Thailand Resilience Eroding as Protests Sap Confidence: Economy

Thailand Resilience Eroding as Protests Sap Confidence: Economy

Thailand’s economy has withstood coups and regime-changing protests for decades, luring manufacturers including Toyota Motor Corp. even when turmoil dented stocks and the baht. This time may be tougher. Demonstrators in Bangkok seeking to oust Prime Minister Yingluck Shinawatra sparked the most violent anti-government clashes in more than three years, raising the risk of the third removal of an elected leader since August 2006. Foreign investors sold a net $1.5 billion of Thai shares last month, the most among 10 Asian markets tracked by Bloomberg.The current turmoil coincides with the rise of frontier nations such as Myanmar and the resurgence of neighbors including the Philippines, both of which are enjoying a period of political stability and quickening growth. In contrast, rising Thai household debt and stalled infrastructure projects are highlighting economic risks in a nation that Indonesia overtook as a destination for foreign direct investment in 2010.

“Investors are getting increasingly nervous about political risk in Thailand,” said Frederic Neumann, co-head of Asian economics at HSBC Holdings Plc in Hong Kong. “While Thailand has shaken off political uncertainty in the past, challenges have mounted in recent years,” he said, adding that the latest round of tensions puts at risk long-term growth prospects, with the possibility of “a lost decade.”

The baht depreciated 2.9 percent in November, the biggest monthly decline since May. The benchmark SET Index fell 5 percent last month.

Tourism Affected

Thailand is no stranger to upheaval. Since August 2006, the country has had six prime ministers, a coup, seizures by protesters of international airports and the torching of one of Bangkok’s biggest shopping centers.

Rallies that began more than a month ago against an amnesty for most political offenses stretching back to the 2006 coup that ousted Thaksin Shinawatra, Yingluck’s brother, have escalated into a wider push to replace what protest leader Suthep Thaugsuban calls the “Thaksin system” with an appointed “parliament of the people.”

At least three people have been killed in clashes between pro- and anti-government supporters, the most number of casualties since the 2010 rallies that left more than 90 people dead. The unrest has “affected consumption, investment and tourism,” and has a direct impact on sentiment, Bank of Thailand Governor Prasarn Trairatvorakul said on Nov. 30.

The economy expanded 2.7 percent in the third quarter from a year earlier, the slowest pace since the first three months of 2012, official data showed last month. The central bank cut its 2013 growth forecast to about 3 percent from 3.7 percent on Nov. 27 as it unexpectedly lowered its benchmark interest rate by a quarter of a percentage point, citing greater risks to expansion.

‘Perfect Storm’

The economy “is now experiencing something akin to a perfect storm,” said Nicholas Spiro, managing director at Spiro Sovereign Strategy in London. “The timing of the political unrest in Thailand is particularly inopportune and heaps yet more pressure” on the central bank, he said, adding that scope for a further escalation of the crisis is considerable.

Yingluck’s administration has tried to speed up budget disbursement and spur local demand as exports faltered. Household consumption slipped 1.2 percent last quarter from a year ago, data showed, while public investment slumped 16.2 percent. The state forecasting agency said last month that it expects no export growth this year.

“The protests will likely undermine investor confidence and detract from an already fragile growth outlook for 2014, a credit negative for the sovereign,” Moody’s Investors Service said in a note this week. “Prolonged or escalating protests will adversely affect foreign investment and tourism, and exacerbate delayed public infrastructure investment, which will weigh on Thailand’s future growth in 2014 and beyond.”

King’s Birthday

Thailand has seen nine coups and more than 20 prime ministers since 1946, when King Bhumibol Adulyadej took the throne as an 18-year-old. Anti-government protesters said they will suspend rallies today as the country marks his 86th birthday, before resuming their push to oust Yingluck.

While political risk is a factor for companies from Toyota to Chevron Corp. and Singapore Telecommunications Ltd., the World Bank still ranks Thailand ahead of the Philippines and Indonesia on its annual index measuring ease of doing business.

“Political volatility is clearly one of Thailand’s major disadvantages,” said Robert Prior-Wandesforde, a Singapore-based regional economist at Credit Suisse Group AG. “But it clearly has significant advantages as well, which are very unlikely to be removed or indeed substantially reduced in the longer term anyway, by what’s happening at the moment.”

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at

As Thailand Calms, Protesters Seek King’s Intervention

Some Have Floated the Idea of Yingluck Shinawatra Stepping Aside in Favor of an Appointed Prime Minister


Updated Dec. 4, 2013 5:37 p.m. ET

BANGKOK—As relative calm settled in Thailand’s capital, protesters and officials turned their attention toward finding a way out of the political impasse that has gripped the country in recent weeks, with many eager to see whether the Thai king will weigh in on the crisis. Protest leaders seeking the ouster of Prime Minister Yingluck Shinawatra  said they were open to a scenario in which she would step aside in favor of a royally appointed interim prime minister—a solution that has occasionally been adopted in the country’s deeply tumultuous political history.

Ms. Yingluck has so far rejected calls to step down, but said she was open to negotiations about government reformswithin her government.

Her government and its rivals, who have taken to the streets in sometimes violent protests over the past week, reached a tentative truce Tuesday to honor the 86th birthday on Thursday of Thailand’s revered monarch, King Bhumibhol Adulyadej, who was expected to make his customary Dec. 5 speech. Protesters have said they would resume their street rallies on Friday.

So far, the king, who often calls for national unity, hasn’t made any statement regarding the current political crisis.

Protests erupted last month when Ms. Yingluck’s Pheu Thai Party tried to push an amnesty law through Parliament that would allow her brother, former Prime MinisterThaksin Shinawatra, to return to Thailand a free man. Critics accused Ms. Yingluck of co-opting the state to serve the interests of her brother, who has been living in self-imposed exile to avoid a corruption conviction that he says was politically motivated.

Aside from brief demonstrations at the National Police headquarters in downtown Bangkok, the city appeared to return almost to normal Wednesday.

Suthep Thaugsuban, who left his post in parliament last month to lead the protests, proposed in a speech Tuesday night to have a “decent person” without any political affiliation as an interim prime minister, and to form an interim government under Section 7 of the country’s constitution.

This provision confers power to the king—as the head of the state—to make such a political decision, when there is no constitutional solution to a situation.

Unelected prime ministers were proposed for King Bhumibhol’s royal endorsement in the past usually when the country was plunged in crisis.

After a student uprising in 1973, the king approved a proposal by the House deputy speaker to appoint a former judge and rector of Thammasat University to be interim prime minister—a precedent that has been followed a few times since.

Anand Panyarachun, who took office in 1991 by an invitation of the military regime and endorsed by the king, remains popular for his push for economic and social reforms.

“Most Thais follow what the king says and look up for his guidance in time of trouble,” said Jade Donavanik, dean at Siam University’s Graduate School of Law.

In 2006, leaders of protests against Mr. Thaksin proposed to replace him with a royally appointed prime minister but he was toppled in military coup, and the military-appointed government took office.

Experts say that appointing a prime minister in this case may not be applicable or even politically viable since there are constitutional structures—such as the Parliament and the judiciary—to deal with the current political crisis.

“No one can simply come up with the idea that the king can give away a prime minister,” said Verapat Pariyawong, a legal adviser and political commentator.

Asking for an appointed prime minister, some analysts said, would be moving Thailand backward.

“In those times in Thai political history, there were struggles of power, there were coup d’etats, there were illegal and unconstitutional attempts to bring down the government,” said Mr. Verapat. “Right now we are not going to repeat those mistakes, where we rely on extra-constitutional procedures.”

Even King Bhumibhol said he was against this idea during a speech in 2006 and insisted on refraining from making unilateral decisions in times of political crisis. The appointment of the interim prime ministers wasn’t an exercise of his power, the king said, but to respond to proposals by the House speaker or the country’s governing body.

“Section 7 of the constitution doesn’t grant a power for the king to do whatever he wishes,” King Bhumibhol said at the time, adding that asking the king to appoint a prime minister would lead to a regime that is “messy and illogical.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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