus to the economy.
“Wait, wait, wait,” said Than, the student activist. “This country is not a toilet that you can put up a sign saying ‘under construction.’ You cannot wait for democracy.”