EIU: Thailand Political Stability Risk Report
Richard
Below is a copy of the latest EIU Political Stability Risk Report for
Thailand for you to take a look at.
Happy holidays.
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Thailand risk: Political stability risk
Copyright 2003 The Economist Intelligence Unit Ltd. All Rights
Reserved; EIU RiskWire
COUNTRY BRIEFING
FROM THE ECONOMIST INTELLIGENCE UNIT
Risk Category Current Current Previous Previous
Rating Score Rating Score
OVERALL ASSESSMENT C 47 C 47
Political stability risk C 60 C 60
Note: E= most risky; 100= most risky.
The risk ratings model is run once a month.
SUMMARY
The Thai Rak Thai (TRT) government led by the prime minister, Thaksin
Shinawatra, dominates the House of Representatives (lower house),
providing minimal scope for effective parliamentary opposition.
Thaksin himself is involved in every element of the day-to-day
management of the economic and political arenas. His ministers have
criticised him for his lack of delegation or even consultation. While
political stability has increased under the TRT, it has been at the
expense of political reform and progress towards democracy. The
government is highly critical of the independent anti-graft agencies
created by the reformist 1997 constitution. Any reduction in the power
of these agencies will reduce the transparency and accountability of
the executive. It would facilitate policy making based more on vested
interests than best practice.
ANALYSIS
* The reformist 1997 constitution, which attempted to increase the
transparency and accountability of the executive, is seriously
weakened (High risk).
Thaksin Shinawatra, the prime minister, has been highly critical of
the new independent anti-graft agencies. Originally it was thought
that Thaksin would amend the constitution after October 2002 (the
constitution could not be legally amended for five years after its
enactment) and severely curtail the power and authority of the
Constitution Court, the National Counter Corruption Commission and the
Election Commission. It now appears that a constitutional amendment is
hardly necessary as Thaksin is managing to reduce the credibility of
the agencies and infiltrate them with his political supporters.
Notwithstanding the means, the ultimate outcome is the same; the
political reform process is being reversed. This will detract from
Thailand's international credibility and attractiveness as a location
for investment. It could also lead to a sharp rise in politicians
using their influence and seeking to make personal profit from their
positions of power. Foreign companies should study carefully any
proposed constitutional changes, since they may lead to a less
transparent and accountable executive. This could mean that economic
and sector- specific policies may be formulated to benefit vested
interests rather than the wider business community and general public.
* The prime minister becomes increasingly autocratic and unyielding
(High risk).
Thaksin has been displaying increasingly authoritarian tendencies,
especially since his acquittal by the Constitution Court on charges of
corruption in August 2001. His early months in office were
overshadowed by the possibility that the court would find him guilty
of failing to declare all of his assets; a conviction would have led
to his removal from office. There have been attempts to stifle media
criticism and recent cabinet and military reshuffles have seen loyal
Thaksin supporters appointed to nearly all positions of authority.
Foreign investors should be aware that although Thailand's political
regime is perhaps the most stable in its recent history, it has come
at the expense of political reform and progress towards democracy. The
ability of anyone outside of Thaksin's immediate circle to influence
policy--including businesses--will be severely limited.
BACKGROUND
Political Forces
The National Aspiration Party (NAP, the second-largest party in the
ruling coalition) merged with Thaksin's Thai Rak Thai (TRT) party in
January 2002. The numerical strength of the merged entity removes the
possibility of effective parliamentary opposition. Thaksin also
believes it will enhance his authority by undermining the strength of
some of the factions within the TRT.
Main political figures
Thaksin Shinawatra: The current prime minister and the founder of Thai
Rak Thai (TRT), Thaksin made a personal fortune from government
telecommunications concessions and won respect for his business
acumen. Thaksin's previous political record was not impressive. As
deputy prime minister in Chavalit Yongchaiyudh's government he
promised to solve Bangkok's traffic problems in six months, but
resigned shortly afterwards, having achieved nothing. He has continued
to make populist promises since coming to power in January 2001 and
has been criticised for failing to consult the cabinet and for his
inability to accept criticism. However, his government has introduced
most of the policies he promised at election time, with the exceptions
of wiping out corruption and dealing with drug problems.
Purachai Piemsomboon: Interior minister and secretary-general of the
TRT. He has a doctorate in criminology and pursued an academic career
before entering politics. He is a close confidante of Thaksin and has
proved popular with the electorate. However, his " social order"
policy has angered powerful businessmen, politicians and the military
with vested interests. The policy aims to wipe out illicit sex, drugs
and underage drinking.
Somkid Jatusripitak: The finance minister and a deputy prime minister,
Somkid is a new face in politics. He was previously an adviser to the
Stock Exchange of Thailand and to many large conglomerates and is
familiar with banking organisations. His performance as finance
minister is seen to be effective so far, although the long-term
consequences of his macroeconomic management are suspect and he is not
popular with the electorate or within the TRT.
Uthai Pimchaichon: The speaker of the House of Representatives, Uthai
enjoys considerable political clout, public support and is an
experienced politician. He rose to prominence in Thai politics as a
democracy activist and has served as party leader (of Solidarity in
the early 1990s) and a cabinet member in previous administrations. He
played an instrumental role in drafting and passing the 1997
constitution. In July 2001 the Supreme Court upheld a previous
conviction against him for malfeasance in office, which dented his
credibility, although he remained in office.
Thaksin's initial appointments to his cabinet in early 2002 were met
with some public disapproval. During the election campaign he had
pledged an end to "old-style" politics and politicians, but a number
of familiar faces were assigned portfolios. Outside the TRT, only the
NAP was granted ministerial positions of any importance--the leader of
the NAP, Chavalit, was appointed deputy prime minister and minister of
defence, and Wanmuhamadnoor Matha was appointed transport and
communications minister. The key economic portfolios all went to
members of the TRT and, for the most part, to close aides of Thaksin.
The Democrat Party is the largest party in opposition and has
traditionally been a force to contend with when out of office.
However, the scale of the TRT's majority in the lower house and
Thaksin's dominant and unifying role in the party mean there is little
current scope for effective opposition. The opposition was weakened
further in early 2002, when the medium-sized Chart Pattana party
announced its intention to join the TRT-led coalition.
The revered Bhumibol Adulyadej is the ninth monarch of the
215-year-old Chakri dynasty. With the help of Queen Sirikit, he has
spent much of the last half-century rebuilding the monarchy from the
low ebb it reached in the wake of the 1932 revolution. However, the
75-year-old king has undergone treatment for heart problems since the
late 1980s, and his designated heir, Crown Prince Maha Vajiralongkorn,
does not command the same public respect as his father.
The king has become more outspoken on political matters in recent
years and, in particular, since the Thaksin administration took power.
In his annual birthday speech in December 2001, the king showed subtle
signs of displeasure at Thaksin's arrogance and growing abuse of
power. The public's immense respect for the king makes him one of the
few remaining institutions with the power to unseat the all-powerful
TRT-led government.
Political Development
Thailand is a parliamentary democracy with a constitutional monarchy.
The king has helped to ensure some political continuity, although
there have been 17 military coups (the last in 1991) since the
absolute monarchy was abolished in 1932. Civilian governments have
historically been shortlived and unstable. In January 2001 the first
general election was held under the new electoral system. The new
system expands the number of seats in the House of Representatives
(the lower house), requires MPs to resign their seats if they accept
cabinet positions and empowers the Election Commission to oversee
polling to prevent fraud. The election resulted in a resounding
victory for the newly formed Thai Rak Thai (Thai love Thai, TRT),
under the leadership of the former telecommunications tycoon, Thaksin
Shinawatra.
Important recent events
November 1997: The prime minister, Chavalit Yongchaiyudh, resigns
after street protests by financial sector employees. Chuan Leekpai's
Democrat Party (DP) gathers enough support from both sides of the
lower house to replace the NAP without an election being called.
September 1998: General Surayud Chulanont, a reformist, is appointed
to succeed General Chetta Thanajaro as army commander.
October 1998: The ruling coalition is expanded by bringing in Chart
Pattana (CP), which controls 51 seats in the lower house.
July 1999: An ongoing internal struggle over cabinet posts results in
the withdrawal of the Social Action Party (SAP) from the coalition
government. The cabinet reshuffle weakens the government's position.
March 2000: The first Senate (upper house) election is held,
installing a significant number of "pro-reform" newcomers.
Historically, the executive appointed Senate members and membership
was limited to military generals and influential businessmen.
April 2000: The interior minister and the DP's secretary-general,
Sanan Kajornprasart, resigns from parliament after being accused of
filing false financial statements. DP credibility suffers.
June 2000: After several failed no-confidence motions, members of
parliament from the opposition NAP resign en masse in an attempt to
force the government to call an early election.
November 2000: Chuan Leekpai dissolves parliament and calls for an
election in early 2001.
January 2001: A general election is held and the Thai Rak Thai (TRT)
party gains an overwhelming victory against the incumbent Democrats.
February 2001: Thaksin Shinawatra, leader of the TRT party, becomes
prime minister at the head of a three-party coalition.
May 2001: Thaksin sacks the Bank of Thailand (central bank) governor,
Chatu Mongol Sonakul, and replaces him with Pridiyathorn Devakula.
June 2001: The Seritham party, with 14 seats in the lower house but no
party-list seats, merges with the TRT giving the coalition a total of
338 seats in the 500 member house.
August 2001: Thaksin is acquitted by the Constitutional Court for
allegedly making a false asset statement in 1997.
January 2002: The NAP votes to merge with the ruling TRT, and the TRT
votes to accept the bid at its general assembly.
May 2002: Key ministers survive a censure debate brought by the
Democrats.
June 2002: The Democrats gain a big victory in Bangkok district
council elections, capturing 152 seats out of 259, with the TRT
winning only 88 seats.
Thaksin and his TRT party won a historic victory on January 6th 2001
in the first general election under the new electoral laws. The TRT,
formed less than two years earlier, mounted an aggressive populist
campaign that captured the public's mood and won 248 seats in the
500-seat House of Representatives. Its nearest rival, the Democrat
Party, won only 128 seats. The medium-sized parties--NAP, Chart Thai
and Chart Pattana-- garnered only half of the seats that they had
expected. The Election Commission (EC) played an active role in
attempting to reduce vote buying and other fraudulent activities, and
the election marked considerable progress in Thailand's move towards
more transparent democratic processes. This election also offered the
Thai public a policy agenda for the first time and not just
"personalities". It was also the first time that a single party had
won an overwhelming mandate to govern in its own right.
Thaksin's first six months as prime minister were overshadowed by the
possibility that he would be removed from office. He faced charges of
making a false asset statement in 1997, when previously in government.
On August 3rd 2001 the Constitution Court acquitted him, with eight
out of 15 judges voting in his favour. The verdict caused much
controversy, and four of the judges are now themselves being
questioned about their conduct during the trial. Thaksin has
subsequently been critical of the new independent anti-graft agencies
and has attempted to undermine their credibility. Although his
government has ushered in a period of relative political stability, it
appears to be at the expense of political reform.
International Relations and Defence
Military forces, 2002
Manpower 506,000
Active 306,000
Reserves 200,000
Defence budget (US$ bn) 1.7
Foreign military aid (US$ m)
From the US 2.8
Source: International Institute for Strategic Studies, The Military
Balance, 2000/01.
The influence of the armed forces in Thai political affairs has
decreased dramatically since their unpopular seizure of power in 1992.
The new constitution has made them more accountable, and the cabinet
must now first approve all internal service budgets. However, a plan
to make all three services come under the command of a civilian leader
was scrapped after strong opposition from senior officers. Officially,
the three services still report to the supreme commander, Admiral
Narong Yuthawong, but in reality he has little power. In practise, the
army chief, Surayud Chulanont, has influence over all services because
of the numerical dominance of the army.
Chuan Leekpai appointed Surayud in 1998--the first time in history an
army chief was not chosen from the top five senior officers. Chuan
believed Surayud was the right man to carry out much-needed reform of
the services. Surayud has progressed steadily towards meeting these
objectives, linking the restructuring with wider efforts to create a
professional, non- political defence force. The number of volunteers
for the army is increasing quickly and it is estimated that
conscription can be abolished in five years. It is intended that
future promotions be made on the basis of ability rather than
connections. A master plan for the overhaul of the defence forces
envisages a reduction of 72,000 personnel by 2007, equivalent to about
15% of current military forces. An early retirement scheme for the
army, which was launched in 1999 and was to run until 2002, has been
extended for another four years, owing to its success, with 100
generals and 10,000 other officers retiring early. By extending the
scheme to 2006, the government hopes to reduce army personnel to
190,000 from the current 220,000.
Since Thaksin became prime minister, the military reform process
initiated by the Chuan government has largely ground to a halt. On
June 3rd 2001 the Communist Prevention and Suppression Act, a 1952 law
giving the armed forces the right to combat domestic security threats,
was repealed. However, the army now proposes that the 1952 statute be
replaced with a law giving them even greater powers. Under this law,
the armed forces would enjoy a sweeping mandate to fight such problems
as drug smuggling and environmental degradation. It would give them
the right to search homes without a warrant, tap telephones and
possibly hold suspects without trial. Despite the drug problem, most
Thais oppose giving more power to the military. A further sign of the
military's resistance to change is its desire to retain an agreement
made with the interior ministry guaranteeing the special treatment of
soldiers suspected of crime. This agreement, made in 1955, gives many
privileges to military personnel.
Budget constraints mean that most artillery and naval craft are now
sourced cheaply from China, mixed with US supplies from the 1960s and
earlier. The task of re-equipping the armed forces has absorbed over
20% of the annual military budget in recent years, with modern tanks,
artillery and frigates being the priority items. In May 2001 Chavalit
gave the army approval to spend Bt4bn (US$88bn) on ammunition and
petrol to replace depleted reserves, but he also announced a policy of
no new weapon procurement. The defence budget was cut from US$2.3bn in
2000/01 (fiscal year October-September) to US$1.7bn in 2001/02.
Strategically, Thailand remains a staunch ally of the West and holds
annual joint military exercises with the US and Australia. In the
1970s Thailand was in the front line of the ideological struggle in
South-east Asia. After left-wing governments took power in all three
countries of Indochina (Vietnam, Laos and Cambodia) in 1975, it was a
base of support for Khmer factions opposed to the Vietnamese
occupation of Cambodia. Ties with Cambodia have been strained since
the 1991 peace settlement, with Phnom Penh accusing Thai security
forces of backing an abortive coup in 1994 and--until its collapse in
1998-99--supporting the Khmer Rouge through logging deals.
Economic ties with Laos have developed rapidly in recent years, but
relations with Myanmar remain strained. Myanmar's ongoing push against
enclaves of ethnic minorities on its eastern border has repeatedly led
to tension with the Thai government and also with the Thai army based
along the border. Under the Chuan administration, relations with
Myanmar deteriorated as Chuan publicly condemned the Burmese regime
and its human rights record. Thaksin promised to improve relations
between the neighbours, focusing instead on mutually advantageous
commercial deals.
After a brief honeymoon period, tensions escalated in May 2002 when
the Burmese authorities accused the Thai army of aiding the Shan
rebels (who are waging a guerrilla war against the Burmese army). The
border between the two countries was closed on May 20th and there was
subsequently vitriolic criticism of Thailand in the Burmese press. In
mid-October, after numerous failed diplomatic initiatives, in
agreement was reached between the two sides and the border was
reopened.
The Thaksin government's appeasement towards the Burmese authorities
angered the military, who were heavily involved in exercises to stem
the flow of drugs, particularly methamphetamines believed to be
produced on the Myanmar side of the border, into Thailand. The Thai
army was initially ordered to halt operations when the tensions broke
out.
Despite some highly publicised drug hauls by the authorities in 2002,
the flow of methamphetamines (called ya ba locally) into Thailand has
continued unabated. The government estimates that up to 2m Thais are
now addicted to ya ba. It is relatively cheap and highly addictive. In
the September 2002 peace talks with the Burmese government, Thailand
promised to help with a crop substitution scheme in Myanmar to
encourage farmers away from opium cultivation. However, although
Thailand is a trafficking route for heroin, the level of heroin
addiction locally is low.
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