Last May, the generals who grabbed power in Bangkok pulled off a PR coup as well: Their takeover cheered investors. While little good had come from 11 previous coups since the 1930s, this one seemed different. Junta-leader-turned-prime minister Prayuth Chan-Ocha proclaimed Thailand open for business and surrounded himself with experienced technocrats, promising to spur growth, attack corruption and "return happiness to the people."
Stocks soared, consumer confidence jumped and executives hailed the return of political stability. Thailand had seen little of the latter since 2006, when soldiers overthrew allegedly corrupt billionaire Thaksin Shinawatra. For much of the 2,802 days between Thaksin's ouster and Prayuth's coup, Thailand's government was crippled by gridlock and under constant siege from street protests. Hence Prayuth's appeal: Here, finally, was the competent, take-charge leader Thailand needed to restore economic growth.
Things haven't gone as hoped. Eight months later, capital is fleeing the country ($1.58 billion out of equities alone in the last 12 months). The economy is flirting with deflation and a possible recession; both consumer prices and the economy are growing at a meager 0.6 percent pace. Unless the government gets moving on long-postponed structural reforms, the economy could well slip into its own lost decade.
Today’s impeachment proceedings against former Prime Minister Yingluck Shinawatra underscore just how misplaced the junta’s priorities are. Yingluck, Thaksin’s sister and the leader Prayuth ousted, is ostensibly being scrutinized for her program of buying rice from farmers at above-market rates. She’s already out of office, though; impeachment might ban her from politics for another five years. The proceedings are meant more to appease the royalist, Bangkok-dominated “Yellow Shirt” faction that supported the coup and has long sought to strip Thaksin and his lieutenants of any shred of political power.
Rather than going after personalities, the junta would do better to eliminate Thaksin’s more wasteful, inefficient policies. Instead, in order to placate the masses who once formed the backbone of Thaksin’s support, Prayuth has issued fiscal handouts to rural areas, tossed loans to farmers and asked consumer-product makers to freeze prices.
What Prayuth hasn't done is equip Thailand to compete in a fast-changing world. Last November, when Samsung was deciding where to build a new $3 billion factory, Bangkok liked its chances. The government touted plans for a “digital economy” to complement Thailand's longstanding expertise in making hard disk drives and autos. Samsung chose Vietnam instead, largely because of its cheaper and more productive labor force and fewer disruptive political tensions.
Thailand, which derives 70 percent of gross domestic product from exports, has enduring strengths as a manufacturing base; the Japanese companies that have invested billions in the country are not going to pick up and leave lightly. Still, the country remains weak in sectors such as smartphones and tablets that are set to grow in 2015 and beyond.
Thai companies have been dangerously slow to adjust production to meet shifts in consumer preferences. Research and development investment substantially lags Singapore, Malaysia and Indonesia. Thailand’s innovation ranking in the World Economic Forum’s 2014 Global Competitiveness Index has fallen to No. 67 from No. 33 in 2007.
If he really wants to prove Thailand is open for business, Prayuth should be fast-tracking plans for $92 billion of spending, much of it on infrastructure. Those plans include a train project that would link up with a Chinese route through Yunnan Province, Thailand and Myanmar and revolutionize regional trade. He should focus less on populist handouts and political witch hunts, and create a cogent, up-to-date strategy to move Thailand up the value chain. That means smart and substantial investments in education and training above all, as well as R&D.
The country can’t afford to wait another eight months. As Thailand grapples with a semi-permanent leadership vacuum -- Prayuth has been vague about when new elections will be held -- neighbors such as Indonesia and the Philippines are moving forward under decisive, popularly elected presidents. They’re weeding out graft, lifting wasteful subsidies and upgrading roads, bridges, ports and power grids to make their economies more competitive.
Peace is important, but so is progress. If he wants to reclaim the wave of optimism that greeted his power grab, Prayuth needs to concentrate on better preparing Thailand for the future, not re-litigating its past.
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