Quote:Thailand's rocky road ahead
By Shawn W Crispin (Asia Times)

(The following is an excerpt from a longer presentation ATol Southeast Asia editor Shawn W Crispin made on Tuesday in Bangkok to a group of foreign-equity and investment-fund representatives now touring the region with US investment bank JPMorgan.)

If indeed investors prefer certainty in making their investment decisions, then Thailand is arguably not the best place for your Page 1 of 2
ASIA HAND
Thailand's rocky road ahead
By Shawn W Crispin

(The following is an excerpt from a longer presentation ATol Southeast Asia editor Shawn W Crispin made on Tuesday in Bangkok to a group of foreign-equity and investment-fund representatives now touring the region with US investment bank JPMorgan.)

If indeed investors prefer certainty in making their investment decisions, then Thailand is arguably not the best place for your



money over the short or medium term. With the return of democracy later this year, Thailand is nonetheless headed toward a highly uncertain political period, one likely to be plagued by intense factional and political party infighting and the incessant shadow threat of another military intervention.

Although the ruling Council for National Security (CNS) will follow through on its pledge to hold democratic polls in December, the military has no intention of fully relinquishing its hold on political power. Knowledge of the inner workings, personalities and proclivities of the opaque institution, as it was before last September's coup that ousted prime minister Thaksin Shinawatra, will be crucial to understanding Thai politics and policy in the months and years ahead.

The new and less democratic constitution passed at last month's national referendum, which contrary to many commentators' predictions was endorsed by 57% of voters, in effect provides for a future role for the military in day-to-day politics. Appointed military proxies or outright representatives will make up nearly half of the 150-member Senate, which will have extraordinary new oversight powers to censure and potentially remove elected politicians with a mere three-fifths majority of the Upper House.

It's one of many new political circuit-breakers the military has installed to weaken the executive branch and avoid a recurrence of the political juggernaut of Thaksin's Thai Rak Thai (TRT) party. Only one-fifth of the members of Parliament will be needed to file a no-confidence motion against the prime minister (it was previously two-fifths) and only one-sixth to file a motion against a minister. These new measures, meant to improve oversight of elected politicians, will also likely hobble the parliamentary process, resurrecting complaints from the 1990s that slow-moving and fractious democracy is bad for business and investor confidence.

The military-influenced Senate will have powers to delay legislation and must be consulted through a joint session with the Lower House to amend the constitution. The Council of State, meanwhile, is readying new national-security legislation, which in times of national crisis could entail a breakdown of the parliamentary order, and will give the military legal protection to launch future coups.

Questions about the legality of last year's military intervention still loom heavily over the CNS - despite a blanket amnesty the military wrote into the new constitution to protect itself, its investigative committees and legislature from future prosecutions. Pro-Thaksin politicians, including new People's Power Party (PPP) leader Samak Sundaravej, have already indicated they plan to raise legal challenges in Parliament, including in relation to TRT's dissolution in May and the five-year bans on its 111 executive members, including the exiled Thaksin.

In response, a government led by the Democrat or the Motherland Party could pursue with vigor lingering corruption charges against Samak, potentially knocking the newly formed party's leader from politics. Samak also has a two-year jail sentence hanging over his head from a criminal-defamation conviction that could come into play. All in all, fierce and potentially destabilizing parliamentary clashes loom ahead as Thailand transitions back to a limited form of democracy.

Those clashes will quickly put the military's back-to-the-barracks pledge to the test. To what degree the Thai military actually exercises the broad new discretionary powers they've vested in themselves will be largely determined by which of three distinctly different career soldiers is elevated this week to the army's top spot. The selection between an extreme hardliner and two less known moderate candidates will reflect just how secure the top brass feel in their positions after toppling Thaksin and a year of purging his loyalists from the military and bureaucracy.

The military reshuffle is nearly as important a signpost for the country's political direction than the results of the upcoming polls. A hardline camp, led by General Saprang Kalayanamitr, appears to favor the military continuing to play a prominent role in day-to-day politics after the elections. A more moderate camp seems to favor a more behind-the-scenes political presence. It's not clear that these opposing philosophies represent a full-blown schism, yet. But the potential for future intra-military instability also looms.

The decision will be the first of many crucial personnel appointments that the military and its proxies will make that shape Thailand's democratic transition. Another concerns what role, if any, current army commander and CNS leader Sonthi Boonyaratklin decides to play in the next government. Speculation has centered on whether he and the military would form their own political party to contest the upcoming polls.

More recent indications are that Sonthi will trade in his khakis for a seat in the Senate or, alternatively, has already been given the nod by the Democrat and Motherland parties that he will be appointed deputy prime minister for security, a security-czar position newly created specifically for him.

Either appointment would give the CNS a prominent role in the next coalition government and avoid the risk of contesting popular polls under a military-affiliated party that would likely fare poorly. Sonthi's entering politics will nonetheless open him up to potential opposition-led censure motions, including over his role in leading last year's coup. How the military would react to such an attack is another looming wild card.

Outside of these intra-military maneuverings is a shifting political-party landscape, which was fundamentally altered by the May 30 court-ordered dissolution of Thaksin's TRT party and the five-year ban on politics slapped on its 111 executive members. Three or four main political parties are expected to contest the next polls, with the previous opposition Democrat Party, the TRT-influenced People's Power Party, and the new Motherland Party all expected to garner significant votes.

I predict that the Democrat and Motherland parties will form the core of a new coalition government, also consisting of the smaller Chat Thai, Rak Chat and Mahachon parties, convened under a national-unity banner. That will put the PPP and a smattering of other smaller parties in the opposition.

I also predict that the marriage won't last longer than two years. As was the case throughout the 1990s, the coalition government will likely dissolve because of factional infighting, conflicts over government resources and allegations of the PPP-led opposition playing money politics to lure enough members of Parliament (MPs) into its camp to break the coalition government.

That would arguably set the stage for a new military intervention, completing the age-old cycle of Thai politics: coup, constitution, political parties, election, legislature, honeymoon period, crisis, new coup, and the installation of another - though not necessarily interim - military-appointed government that with the perceived failure of elected politicians would likely be less committed to returning the country to democracy.

Parties and personalities
Three main and four small parties will contest the next polls, and each is expected to run on similar populist policy pledges. Nearly all of the relevant political parties - including the Democrats, who in the opposition often railed against Thaksin's perceived profligate populism - plan to campaign on pro-poor policy platforms, pledging an array of government services, handouts and goodies if elected.

The similarity in approach shows how much Thaksin's TRT party has changed the face of at least electoral Thai politics. It's unclear how relevant these campaign promises will be to actual future economic-policy making and the state of the national finances, which at present are at a manageable level. A constitutionally mandated medium-term fiscal-management framework, aimed at maintaining medium-term fiscal stability, should keep actual populist and off-balance-sheet spending in check.

The Democrats, Motherland, and Chat Thai parties are known to have strong followings in separate geographical regions - south, northeast and central respectively - where residents historically

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Quote:Thailand's rocky road ahead
By Shawn W Crispin

have tended to vote on party lines. The three parties have also hinted their willingness to work with the military - unlike the PPP - which will likely give them a cosmic edge in forming the next coalition government.

The Democrats are expected to win all of the southern region's 54 seats, take the majority of Bangkok's 37 seats, place strongly in the central region, and make strong inroads in the north and lesser ones in the northeastern regions, which should give them about 150 seats among the Lower House's 400 elected MP positions.

The PPP is expected to be popular in the poor north and northeastern regions, where historically elections have been won and lost. The northeast accounts for 136, and the north 72, of the Lower House's 400 elected MPs. The two regions also account for the most so-called "party list" seats, which account for another 80 seats in Parliament.

Thaksin was able to sweep the region at both the 2001 and 2005 polls through populist pledges of cheap health care, debt moratoriums and village development funds, and just as crucially through his identification and recruitment of popular grassroots figures into his party's camp. The PPP, which likely will consist of about 180 former TRT MPs, is expected to play on Thaksin's still-strong grassroots popularity and a vow to extend his populist policies.

That said, the coup and TRT's subsequent court-ordered dissolution have resulted in a significant splintering of the party's rank and file. Thaksin's party won 377 of Parliament's 500 seats at the previous poll. But the defection of former TRT deputy leader and labor minister Somsak Thepsuthin, who heads a faction of 70-80 former MPs known as Matchima, is particularly significant because his power base is in the pivotal northeastern region.

The announcement this week that Matchima has joined forces with influential elements of another northeastern-oriented breakaway Thai Rak Thai faction, known as Saman Chan, as well as the small Reconciliation and Bangkok 50 group and Pracharaj parties, will make the newly formed Motherland Party a formidable third force at the upcoming polls.

The new party is expected to compete head to head with the PPP for votes in the northeast and has already hinted at a campaign that bids to "out-populist" the PPP. For instance, Matchima leader Somsak has already vowed to top Thaksin's popular "1 million cows" policy, where livestock is given to poor rural families, by disbursing 2 million cows if the party is elected.

All of this, of course, is semi-educated guesswork. There are already unconfirmed reports circulating of heavy-duty money-politicking - where MPs are allegedly going for about 40 million baht (US$1.2 million) per head in the northeastern region - financial incentives that could result in shifting allegiances and mass defections in the run-up to the polls. Whom the smaller Thai Ruam Jai and undecided elements of the Saman Chan parties finally join forces with is still a wild card.

What is certain is that the upcoming polls will be messy, complicated by the fact that the military is expected to maintain martial law and position soldiers near ballot boxes in hotly contested constituencies in the north and northeast. Political analysts believe that armed presence in particularly sensitive areas during last month's constitutional referendum, including former TRT stronghold Buriram province, cut down significantly on vote-buying aimed at defeating the new charter.

Military planners are reportedly keen to extend that armed presence in the swing northeastern and northern regions at the upcoming polls, so much so that there are apparent plans to redeploy troops from the restive southern regions to help manage the election.

The CNS and its military-appointed government and National Assembly have over the past year taken foreign investors on a roller-coaster ride, with capital controls, nationalistic revisions to the Foreign Business Act, and widespread rhetoric of implementing an inward-looking "sufficiency economy" that concentrates more on "gross national happiness" than gross national product.

If the conservative Democrat party forms the core of the next government, it can be expected to implement classic neo-liberal, foreign-investor-friendly policies. The party has already indicated that it would move to repeal the capital controls and ramp up fiscal spending if elected. At the same time, it's still unclear how much influence the military and its political proxies will have over the Lower House of the next Parliament. It's a relatively safe bet that they will guard against a complete reversal of the nationalistic policies they have made, particularly in relation to the Foreign Business Act.

The PPP would likely try to resurrect Thaksin's economic policies, which after lurching toward more protectionism in the early phases were decidedly laissez-faire for most of his tenure. The Motherland Party could potentially represent a more nationalistic posture, judging provisionally by its party slogan "Building the nation, maintaining religion, and safeguarding the monarchy."

The uncertain future
It's important to note that there is a palpable feeling among certain elite circles that in recent years Thailand has opened too much, too fast to foreign investment in domestic-oriented industries and that new opportunities opening in the tourism and property sectors should prioritize Thai over foreign entrepreneurs.

To be sure, Thailand still wants and courts large-scale, export-oriented investments, but indications are that the door is closing and will likely continue to close on smaller-scale ventures that compete for domestic markets. No party has yet to play the anti-foreigner card overtly and I don't expect any of them will. But it's also interesting to note that the new constitution mandates that the next government implements King Bhumibol Adulyadej's sufficiency-economy concept and that the highly respected monarch himself said in a recent speech to officials that the philosophy should be fully, not partially, followed.

The unspoken subtext to all of this is the role of the palace, which by Thai law is above politics. The Privy Council advisory body to King Bhumibol was seen by many as instrumental in planning and staging last year's coup - though the council has denied it. Since the coup, the body's president, Prem Tinsulanonda, has been dragged in unprecedented fashion into the cut-and-thrust of Thai politics, with anti-junta groups rallying in front of his home and accusing him of, independent of the palace, masterminding last year's military intervention.

Many believe that for all the military's original stated motivations for launching the coup, including the allegations leveled against Thaksin of corruption, abuse of power and dangerously dividing the nation, it was royalist concerns that if he remained in power when the highly revered Bhumibol finally passes from the scene that the ambitious premier could have complicated the already delicate royal succession.

As Thailand prepares to celebrate King Bhumibol's 80th birthday in December, as always, speculation is rife among the chattering classes about his health. He had a major surgery last year and has a long history of heart ailments. Many Thais will tell you openly that they dread the uncertainty that the generational transition could cause, and many believe that with the eventual handover, the current centrality of the institution of the monarchy in Thai society could be at stake.

If that day were to arrive in the months ahead, it is highly likely that the military's concerns for national security would trump its stated commitment to uphold democracy and that royalist soldiers would move to dissolve government and resume their hold on power to manage the transition. And, as with last September's coup that ousted Thaksin, it would likely be a popular decision among Bangkok's upper and middle classes, who, as ever, despite all the talk of democracy, still dictate Thailand's political course.

Shawn W Crispin is Asia Times Online's Southeast Asia Editor. He may be reached at swcrispin@atimes.com.