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Thailand Inc. hopes economy moves forward even if democracy doesn't
HIROSHI KOTANI
August 14, 2016
A voter in Thailand's constitutional referendum held on Aug. 7.
BANGKOK -- While critics say Thailand's new constitution marks a setback for democracy in the Southeast Asian nation, the local business community has for the most part welcomed it, perhaps hoping that a period of "developmental dictatorship" will do the stagnant economy good.
"It is positive and the stock market could jump at the opening bell on Monday," the local English daily Bangkok post quoted Teerawut Kanniphakul, senior vice president of CIMB Securities as saying, after provisional results of the Aug. 7 referendum on a new constitution were announced that night. Many other voices in business and finance were saying the same thing.
As expected, the benchmark SET Index rose 1.6% the following day, moving by more than 1.5% for the first time in about six weeks.
The most striking aspect of the new Thai constitution is the latitude it grants the military to intervene in politics even after the next general election, to be held as early as the end of 2017. An appointed Senate, its members chosen entirely by the military, replaces an upper house that was previously half elected by popular vote. The new Senate, in turn, will be directly involved in choosing the prime minister.
An elected Senate first emerged as a feature of Thai politics in the 1997 constitution. The new charter thus rewinds democracy in Thailand 20 years. Yet one can scarcely detect such concerns in the expectant mood enveloping business leaders.
These hopes attest to the depth of the anxiety brought on by the on-again, off-again conflict between supporters of former Prime Minister Thaksin Shinawatra and his political movement's opponents. Turmoil in politics has severed continuity in policy, capping the nation's economic growth at around 3% a year.
From 2006, when a coup deposed Thaksin, to 2015, Thailand logged the lowest growth in final consumption expenditure, gross capital formation and gross domestic product of any of Southeast Asia's five major emerging economies.
As one of the first nations in the region to get on the development track, Thailand has arrived at a relatively high level of economic maturity. But its GDP per capita of $6,000 leaves it stuck in middle-income status. "Public infrastructure projects have stalled amid the frequent changes in government,"U.K. research firm Capital Economics wrote in a report on Aug. 8, adding that the unpredictability of Thailand's business environment has discouraged private-sector investment.
The current ruling junta, which arose out of a May 2014 coup d'etat, has certainly brought back a semblance of stability in economic policy. The military government is particularly keen on infrastructure, putting forward an "action plan" for 1.8 trillion baht ($51.8 billion) in investments in high-speed rail, expressways and other projects by 2022. The junta has also proposed building a new "economic corridor," a swath of industrial zones and transport links stretching across several provinces east of the capital.
In a televised address Wednesday, Prime Minister Prayuth Chan-ocha, the junta leader, stressed his government's efforts to promote economic recovery, industrial transformation and infrastructure improvement, and to pave the way for a digital economy. But Thailand's path up the industrial value chain remains as unclear as before. Meanwhile, tax reforms meant to narrow income disparities have been watered down.
The political stability that Thailand now enjoys rests on a dangerous structure of repressive policies, such as curbs on free speech and political activities. A deadly string of explosions Thursday and Friday, some in popular beach resorts, may be the work of anti-junta forces seeking to create chaos.
For now, the business community may be justified in welcoming the generals' firm hand on the tiller of economic policy. But true stability will only come with national reconciliation.
asia.nikkei.com
HIROSHI KOTANI
August 14, 2016
A voter in Thailand's constitutional referendum held on Aug. 7.
BANGKOK -- While critics say Thailand's new constitution marks a setback for democracy in the Southeast Asian nation, the local business community has for the most part welcomed it, perhaps hoping that a period of "developmental dictatorship" will do the stagnant economy good.
"It is positive and the stock market could jump at the opening bell on Monday," the local English daily Bangkok post quoted Teerawut Kanniphakul, senior vice president of CIMB Securities as saying, after provisional results of the Aug. 7 referendum on a new constitution were announced that night. Many other voices in business and finance were saying the same thing.
As expected, the benchmark SET Index rose 1.6% the following day, moving by more than 1.5% for the first time in about six weeks.
The most striking aspect of the new Thai constitution is the latitude it grants the military to intervene in politics even after the next general election, to be held as early as the end of 2017. An appointed Senate, its members chosen entirely by the military, replaces an upper house that was previously half elected by popular vote. The new Senate, in turn, will be directly involved in choosing the prime minister.
An elected Senate first emerged as a feature of Thai politics in the 1997 constitution. The new charter thus rewinds democracy in Thailand 20 years. Yet one can scarcely detect such concerns in the expectant mood enveloping business leaders.
These hopes attest to the depth of the anxiety brought on by the on-again, off-again conflict between supporters of former Prime Minister Thaksin Shinawatra and his political movement's opponents. Turmoil in politics has severed continuity in policy, capping the nation's economic growth at around 3% a year.
From 2006, when a coup deposed Thaksin, to 2015, Thailand logged the lowest growth in final consumption expenditure, gross capital formation and gross domestic product of any of Southeast Asia's five major emerging economies.
As one of the first nations in the region to get on the development track, Thailand has arrived at a relatively high level of economic maturity. But its GDP per capita of $6,000 leaves it stuck in middle-income status. "Public infrastructure projects have stalled amid the frequent changes in government,"U.K. research firm Capital Economics wrote in a report on Aug. 8, adding that the unpredictability of Thailand's business environment has discouraged private-sector investment.
The current ruling junta, which arose out of a May 2014 coup d'etat, has certainly brought back a semblance of stability in economic policy. The military government is particularly keen on infrastructure, putting forward an "action plan" for 1.8 trillion baht ($51.8 billion) in investments in high-speed rail, expressways and other projects by 2022. The junta has also proposed building a new "economic corridor," a swath of industrial zones and transport links stretching across several provinces east of the capital.
In a televised address Wednesday, Prime Minister Prayuth Chan-ocha, the junta leader, stressed his government's efforts to promote economic recovery, industrial transformation and infrastructure improvement, and to pave the way for a digital economy. But Thailand's path up the industrial value chain remains as unclear as before. Meanwhile, tax reforms meant to narrow income disparities have been watered down.
The political stability that Thailand now enjoys rests on a dangerous structure of repressive policies, such as curbs on free speech and political activities. A deadly string of explosions Thursday and Friday, some in popular beach resorts, may be the work of anti-junta forces seeking to create chaos.
For now, the business community may be justified in welcoming the generals' firm hand on the tiller of economic policy. But true stability will only come with national reconciliation.
asia.nikkei.com