Thailand’s Troublesome Constitution

A soldier checks sacks of rice at a warehouse in Ayutthaya province Photo: Reuters, Chaiwat Subprasom
A soldier checks sacks of rice at a warehouse in Ayutthaya province Photo: Reuters, Chaiwat Subprasom

A soldier checks sacks of rice at a warehouse in Ayutthaya province
Photo: Reuters, Chaiwat Subprasom

Election delays and constitutional squabbling leave Thailand in danger of missing out on a slice of pie as Europe and the US look towards ASEAN for Free Trade Agreements. By Ate Hoekstra

When Thailand’s military took power last May coup leader Prayut Chan-o-cha made several promises. One was that Thailand would soon return to be a stable, conflict-free democracy; another was that the weak economy would quickly recover. A year-and-a-half later both remain to be seen. A draft constitution has been rejected, elections have been delayed and economic trust is slipping out of the general’s hands.

The outgoing Bank of Thailand (BoT) governor Prasarn Tairatvorakul made his view clear at the end of September. In an interview with The Nation newspaper Prasarn said his biggest concerns were Thailand’s political situation and its economic potential. Due to the on going political conflict, a lot of time has been wasted trying to fix Thailand’s problems, Prasarn explained. And not only that. Investor confidence is declining, and both Vietnam and Indonesia have grown as economic competitors ready to overtake Thailand. “It’s like sitting in boiling water and we don’t feel it,” the former BoT governor, who ended his five-year term on September 30, said.

Prasarn’s comments came as no big surprise to political analysts and economic experts. After the military took power with a bloodless coup on May 22, 2014, many businesspeople and citizens were hopeful that Thailand would finally get out of the cycle of political unrest that has bitterly divided the country since 2006. But with the rejection of a draft constitution in early September and the delay of new parliamentary elections to mid 2017, confidence is on the decline.

“Investors don’t like uncertainty, and if you have uncertainty it’s very difficult to convince European investors to come to Thailand,” says Rolf-Dieter Daniel, director of the Bangkok-based European Association for Business and Commerce (EABC), in an exclusive interview with ASEAN Forum.

Being in ailand for 34 years, Daniel has seen the best and the worst of Thai politics and its impact on the economy. “I don’t know how many coups I have seen here, but all this time whatever happens on the political front is hardly affecting business development,” he says. “When there were demonstrations, business and exports went on.”

This time things are different. Thailand’s delay in returning to democracy is impacting upon the economy, Daniel explains.

In early 2014 ailand and the European Union (EU) were discussing a free trade agreement (FTA). All was going well until the military took over. Against a backdrop of widespread criticism by international leaders against the coup, the EU decided to halt negotiations.

“We were very close to signing the FTA, but as long as there’s a military process we will not have an FTA,” Daniel says. “Compared with other ASEAN peers, it sets the country back for quite some time. Vietnam has just signed an FTA with the EU; Singapore already has one. That’s not good for Thailand.”

Recently the government appointed economist Somkid Jatusripitak as its new deputy prime minister. As Somkid was a minister under former prime-minister Thaksin Shinawatra – widely seen as the junta’s main enemy – his appointment shows to what lengths the government is willing to go. But will it be enough to keep the promise Prayut made 18 months ago?

“At this moment the economy is not very robust, and the cabinet is having a very difficult time to confidently manage it. They have a lot of things on their plate”, says Kim McQuay, Thailand’s country representative for The Asia Foundation, an international organisation with a strong focus on economic development.

If the government proves incapable of restoring the economy, Thailand could find itself in a perilous situation. Declining wages, increased unemployment and rising debt would exacerbate the current dissatisfaction with the state of realpolitik. A recent news report from press agency Reuters signalled significant discontent among rice farmers in Thailand’s Northeast. In the weeks after the military coup many farmers were pleased to finally receive their payments from a controversial rice scheme. With declining exports, lower rice prices and growing debt, that happiness has long since evaporated.

Although Thailand’s Northeast – home of the pro-Thaksin Red Shirts – has in the past played a prominent role in Thailand’s political conflict, including a major protest in Bangkok that resulted in a bloody confrontation with the military in May 2010 and the death of at least 90 people, analysts doubt their dissatisfaction will soon lead to new unrest.

“It’s [the unrest] becoming more emboldened, but I believe that in the short term it’s a big jump from discontent to a street protest,” says McQuay. “Many Thais remember what happened with the violence in May 2010. ings have to get dramatically bad to get there.”

Tulsathit Naptim, columnist and political analyst at The Nation, holds a similar view. “Economic hardships have to be very extreme, to the point of food being wiped from the table, to create political upheaval,” he says. “ The political turmoil has all been related to power play, not people having nothing to eat. Issues like corruption and severe oppression can threaten the government more than a weaker economy.”

Perhaps Thailand’s biggest threat is not a domestic one, but one from outside its borders. ASEAN countries, such as Indonesia, the Philippines and especially Vietnam are all experiencing stronger economic growth, and are presenting themselves as more attractive options for foreign investment than ailand. With many issues still unsolved and ongoing uncertainty about its democratic future, Thailand is not the stable country investors wish it to be. And as Vietnam snuggles up closer to the EU as well becoming part of the Trans-Pacific Partnership from which Thailand is excluded, it looks ready to take over Thailand’s position.

EABC director Rolf-Dieter Daniel believes Vietnam is a big threat to the ai economy, but remaining optimistic, he believes that as soon as ailand and the EU restart free trade negotiations things can improve quickly.

“ Thailand is still a good place to invest. European companies that have been here have done very well,” he says. “Once you have the FTA with the EU I believe Thailand can be a major competitor to Vietnam. And I think the ai government understands that, and that they are trying really hard to restart the negotiations.

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