Editorial Board

Reports of Thailand's Revival Are Greatly Exaggerated

Signs of an economic rebound in Thailand don't resolve the deep structural problems that continue to afflict its politics and economy.

Let's not get ahead of ourselves.

Photographer: Nicolas Asfouri/AFP/Getty Images

Thailand may still be the best place in the world to get a nose job, even after its military coup last spring. But tentative signs of an economic rebound hardly resolve the deep structural problems that continue to afflict its politics, economy and society.

Thailand's Troubled Democracy

The Thai stock market is booming, and growth has ticked upward slightly after shrinking almost 2 percent in the first quarter. The country has retained its position as the world's No. 1 destination for medical tourism, including cosmetic surgeries.

At best, however, May's coup has only stemmed the bleeding caused by months of political turmoil. The World Bank thinks the country will remain the slowest-growing economy in Southeast Asia through 2016. High household debt levels -- more than 80 percent of gross domestic product -- will continue to depress spending. While coup leaders have put some money in citizens' pockets with millions in payments to rice and rubber farmers, household consumption is projected to grow only 1.5 percent next year. The central bank's easy-money policy has led mostly to a run-up in stock prices.

Previous military-led governments in the 1980s were able to jump-start growth through heavy state-directed investment. But today's ruling generals face a more complex challenge. It's too late for Thailand to regain low-end manufacturing jobs, which have shifted to cheaper neighbors. To move up the value chain, the country needs to invest in education, research and development, and infrastructure -- something juntas have proved no better than civilian governments at doing. Plans to spend $60 billion on transportation infrastructure during the next 10 years will help but not immediately and not enough.

Nor does the military's road map for returning power to civilians inspire confidence. Early drafts suggest that the proposed political reforms will be designed not to heal Thailand's divides, but to ensure that followers of exiled former Prime Minister Thaksin Shinawatra cannot return to power through elections. Even assuming that army-chief-turned-Prime Minister Prayuth Chan-Ocha keeps his pledge to step down by the end of 2015 -- which is far from a given -- that's hardly a recipe for long-term political stability.

Thailand cannot move forward by repressing the democratic aspirations of half its population. Doing so will undercut the legitimacy of the country's courts and regulatory agencies, as well as the parliament, which will be dominated by appointed rather than elected legislators. They will exacerbate Thailand's already appalling inequality (in which the richest 10 percent of Thais own as much as 75 percent of national wealth). Perhaps most damaging, this will remove the need for Thai opposition parties to develop a true political alternative to Thaksin's electoral machine. Any reforms that do not address that fundamental problem are only skin-deep.

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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