Political Landscape - Thailand

Part
01
of one
Part
01

Political Landscape - Thailand

Over the last century, Thailand witnessed 13 military coups and 20 new constitutions. Protests and civil unrest are common in the country, but Gen Z is creating unprecedented political turmoil by defying the monarchy. Meanwhile, despite not being as heavily affected by the COVID-19 virus as some of its neighbors, Thailand took a severe economic hit. Analysts now predict the country will have a slow, U-shaped recovery.

Political Landscape

  • As previously noted, the political landscape in Thailand is extremely complex. As a result, this report is extensive and presents several events, given that country's current political climate can be traced back to 2006. For clarity, the political landscape research was structured based on the events' chronological order, aside from initial concepts.

Political System and Structure

  • Thailand is a constitutional monarchy and parliamentary democracy.
  • In October 2016, King Maha Vajiralongkorn ascended the throne following his father's death, King Bhumibhol. For decades, the king was Thailand's central source of political legitimacy, above elected politicians.
  • The monarchy has limited formal power; however, the king traditionally is "highly influential in Thai politics and has significant influence over the military." Some theorize that this dynamic is changing.
  • For reference, Bloomberg published an extensive article explaining the reign of King Bhumibol Adulyadej and the contrasts with his successor. There are also articles explaining the long history and relationship between the military and the monarchy.
  • Main political parties (analysis by Santander Trade):
    • "Pheu Thai Party (PTP); centre-right, populism, economic liberalism."
    • "Palang Pracharath Party: right-wing, conservatism, pro-military."
    • "Future Forward Party (disbanded): centre-left, progressivism, anti-militarism."
    • "Democrat Party: centre-right, classical liberalism."
    • "Bhumjaithai Party: centre, poppulism."
    • "Thai Liberal Party: centre-left, anti-militarism, progressivism."
    • "Chartthaipattana Part: right-wing, conservatism."

13 Military Coups and 20 Constitutions: The Power of the Thai Military

  • Thailand has a long history of military coups. Between 1932 to 1977, Thailand endured 11 military interventions, resulting in the death of numerous civilians and political opponents.
  • In 1991, General Suchinda Krapayoon overthrew the "democratically elected government of Chatichai Choonhavan on the grounds that it was corrupt and abusing their power." The coup led to a year of political disturbances that culminated in an event known as "Black May," in which soldiers opened fire on 200,000 unarmed civilians during a protest in Bangkok.
  • In 2006, prime minister Thaksin Shinawatra left the country for a UN summit in the US. The military "used the opportunity to overthrow the Thaksin government in absentia." This coup reasserted the military control in the country and it is considered ground zero for the political turmoil that afflicted Thailand over the last decade.
  • The 2006 coup was "culmination of street demonstrations organised by the royalist People’s Alliance for Democracy, dissatisfied with Thaksin’s purported cronyism and corruption scandals whilst in office." Important to note that he also had numerous supporters. Street demonstrations followed by military intervention is a common political narrative in the country and a "recurring piece of the pattern of power change in Thai politics."
  • About 18 months after the coup, elections were held under a new constitution. Pro-military parties lost, which was also a pattern in Thailand; they usually lose post-coup elections.

The 2014 Coup d'état

  • The last coup happened in 2014. At the time, the political landscape was divided between anti-government protesters and the Yingluck Shinawatra government (Thaksin Shinawatra's sister). Thaksin had been in exile since the 2006 coup.
  • Following months of civil unrest, on May 7, 2014, the Constitutional Court removed Yingluck from office, citing "abuse of power over the transfer of a security officer in 2011." With the prime minister removed, the government did not have legitimate power. Under the leadership of General Prayut Chan-o-cha (or "Prayuth", depending on the source), the military intervened and declared martial law nationwide.
  • Prayut called the involved parties to start negotiations. At the end of the second day of negotiations, "politicians and protest leaders were shepherded into military vehicles to an unmarked location. General and now coup-leader Prayut Chan-ocha made a televised address to the nation announcing his intent to seize power."
  • According to the BBC, the coup's official script would say that the military intervened to "end crippling political turmoil." However, in reality, they were trying to secure the royal succession and "to cripple the political movement loyal to ousted former Prime Minister Thaksin Shinawatra, which had won every election since 2001."
  • According to political scientist Prajak Kongkirati, the 2014 coup was different from the previous ones when "the military intervened, then stepped back. This time, they came in to reorganize things and stay for the long haul." In 2017, a new constitution was enacted, the country's 20th. It changed the electoral system and the distribution of the parliament, favoring the military and the monarchy.
  • Prayut's "allies established a new party, Pracharath, in 2018, drawing in politicians from other parties, reportedly offering money and government positions."

The Current Political Landscape (2019-2021)

  • After five years, in 2019, the junta was extinct, and general elections were announced. According to Kongkirati, the election was "the military’s attempt to rid politics once and for all of the influence of ousted prime minister Thaksin Shinawatra, whose affiliated parties - promoting some hugely popular pro-poor policies - had won four elections."
  • In the months preceding the 2019 election, people believed that the Palang Pracharat party would lose, given the rising popularity of the anti-military Future Forward Party. However, last-minute changes to the parliament distribution decreased the latter representation and increased Prayut's odds.
  • Not only were the 250 senators appointed by the junta and approved by the King (one-third of whom had a military background), but the Election Commission changed the seat distribution of the lower house, "effectively reversing a projected majority for the anti-junta Democratic Front."
  • To be elected, the new prime minister would need to obtain 375 votes out of the 750 parliament seats. The Thai parliament elected Prayut as the prime minister on June 6, 2019, with 500 votes. Future Foward's Juangroongruangkit received 244.
  • Even with the changes, Future Forward performed well, and became the third-largest party in parliament. It received a lot of support from young voters, signaling "a growing tiredness of the old cycle of politics."
  • Thailand's youth was extremely dissatisfied with the government and Prayut's election. Multiple protests happened across the country, asking for the "reform of the political system, including the role of the monarchy." Gen Z protesters were now targeting the royal family, which was unheard of prior to 2019.

Gen Z and the Monarchy

  • Protests against the government are not uncommon in Thailand's history. However, Gen Z is the first generation to openly stand up against Thailand's modern monarchy, in a movement that is being referred to by some as a "turning point." The economic recession, the country's inequality and injustice, and a series of scandals led to this point:
    • In February 2020, the Constitutional Court, which is known for being extremely loyal to the monarchy, disbanded Future Forward "and banned its leaders from entering politics for ten years over what many see as a technicality: the party accepted a loan from its leader, Thanathorn Juangroongruangkit, which violated the political parties law." The disbandment caused the first wave of student protests.
    • Prayut, on the other hand, was unanimously acquitted by the Constitutional Court for "occupying an army house after retirement in purported violation of an army regulation."
    • By Q2 2020, the Thai government started to censor media and impose harsher limitations to contain the virus. It drew criticism for "extending its Emergency Decree although there were no local transmissions for months; many accused the government of using the decree to maintain power in the face of public discontent." However, at this point, the pandemic had slowed down protesters.
    • On June 4, 2020. LGBTQ activist and political satirist Wanchalearm Satsaksitwas, who was in exile after being accused of breaking the Computer-Related Crime Act, which criminalizes online expression that incites unrest, was abducted by armed men in Cambodia. He was the "ninth exiled critic of Thailand's military and monarchy to become a victim of enforced disappearance in recent years." He was never found.
    • The news spread on social media, and #SaveWanchalearm began trending on Thai Twitter. The hashtag #abolish112 was also "written or retweeted more than 450,000 times. This is a reference to Article 112 of Thailand's criminal code, which states: 'Whoever defames, insults or threatens the King, Queen, Heir-Apparent or Regent shall be punished with imprisonment of three to 15 years," which is also known as the "lèse-majesté" law.
    • The disappearance was linked by many to the palace. On July 2, 2020, BBC noted that the strict laws prohibiting questioning or making negative comments about the monarchy "make this a dangerous link to explore or investigate." Most people believed that the Thai population would shy away from attacking the monarchy. Still, Gen Z defied expectations.
  • In the middle of July, a second wave of student protests started. Initially, they had three demands: "constitution reform, dissolution of the House of Representatives, and cessation of harassment against government critics. It has since evolved into a widespread awakening on a wide range of issues, including abortion to LGBTQ+ rights, decrying sexual violence, reforming school uniforms, and freedom of speech."
  • High-school and college students started to organize and communicate on social media. On August 10, 22-year old Panusaya Sithijirawattanakul "shocked the nation by reading out the 10 Demands for monarchy reform– an issue only previously discussed in hushed whispers in Thailand."
  • Gen Z adopted the Hunger Games' three-finger salute as a symbol, and "On October 14, Her Majesty the Queen's Royal Motorcade passed by a group marching towards the Government House. Video footage showed protestors flashing the three-finger salute. Prayut then declared a state of emergency the next day, which was quickly lifted after backlash."
  • The movement continued to grow despite government resistance and police violence. "Police use of water cannons and tear gas near Pathumwan intersection on October 16 shocked the country. Further planned protests were met with barbed wire and barricades reminiscent of dystopian movies, which the protestors faced off with the infamous yellow inflatable ducks."
  • Gen Z gave the opposition strength to "break the royal taboo." Several house speakers started to question why a "constitutional monarchy has a king who is not strictly bound by the Constitution." Royal decisions and links were also no longer off limits.
  • In 2021, the government started to enforce lèse-majesté laws, which were always presented but rarely enforced. Between November 2020 and January 2021, 55 were charged. Acts such as selling calendars with rubber ducks could now result in 15 years of prison. Some protesters face dozens of charges, including high school students, while others were seized by the police.
  • Thanathorn Jungroongruangkit was accused of defaming the monarch by questioning how a company with ties to the royal family won a contract to produce the COVID-19 vaccine. He could face up to 30 years in prison. Meanwhile, a former civic servant "who posted audio deemed insulting to the monarchy was sentenced in January to 43 years in prison."
  • Tamara Loos, a professor of history and Thai studies at Cornell University, believes that the law is a "short-term solution for what is a long-term problem -- and that is that people won’t be silenced. It might quiet down because of the intense repression being used against them, but it’s not the end of this."
  • According to historian David Streckfuss, "The youth, in speaking out about the monarchy, are making a wager against the past: Thailand has changed and all public institutions, including the monarchy, are open to public criticism and scrutiny."
  • In January, the Thai pro-democracy movement took to social media to address the speculation that the campaign is over. "Our movement is not dying down or fading as many would have you believe. Prayuth and his cohorts have not resigned, the constitution is still not written by the people, and the monarchy is still above the constitution. Our movement will continue. Get ready for a big show."

The Future

  • James Buchanan, a researcher on Thai history and politics, believes the strict enforcement of lese majeste laws could backfire. "The regime has unwisely tried to take advantage of the suspension of protests to increase repression. If the protests were indeed running out of steam, this is likely to make things start boiling again." He further adds, "I expect the contentious politics we saw in 2020 to continue throughout 2021, and the monarchy and the lese majeste law will be at the very center of it."
  • Thomas Park, policy expert and The Asian Foundation's representative in Thailand, notes that "Thailand could benefit from the Biden administration’s renewed emphasis on alliances, but this could be offset by disagreements over democracy and human rights issues, especially if the protests intensify."
  • Pareena Kraikupt, a lawmaker for the governing Palang Pracharat party, compares insulting the royal family to insulting Allah in a Muslim country. She further adds, "Reforming the monarchy, this will not happen. Thailand has a king who is beloved and most respected with all our lives."

Financial Landscape

The Impact of the Pandemic and the Current Economic Situation

  • Thailand was successful at containing the spread of the COVID-19 virus. However, due to its substantial tourism exposure, the country took a severe economic hit—July 2020 predictions indicated an 8.1% GDP contraction, the worst decline in Southeast Asia. Analysts also predicted 2021 would only witness a 4% rebound.
  • There was a small recovery during the third quarter of 2020, and the contraction stayed at 6.4%. The contraction is now expected to reach 6% -7% YoY.
  • The Thai government approved extensive relief measures to support the economy during the pandemic, including a "1.9 trillion baht ($63 billion) stimulus package, while the central bank has slashed interest rates by 75 basis points this year to a record low of 0.50%."
  • Measures to support "stability in the financial sector include: (i) a Corporate Bond Stabilization Fund (BSF) established for the BOT to provide bridge financing of up to THB 400 billion by December 31, 2021, to high-quality firms with bonds maturing during 2021, at higher-than-market ‘penalty’ rates; (ii) BOT purchase of government bonds to ensure the normal functioning of the government bond market (THB 100 billion in March 2020); (iii) reduction in BOT bond issuance; and (iv) a special facility to provide liquidity for mutual funds through banks. On November 12, the BOT lifted restrictions on dividends payouts by financial institutions, which was imposed in June 2020. However, the distribution of dividends should not exceed the last years payout ratio and half of this year's net profit."
  • According to KPMG, since the end of the "debt moratorium in October, the government and financial institutions continue to support businesses through the DR BIZ program and other debt relief measures, with repayment holidays and interest relief measures provided on a case-by-case basis. Many large corporates have raised additional liquidity in the capital markets, whilst SMEs have benefited from soft loans, as indicated by the increase in loans of less than THB 500 million."
  • Despite the political turmoil and economic downturn, investors are not leaving the country. A survey conducted with foreign investors by Bolliger & Company Consulting for the BOI reported that "out of the 600 companies surveyed, 19.33% said they have plans to increase their investment in Thailand, while another 76.67% said they expect to maintain their current investment level." Investors mentioned the privileges provided by the government and the availability of raw materials and parts as the main reasons to stay.

Key Players

  • The Thailand Board of Investments is a "government agency under the Office of the Prime Minister. Its core roles and responsibilities are to promote valuable investment, both investment into Thailand and Thai overseas investment."
  • The Bank of Thailand (BOT) oversees commercial banks and financial business groups as a whole, "which may include their entities that have already been supervised by specific regulatory agencies such as security companies and insurance companies, which are supervised by the Securities Exchange Commission and the Office of Insurance Commission respectively."

Thailand 4.0

  • Thailand 4.0 is an initiative promoted by the Thai government to transform the country into a high-income tech hub by 2037. The plan aims to develop fundamental infrastructure, digital infrastructure, and smart cities and financial centers. Additionally, it plans to attract high-tech companies, promote tourism, and develop human resources, education, and research.
  • The infrastructure development includes high-speed rail connecting three airports, the U-Tapao international airport's renovation, intercity motorways, double-track railways, a new automated seaport, and Map Ta Phut Industrial Estate in Rayong province. All infrastructure projects, except motorways and double-track railway, are being funded through public-private partnerships (PPP). The government is co-investing, but private participation accounts for 68% of the total investment.
  • Digital infrastructure development includes "digital-related laws, digital government, cyber security, technology innovation and digital talent development." Projects include smart pole, the ASEAN Digital Hub, advanced Big Data could and data center, IoT infrastructure, and 5G beds.
  • The initiative targets 12 fields: next-generation automotive, intelligent electronics, advanced agriculture and biotechnology, food for the future, high-value and medical tourism, automation and robotics, aviation and logistics, medical and comprehensive healthcare, biofuel and biochemical, digital, defense, and education and human development.
  • To accelerate the development of smart cities, the government is offering incentive programs to cities and projects in the following categories: smart environment, smart economy, smart mobility, smart energy, smart people, smart living, and smart governance.
  • To improve Thailand's competitiveness in healthcare and the country's status as a medical hub, the BOI also approved incentives to "promote clinical research, covering both Contract Research Organization (CRO) and Clinical Research Center (CRC) operations, with 8 years of corporate income tax exemptions."
  • Furthermore, In December 2020, the BOI announced a series of initiatives and incentives to accelerate investment and encourage digital technologies in the country. According to Ms Duangjai Asawachintachit, Secretary-General of the BOI, the package was designed to promote large scale projects. The Bank of Thailand's "Strategic Plan 2020-2022" is also focused on accelerating digital technology and data use in all its operations

Government Initiatives & Programs

  • The government's recent initiatives, apart from Thailand 4.0, are focused on dealing with the consequences of the pandemic. In June, prime minister Prayut announced the launch of the government's "new normal" initiative. Representatives of all sectors were invited to present their recommendations to accelerate the country's progress. The initiative includes a package to employ 400,000 people, healthcare investment, programs to help those financially affected by the pandemic, investments to strengthen the farming sector, and measures to improve SMEs access to funding, in collaboration with the BOT and the Thai Bankers Association.
  • The Thailand Board of Investment (BOI) approved in November the "roll out of a comprehensive set of incentives covering all major aspects of the electric vehicles (EV) supply chain, with a focus on battery electric vehicles (BEVs), local production of critical parts, and the inclusion of commercial vehicles of all sizes as well as ships." More information on the investment is available here.
  • Maintaining the trend of fiscal incentives for investments and businesses in the country, the BOI approved the "reinstatement of the International Procurement Office (IPO) category with the aim to strengthen Thailand’s position as the regional business and investment hub. IPO businesses will get import duty exemptions on machinery and raw materials for use in production for exports, as part of the policy to promote the development of the country’s supply chain."
  • On February 2, 2021, the Thai tourism minister announced plans to create a co-payment program for the tourism sector, which would pay, for two months, 50% of salaries for "of around 400,000 employees in tourism-related businesses, up to maximum payouts per person of 15,000 baht in total." The program depends on the approval of other ministers.

The Future

  • Fitch Rating analysts expect Thailand's economic rebound to be slow due to the country's heavy reliance on tourism. Fitch still expects "Thailand's sovereign ratings to be resilient in light of its strong public and external finance buffers. However, Thailand's banks and corporates sector face significant financial and operating risks into 2021."
  • Asian Foundation's Thailand representative, Thomas Parks, predicts that "Thailand’s strong track record in managing the pandemic is likely to bring an early return to quasi-normality, but the slow pace of vaccine acquisition may delay a full recovery until 2022. If the Thai government allows inoculated visitors to enter Thailand without quarantine, then the all-important tourism sector should begin to rebound by the third quarter of 2021, but it will probably take years to return to pre-Covid levels. As one of the worst-affected ASEAN economies in 2020, Thailand will feel acute pressure to find new areas for reviving growth in the post-Covid world. The country’s political prospects will add further uncertainty to 2021 and could also complicate economic recovery."
  • The Puey Ungphakorn Institute for Economic Research projects that "structural changes in the global and domestic contexts have ushered the Thai economy into a new normal in several aspects. Although potential growth is expected to be lower, Thailand can shift itself to a better new normal with appropriate supply-side policies, with the assistance of attentive monetary policy in closing any output gap in the short run. In terms of inflation, while short-run inflation dynamics have undergone several changes, a credible monetary policy framework and a demonstrated commitment to fulfill a monetary policy target will work to anchor long-term inflation expectations, thereby facilitating an eventual return of inflation to its target."
Sources
Sources