Thailand stumbles from one crisis to the next

Economist.com

Thailand’s ropey politics

Mar 2nd 2007
From the Economist Intelligence Unit ViewsWire

The finance minister goes, another sign of trouble

The resignation of Thailand’s finance minister, Pridiyathorn
Devakula, on February 28th is another big setback for the
military-backed interim government, which continues to stumble from one
crisis to the next. His departure follows that of another senior
economic adviser the previous week, raising further concerns about the
stability, effectiveness and consistency of economic policy. Add to
this the ongoing uncertainty over the prospects for the timely
restoration of democracy, and both domestic and international
confidence in Thailand is likely to fall even further.

Pridiyathorn‘s exit highlights some of the tensions that have beset
the interim administration of the prime minister, Surayud Chulanont, a
retired general, since late 2006. Pridiyathorn was well regarded in his
former position as governor of the central bank, maintaining the bank’s
independence from the government of Thaksin Shinawatra, who was ousted
as prime minister in the September 19th military coup. Pridiyathorn’s
appointment after the coup as finance minister and one of two deputy
prime ministers in the interim administration initially met with
optimism among foreign investors, who, though concerned about the
suspension of democracy, were at least reasonably confident that the
military had installed competent policymakers to keep the economy on
track.

Policy misadventures

Since then, however, the government’s policymaking has proven
thoroughly unconvincing. It has unsettled foreign investors with its
strange and ill-defined “sufficiency” theory, as well as with its
botched imposition of capital controls and its efforts to change
shareholding rules applying to foreign firms. This latter move, widely
seen as nationalistic, has led to concerns that Thailand is becoming
less open to foreign investment. Pridiyathorn’s image, inevitably, has
suffered as a result of his connection with some of these policies.
However, this does not mean that investors will breathe a sigh of
relief at his departure, for the circumstances of his resignation,
though not entirely clear, simply reflect deficiencies that are
undermining confidence in the Surayud administration.

Infighting would seem to be one of these problems. Pridiyathorn‘s
resignation came one week after that of another senior official, Somkid
Jatusripitak. General Surayud appointed Somkid as a senior economic
adviser in an attempt to improve the communication to foreign investors
of the government’s “sufficiency” theory. But the attempt to “unspook”
investors backfired and Somkid was forced to resign less than a week
later. Somkid, a former finance minister and commerce minister under
Thaksin, was one of the major architects of the populist “Thaksinomics”
economic policy. The appointment of someone so closely linked to
Thaksin prompted a backlash from the opponents of the former prime
minister, many of whom had called vociferously for his resignation
during the protests that preceded the coup. Somkid’s appointment also,
in effect, undermined Pridiyathorn, and thus almost certainly
heightened rumoured tensions between Pridiyathorn, the prime minister
and other officials. Tensions had already emerged as a result of
disagreement over the government’s relations with the media; recent
policy tribulations can hardly have helped either.

Uncertainty ahead

To some extent, Pridiyathorn‘s departure may help to draw a line
under these difficulties. But it will also add to the uncertainty over
policy continuity and perhaps even threaten the interim government
itself. If the government fails to bring in a credible and durable
replacement for the finance minister–at the time of writing a couple
of bankers had emerged as possible successors–then the prevailing
atmosphere of chaos will deepen. General Surayud could then quickly
lose the support of a public that is already beginning to wonder
whether the interim administration will return power to an elected
civilian government as promised by late 2007, or whether it is even
competent enough to manage the arrangements for this transition.

What will particularly concern Thais and foreign investors is how
the crisis has emerged largely as a result of the inexperienced
military-led government’s excessive meddling with economic policy. This
started with the sufficiency theory, and has also been visible in
capital controls, the moves to amend the Foreign Business Act, and the
hasty and badly explained appointment of Somkid. Although the public
has broadly welcomed the sufficiency theory because of the Thai king’s
initial support for it as a broad concept, the government’s failure to
explain how it will be applied in practice is proving problematic.

For the time being, General Surayud is probably safe, if for no
other reason than the fact that the military would struggle to find any
suitable replacements willing to succeed him. The current instability
could, of course, embolden Thaksin to attempt to return to Thailand and
re-enter the political fray. But this too would be highly divisive and
destabilising, given the polarisation of opinion about the former prime
minister. For now, therefore, the most likely outcome is still that the
various parties involved will wait for the military-backed government
to conduct the promised referendum on a new constitution and call
democratic elections. But if the government does not get a grip soon,
it may find that it has not seen the last high-profile resignation.

 Blogger

Thai govt may place army officer in provincial posts

BANGKOK – THE military Council for National Security (CNS) is
considering the appointment of senior military officers as deputy
governors in charge of security in all of Thailand’s 76 provinces.

The
Bangkok Post, quoting sources, reported yesterday that CNS chief Sonthi
Boonyarataglin – who is also the army chief – floated the idea during a
meeting with some 40 local municipality and village heads on Thursday.

The
deputy governors would be officers of the rank of colonel or
major-general. The idea is seen as a move to extend and tighten the
army’s control over the country at the provincial level.

Since
taking over, the army has been concerned at what it calls an
‘undercurrent’ of opposition at the grassroots level, largely from
supporters of deposed prime minister Thaksin Shinawatra.

Elements of this undercurrent have been blamed for sporadic incidents of arson in the north and north-east since the coup.

The
northern and north-eastern areas are the stronghold of the Thai Rak
Thai party, founded by Mr Thaksin, who was ousted in a coup last year.

General
Sonthi reportedly mentioned these concerns at the meeting, citing them
to justify giving more powers to local officials so that they could
better support the Internal Security Operations Command, which
coordinates information on intelligence and security.

The Post quoted its source as saying the CNS also wants to double the tenure of village heads from five years to 10 years.

Taken together, the moves would help entrench the military’s presence in the country’s administration.

They
are seen as an attempt to counter local officials who, more often than
not, owe their positions to powerful district and provincial
politicians who cultivate their own support base in the local
bureaucracy.

Government spokesman Yongyuth Mayalarp told The
Straits Times yesterday that the proposal was ‘Gen Sonthi’s opinion’,
and that the ‘government would consider it’.

The Post reported
that a deputy governor in charge of security issues was already in
place in Songkhla and had taken charge of four districts pending formal
appointment by Prime Minister Surayud Chulanont.

Pro-democracy
Thais are bound to view the Bangkok Post report as evidence that the
military is consolidating its hold on the country.

At a forum at
the Foreign Correspondents Club of Thailand on Wednesday, Thai Rak Thai
acting leader Chaturon Chaisang echoed the opinion of many analysts
when he predicted that elections – expected towards the end of the year
– would produce a fragile coalition that would rule ‘with the military
shadow looming in the background’.

Pro-democracy activist
Supinya Klangnarong of the Campaign for Popular Media Reform told The
Straits Times: ‘In the beginning, it (the military) tried to appear
very humble, but at the end of the day, the army is the army.’

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