Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Driving commercial and political engagement between Asia, the Middle East and Europe
Fresh clashes in Bangkok this week highlight the precarious political situation in Thailand, with lawmakers debating constitutional reforms and a growing presence of pro-royalist groups emerging in opposition to the protest movement. The unrest comes at a critical time for Thailand which, despite achieving notable success in controlling the COVID-19 pandemic, has been hit hard by the economic shock heralded by the crisis.
This Asia House Advisory briefing addresses three key issues facing Thailand right now: resolving the political unrest; maintaining the effective handling of COVID-19; and reviving a stumbling economy.
Key takeaways
– There has been a resurgence of anti-government and pro-monarchy protests in the last week. Recent votes on a path to constitutional change in the parliament are unlikely to quell protests. However, it is unlikely that Gen. Prayut will resign or be ousted. The situation will continue to be unstable leading up to nationwide local elections in March 2021.
– Thailand’s response to the COVID-19 pandemic has been near exemplary by international standards, though the economic impact on an economy heavily reliant on travel and tourism has been tough.
– Key sectors have held steady, with exports holding up year on year and infrastructure projects largely unaffected. The government is also seeking to shore up hard-hit sectors such as tourism, with stimulus measures totalling at least US$4 billion in the pipeline
– Success for the Thai economy hinges on financial restructuring and private debt management, strong financial systems to support recovery, macro-economic stability, investors’ confidence, and improved competitiveness.
The current wave of anti-government protests in Bangkok is being led by the ‘Citizen Group’ – a mix of student leaders, political activists, and human rights organisations, many with close ties to the Future Forward Party, which was dissolved by Thailand’s Constitutional Court in February 2020.
The protestors have four demands:
– The resignation of Prime Minister Gen. Prayut
– Dissolution of the current parliament
– A process to draft a new constitution, with public input
– Bringing the royal institution under the constitution
The final demand is unprecedented in a society that reveres the monarchy. It is driven by the belief that the king intervened inappropriately in the process of rewriting the 2017 constitution to consolidate his personal power and wealth, breaking convention on the interaction and involvement of the monarchy in day-to-day politics.
At the end of October, the parliament convened a special session to seek a solution to the protests. In an effort to meet some of the protestors’ demands, the government agreed that the 2017 constitution should be amended under an accelerated process and called for proposals from all parties. The Citizen Group responded by reiterating its demands – including those related to the monarchy and the constitution – and vowed to continue protesting.
The protests have their roots in the May 2014 coup, when the current Prime Minister Gen. Prayut Chan-o-cha installed a military government following the breakdown of national civilian politics and widespread unrest.
Gen. Prayut took over as prime minister, abolished the constitution, and led a redrafting process over the subsequent three years, ending in 2017. After several delays, a general election was held in March 2019, resulting in Gen. Prayut being elected by the parliament as a ‘non-MP’ prime minister, an appointment helped by a newly appointed, unelected senate.
The new constitutional arrangements had implications not only for civilian politics, but also the role of the monarchy in Thai politics. Following the death of King Bhumibol (Rama IX), King Vajiralongkorn (Rama X) ascended to a throne bolstered by unprecedented political power, direct military control and personal wealth.
The past six years of military and quasi-civilian rule have undermined public trust in politics and governance. Political rallies gained momentum through July 2020, with dissent escalating on social media and spreading protests across the country.
The political situation in Thailand remains contentious and unpredictable. The resignation of the government and dissolution of the parliament without a clear interim caretaker government would result in a constitutional and political crisis, with severe impacts on the economy, and the continued COVID-19 public health response.
However, Gen. Prayut’s resignation and the dissolution of parliament are unlikely. Gen. Prayut has resisted calls to resign, citing the disruption of the past few months as a reason to stay in position and provide stability. A no confidence motion introduced by opposition parties in the parliament would be highly unlikely to pass – it would require at least 85 of the 250 senators to move against Gen. Prayut. Upper chamber members were appointed by the military under the 2017 constitution. Should either of the above happen, it is possible that a ‘national government’ could be appointed by the king, although he is not in favour of this. It would likely lead to a new constitution, a new election, and could take at least a year to resolve.
Protests had been initially waning as the time and financial pressures of long-term protesting thinned out the ranks and the Thai holiday season approached. However, anti-government protests have been renewed this week with the appearance of ‘yellow shirt’ pro-monarchy protesters. The two sides have clashed with each other and police, including incidents involving live ammunition. The government extended a nationwide state of emergency until January, nominally to manage the COVID-19 pandemic.
On Wednesday 18 November, parliament accepted two draft amendments put forward by the government and the opposition. Five other amendments, including those proposed by protesters and iLaw, were not voted through. iLaw’s amendment would have allowed changes to any part of the constitution and related laws, including parts relating to the monarchy.
It is unlikely that the conservative path laid out by the accepted amendments will be enough to quell protests. Protestors have vowed to continue, with a major protest planned for 25 November at the Crown Property Bureau, the institution that manages much of the king’s asset portfolio. The increase of pro-monarchy protests will contribute to street-level instability in the coming weeks.
The WHO has praised Thailand for its response to the COVID-19 pandemic, which has been near exemplary by international standards, and for it support to its immediate neighbours Myanmar, Lao PDR, and Cambodia with PPE, testing kits and medicines. The country is now playing a role in the global efforts against the pandemic. Thai-based Siam Bioscience Laboratory will be the manufacturing base for the Oxford University and AstraZeneca ‘AZD1222’ vaccine
The Center for COVID-19 Situation Administration (CCSA) was set under the PM and has been led by public health professionals. Since mid-March the government implemented strict rules on social distancing, wearing masks in public, and the closure of non-essential businesses and public institutions including schools and universities. Air, land and sea borders were closed for to all foreigners later that month. Entrants were required to acquire a ‘fit-to-fly’ medical certificate and approval from the Thai embassy in their country of departure and were subject to a 14-day quarantine on arrival.
The economy was gradually re-opened in July as the number of new infections fell. Expats with work permits have been able to return to Thailand since August, and the first tourists since March have been allowed since October. Tourist visas are now 90-day as standard (extendable to 270 days) of which the first 14 must be spent under quarantine.
Social distancing and travel restrictions have had a big impact on Thailand’s economy, which has a large travel and tourism sector. Thailand’s manufacturing sector has also been hit by decreased demand and investment. Job losses have surpassed 2 million, predominantly in the services and SME manufacturing sectors. FDI has continued to decline between 15 and 20 per cent from 2019, though this is comparable to ASEAN neighbours Vietnam and Indonesia. The World Bank estimated that the Thai economy will contract by 8.3 percent in 2020 – pre-COVID projections were between 4-5 percent growth – but should rebound with 4.9 percent growth in 2021.
There are some positive signs for Thailand’s economy, however. Several sectors have held steady. Light manufacturing slowed down, but not significantly, while exports remain steady year-on-year. Infrastructure development has continued relatively uninterrupted. Key projects include the highways linking the country’s north and south and Bangkok to its outer ring roads; the high-speed rail link through Lao PDR to China; and the expansion of the Bangkok Mass Transit System (BTS) ‘sky train’.
To boost domestic consumption, the government has initially provided US$1.2 billion worth of stimulus packages, subsidies to refinance corporate bonds, direct lending to SMEs via the central bank, and grants to informal business operators and vulnerable groups. More recently the government has been matching funds to the tourism industry and hospitality services to increase domestic tourism and supplement the loss of tourist income. Further stimulus packages are in the pipeline, totalling at least US$4 billion.
The Bank of Thailand forecasted economic recovery will take time, beyond 2022. Success for the Thai economy hinges on financial restructuring and private debt management, strong financial systems to support recovery, macro-economic stability, investors’ confidence, and improved competitiveness.
Despite the recent political unrest and the global pandemic, the Thai economy is holding up relatively well, and the public health response has been solid. The government is likely banking on the upcoming holiday season to stimulate the economy, with measures to encourage consumption. Infrastructure projects, including those under the Eastern Economic Corridor, are also starting to move forward.
However, the political situation may threaten both the economic and public health situation. Unless the protests produce a significant outcome. the next pinch point will be countrywide local elections in March. These elections will provide a significant political platform for the opposition party and others demanding change, who will be scrutinising the results of the government’s medium-term COVID-19 public health management and economic performance.
Authors
Ed Ratcliffe
Head of Advisory,
Asia House Advisory
Tanatat Puttasuwan
Advisor, Thailand,
Asia House Advisory
This analysis was produced by Asia House Advisory. For more information about the consultancy and research services provided by Asia House Advisory, please contact ed.ratcliffe@asiahouse.co.uk
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