FEER : Thailand Incorporated
Yap Yok Foo
Issue cover-dated 18th January 2001
Thailand Incorporated
Thaksin Shinawatra won by embracing populism on a grand scale; but his
government is set to be one of big money and big business, and will
find it hard to meet campaign promises
By Shawn W. Crispin and Rodney Tasker/BANGKOK
IT WAS A ROUT. Thaksin Shinawatra's many promises to ease the average
Thai's economic pain won him unprecedented popular support during
Thailand's general elections on January 6. As the REVIEW went to
press, Thaksin's Thai Rak Thai Party was set to win more than half of
the 500 parliamentary seats, giving his party the strongest mandate
ever for an elected Thai government.
The 51-year-old tycoon's sweeping victory signals a big shift in the
Thai political landscape. But rather than a movement toward greater
democracy, as promised by the 1997 constitution, a Thaksin-led
government more likely represents a full-blown merger between politics
and big business. Contrary to the aims of the reform drive, Thailand
ultimately could end up with political and economic power being fused
even more closely than in the past.
"More than ever, it looks like the old capital gang is in control of
government," says Chris Baker, an author of authoritative books on
Thai politics and economics. "Although they have very vested interests
in getting the economy moving again, the long-term danger is the
government will concentrate economic power in even fewer hands. That's
why Thaksin is talking so much about his social policies."
Indeed, in the short term, Thaksin can savour his party's iron-clad
victory and the vindication of his populist policies, Thais can hope
for a more robust economic recovery and investors can ride the
stockmarket's euphoric blip. But even if Thaksin dodges a possible
Constitutional Court ruling that could bar him from politics for five
years for allegedly concealing assets, he will find it increasingly
difficult to honour his promises without undermining macroeconomic
stability. His government appears poised to put off the inevitable
time of financial reckoning for short-term political gains.
That marks a clear departure from the course set by the outgoing Chuan
Leekpai-led coalition. Chuan's Democrats put forward a reform
programme that went to the heart of many of the institutional and
structural flaws in the Thai economy that led to crisis in 1997. But
belt-tightening brought little short-term economic relief,
particularly at the grassroots, and perceptions grew that the
Democrats gave a helping hand only to big financial institutions and
foreign investors.
"The vote for Thaksin was just as much a vote against the Democrats,"
says Duncan McCargo, senior lecturer in Thai politics at Leeds
University in Britain. "The Democrats' open contempt for the plight of
the common Thai set off a revenge vote against the party."
Thaksin masterfully exploited the growing popular angst by presenting
himself (Thailand's wealthiest individual) as a man of the people and
Thai Rak Thai (Thais Love Thais) as their party. In doing so, he
closely identified with the country's struggling small-businessmen,
promising a new bank for small- and medium-sized enterprises. He also
pledged a three-year debt moratorium for perennially indebted farmers,
along with a development fund of 1 million baht ($23,000) for each of
Thailand's 70,000 villages.
Yet Thaksin has failed to say where all the money will come from. Even
his party members are strapped for a clear answer. Some Bangkok-based
analysts estimate that if Thaksin does honour all his promises, public
debt, which now stands at 60% of GDP, may rise as high as 100% of GDP.
That would risk weakening the baht even further and could stoke the
flames of inflation, which has been holding at 0.6% under the
Democrats. In such a scenario, the burden of Thaksin's populist
pledges would boomerang straight back on to the average Thais he
promised to help.
In reality, stripped of its populist sheen, Thaksin's government will
be one of big money and big-business interests, reflecting its
leader's pedigree. With his promise to establish a national
asset-management company to shoulder the burden of nonperforming
loans, Thaksin offered both indebted companies and bankers an escape
route. (See related article on page 44.) And judging from his campaign
rhetoric, such a policy may be only the first of many measures to
shield local businesses from the reality of global competitive forces
and their own weaknesses.
PROMISES, PROMISES
"Expect to see many drastic political and economic changes in the next
couple of months," says Sombat Chantornvong, professor of politics at
Thammasat University in Bangkok.
On the campaign trail, Thaksin promised to roll back many
economic-reform measures introduced by the Democrats, raising concerns
about the fate of new bankruptcy and foreclosure laws. If he honours
his pledges, Thailand will move down a more narrow, inward-looking
economic path. This would augur ill for the reformers' hopes of
breaking up corrupt and collusive practices that traditionally
confined business opportunities to a select, politically connected
few.
Thaksin's personal success with Shin Corp. is very much a product of
such favoured treatment. In the early 1980s, his political connections
in the country's police department earned him exclusive rights to
outfit it with computers. With that cash, Thaksin established the
Shinawatra group of companies, including Advanced Information
Services--Thailand's largest mobile-phone operator, which enjoyed a
monopoly for much of the 1990s.
But when competition with his chief rival, Telecom Asia of the CP
Group, started heating up, Thaksin entered politics in person, rather
than by proxy.
Thailand's local telecoms market is slated for liberalization later
this year, and Thaksin will be under heavy pressure to prove that Shin
Corp. isn't getting preferential treatment. Another big test of his
government's credibility will be whether he can resist the temptation
to reward his political allies by favouring their interests in
liberalization of the media and the privatization of many state-owned
enterprises, also due later this year.
For now, foreign investors are largely taking a wait-and-see attitude
on which way the new government will move. One Bangkok-based foreign
banker, who asked not to be named, said foreign investors' initial
enthusiasm over the promise of stability implied by Thaksin's sizable
victory would be short-lived. "In the first few weeks, Thaksin will be
given the thumbs-up by investors, but then he may come unstuck as he
starts to implement his programme," the banker says.
One way Thaksin could assuage foreign doubts would be to appoint the
widely respected and independent-minded central-bank governor,
Chatumongkol Sonakul, as finance minister. That would give the plans
for a national asset-management company much-needed credibility.
Perhaps more importantly because of Chatumongkol's princely
credentials, he would give the government the royal prestige it
craves.
Should Thaksin fail these tests, Thailand may be in for a rough
political ride. Thaksin aimed at cobbling together a coalition that
would give him over 320 parliamentary seats, making him impregnable to
any no-confidence motion, which needs 40% of the legislative body.
But his strong mandate may prove deceptive because divergent interests
and factions within his party encompass both extremes of the political
spectrum. Old-style patronage politicians lured largely by the promise
of money will have to rub shoulders with younger, reform-minded
idealists. Outside the party, Thaksin will have to answer to an
increasingly organized and vocal civil movement, pro-reform groups in
the Senate elected last year and a Democrat Party that shines in
opposition.
These pressures, on top of a possible verdict against him in the
Constitutional Court, might lead him to try to reverse political
reform to ensure his survival. So far, Thaksin has demonstrated a will
to ride roughshod over any form of opposition to his ascent to the
premiership. He snubbed the National Counter Corruption Commission on
December 26 when he was indicted by it for concealing assets. And the
country's only independent television station, iTV, came under
pressure to slant its campaign coverage in his favour. Shin Corp.
holds a major stake in iTV.
There are even allegations swirling among some political observers
that his party may have put pressure on members of the Election
Commission to overlook instances of poll fraud. One election
commissioner's claim on January 4 that 100 candidates under the Thai
Rak Thai banner were implicated in a vote-buying scam in the
northeastern province of Khon Kaen failed to yield any "red cards"
that would have disqualified them before the polls. Such interventions
require a consensus of all five commissioners.
"Internal problems at the EC have been a problem," says Thammasat's
Sombat. "The five members have formed five different camps."
Thailand's 1997 constitution was written to set Thai politics on a
cleaner and more stable course. Unfortunately, even with Thaksin's
strong political mandate, that path seems as elusive as ever.
=============================================
Old Boys' Reunion
Tycoon Thaksin's new government looks bound to feature some old faces
and old problems
By Shawn W. Crispin/BANGKOK
ON THE CAMPAIGN trail, Thaksin Shinawatra billed his Thai Rak Thai
Party as the choice of a "new generation." Hopes were that the first
general election under Thailand's 1997 constitution would usher in a
new breed of politicians to better represent national, rather than
their own, interests. But as the dust settles, many of the faces in
Thaksin's camp are all too hauntingly familiar and seem to bring with
them a risk of a return to corrupt old ways.
Out of power for the past three years, many conservative politicians
saw their patronage networks weaken without access to government
resources. Now they're with Thaksin, the temptation to funnel
government money to revive such ties may prove hard to resist.
It was the corruption and nepotism of the Banharn Silpa-archa and
Chavalit Yongchaiyudh governments from 1995 to 1997 that spurred the
sharpest popular calls for political reform in Thailand. When economic
crisis hit in 1997, many old-style politicians were discredited and
fell from power, their reputations sullied as past incompetence, abuse
of power and mismanagement came to light. But with this month's poll,
many politicians widely blamed for bringing the country to its
economic knees are on the verge of returning to power.
To them, election victory is revenge for the double blow of losing
face in 1997 and having their personal interests threatened by reforms
introduced by the Democrat Party of defeated Prime Minister Chuan
Leekpai. Pressure to reverse constitutional reforms and others
sanctioned by the International Monetary Fund--or at least to slow
them--can therefore be expected. And Thaksin's resounding
parliamentary majority means such changes will probably pass easily.
Early signs are that Thaksin will form a government with Chavalit's
New Aspiration Party and perhaps Banharn's Chart Thai Party. Already,
many senior MPs have left both parties for Thaksin's camp. He has
promised that all economic portfolios will be taken by Thai Rak Thai,
leaving the less lucrative but less scrutinized portfolios for junior
coalition members.
Most prominent of the returning old school is former Interior Minister
Sanoh Thientong, one of the country's most powerful patronage
politicians. Sanoh once described himself as not so much a good
person, but not a bad godfather. He effectively brokered Banharn's
rise to the premiership in 1995. Denied the Interior Ministry, Sanoh
then orchestrated Banharn's downfall by switching the 40 MPs in his
faction to the New Aspiration Party. This paved the way for Chavalit's
rise in 1996 and Sanoh gaining the Interior brief.
Last year, Sanoh's group changed sides yet again, joining Thai Rak
Thai and giving Thaksin key electoral support in the northeast. Many
members of Sanoh's Wang Nam Yen faction were on Thaksin's party list
for allocated seats. He himself will probably win the Interior
Ministry once more.
Another controversial old-school figure is Thai Rak Thai deputy leader
Surakiart Sathirathai, who's angling to be foreign minister. After the
1991 military coup, Surakiart was a senior adviser to coup leader Gen.
Suchinda Kraprayoon. A law professor, Surakiat was widely considered
out of his depth as finance minister under Banharn. Many
capital-market and financial reforms proposed by the Democrats were
shelved under his watch. He was finally asked to resign by the prime
minister in May 1996 because of the mishandling of a scandal involving
Bangkok Bank of Commerce.
THAKSIN'S DILEMMA
Plenty of people with their own big-business interests have queued up
behind Thaksin. Notable is party-list member Pracha Maleenont, tipped
to be minister of the prime minister's office. As a senior executive
of media group BEC World, Pracha has vested interests in the course to
be adopted for media and broadcasting liberalization this year.
Telecoms giant Shin Corp., founded by Thaksin, likewise has an
interest in how this year's telecoms liberalization is carried out.
Early indications are that Sudarat Keyuraphan, perhaps Thaksin's
closest aide, could become minister of communications and transport.
A pressing concern for government stability will be whether Thaksin
can placate the old guard while keeping the confidence of more
reform-minded politicians under the party banner. Some economic
liberalization measures will inevitably erode the personal business
interests of government members. More importantly, Thaksin's promise
to fight graft may require the disciplining of some of the most
prominent politicians in his power base. But for all the optimism that
many Thais feel about voting for a fresh start, the risk is high of a
return to bad old ways.
**************From Uncle Yap**************
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