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Candidates from the Thai Rak Thai-led coalition in Thailand swept the polls in by-elections on June 30, leaving the opposition Democrats in an even weaker position than before. But the Thai Rak Thai leader, Prime Minister Thaksin Shinawatra, is still facing charges of having concealed his personal wealth while in office in a previous government. If the Thai Constitution Court finds him guilty, he will be forced to resign and barred from holding any public office for five years. The court is expected to deliver its verdict before the end of August, and, given Thaksin’s popularity, a guilty verdict could lead to ‘turmoil and even bloodshed,’ according to spokesmen for his party.
Thai Rak Thai was formed only two years ago by Thaksin, a 51-year-old multibillionaire who made his fortune from telecommunications. His party, whose name means ‘Thais love Thais’, grew out of the Asian economic crisis. It has played on a combination of nationalist sentiments, which also grew out of that crisis, and populist policies such as promises of 1 million baht (US$22,000) to every village in the country and a new health-care programme under which patients would be charged only 30 baht (US$ 65 cents) for any treatment in government hospitals. As a result, Thai Rak Thai won more than half of the 500 parliamentary seats at stake in the general election on 6 January 2000. This was the first time a single party had won an absolute majority in a Thai election, but, even so, Thaksin brought a number of other parties into his government to give it an even stronger support base.
The recent by-election shows that Thaksin’s popularity is holding. But has he delivered on his election promises? And what are the prospects of his being able to turn the Thai economy around? The villages are still waiting for their money, and no one has been able to explain from where the funds would come to finance the handouts, or the new health-care program. On 26 June, deputy Democratic leader Aphisit Vejjajiva warned that the government is risking total collapse of the national economy through its already record-high deficit in the fiscal budget and an unspecified ‘reserve fund’. The budget for the next fiscal year marks a 12.4% increase over the current year, while the deficit has risen to almost twice as much.
Thailand’s leading English-language daily, the Bangkok Post, concluded in its mid-year economic review for 2001 that Thaksin has discarded the market-led approach taken by the previous Democrat-led coalition in favour of strong state-led solutions, including the formation of ‘the Thai Asset Management Corporation’, which will take over 1.3 trillion baht (US$28 billion) in bad loans from local banks. But with Thai exports stalling because of the slowdown in markets in North America, Australia and Japan, and with almost no domestic private investment, such efforts are not likely to revitalise the Thai economy. The Bank of Thailand announced in April that it was cutting its growth forecasts for 2001 to 2.5-4% from 3-4.5%.
In the short term, Thailand could be facing both serious economic and political problems, if the economy fails to improve – which seems likely – and if Thaksin is found guilty – which also seems likely, judging from comments by Thai legal experts and reports made public by the National Counter Corruption Commission. Thaksin’s plea for ‘understanding’ may sway the public, but not the courts. However, Thailand’s long-term prospects look better as a new constitution, adopted in 2000, gives the country a more open and democratic system than any of its neighbours in Southeast Asia. A failed government can be replaced constitutionally and even prime ministers can be held responsible for their actions – and that is Thailand’s main strength today.
WATCHPOINT: Will Thaksin survive as leader and would anyone else be better able to improve Thailand’s prospects?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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