Dr. Narongchai, gave a very candid description of the current political and economic situation in Thailand as well as the bilateral relations between the kingdom andSingapore.
Beginning his talk by reassuring that the bilateral relations remain good and mutually beneficial, the Shin Corp-Temasek debacle notwithstanding, he cited examples of strong Singaporean involvement in the Thai economy especially in the property development sector and investment projects. He maintained that the economic ties between Singapore and Thailand look set to grow, and that in future, stronger people-to-people ties are also foreseeable.
Going on to explain the goings-on in Thailand presently, Dr. Narongchai asserted that Thai politics was both interesting and complex and necessitated a brief historical overview. In the modern history of Thailand, Dr. Narongchai felt that the Thai economy had generally been very strong, while the political aspects were comparatively messy. Whether or not chaotic politics would affect the economy, Thailand had proved to always recover from “political shocks”, averaging a decent 5-6% growth annually for the past few decades. Even with the troubles of 2006, Thailand still managed to grow 5 %, maintain low public debt and possess a current account surplus. However, it would naturally be too early to predict how the current political situation would pan out in Thailand.
This phenomenon of a nimble economy able to withstand “political shocks” was because of the strong and sound socioeconomic fundamentals. Dr. Narongchai said that with the Thai Chinese population being heavily involved in the business/financial aspects of Thailand, this set in place a strong foundation for a liberal Thai market economy friendly to foreign investors and in tune with globalization.
Thai politics, on the other hand, had a rule-bending tendency. Dr. Narongchai admitted that there existed certain elements of Thai politics that remained off-limits, the most crucial being critiquing the monarchy as strong royalist sentiment continues to shape Thai politics. Explaining further, Dr. Narongchai stressed that there was a fine balance in keeping Thai society stable. The forces that had to be managed were the royalists, military, the executive/bureaucracy, and increasingly, also the political parties, and civil society as Thai society democratizes in the last two decades. Whenever imbalance occurred, a coup was likely to arise.
This had happened throughout the twentieth century ever since 1932 where the monarchy first lost power to the military and bureaucracy. Dr. Narongchai felt that the most peaceful period in modern Thai history was during Prem Tinsulanond’s leadership in the period 1980-88 where Prem struck an effective balance between all the five fundamentals of Thai society. However, when political imbalance recurred, another coup occurred in the early 1990s. Due to the military mismanagement of the coup and heavy-handedness against protestors, the military fell out of favour. When balance was restored, 1992 till 2000 saw another peaceful period wherein the weakened military remained largely silent in Thai politics.
Thaksin swept into power in 2000 as his populist tactics garnered him great support. However, as he began to consolidate absolute power and “swallowed” smaller parties into his Thai Rak Thai party, the public grew wary and questioned his motives. Trouble snowballed and advice by Thai parliamentarians like Dr. Narongchai went unheeded. Instead of stepping down to quell public unrest, Thaksin dissolved the House and set a date for elections. As the elections were boycotted by the opposition parties and public dissent rose, the King intervened and declared the elections “undemocratic”.
Dr. Narongchai opined that perhaps one of the key reasons for the September 2006 coup was really due to Thaksin’s meddling with the military reshuffle as top personnel took issue with the new appointments. Dr. Narongchai also believed that when the military took over government, it had to deal with the unexpectedly strong civil society that condemned their actions. The military realised that absolute control was not possible, and it now continues to struggle with the right degree of control to manage Thailand. Erring on the side of either too much force or weakness would earn it castigation by the public.
Regarding the Bangkok bombs on New Year’s Eve, Dr. Narongchai believed that it was done by those in the military unhappy to have been sidelined by the new regime, and not by the Southern Muslim insurgents, as the means and methods differed from the Southern tactics.
In his forecast for 2007, Dr. Narongchai expected that elections will be held in November, with a new constitution being set in place. Presently, the Surayud government is trying to manage Thailand as best as it can. However this is a daunting task especially regarding the economy. First there is too much international liquidity –particularly in Asia due to the UN current account deficit. Second, Japan does not want to take up the liquidity glut. This means that other Asian states have to manage their currency flows more tightly. In particular, Thailand was so affected by this that the Bank of Thailand (BOT) imposed a 30% tariff on investment monies coming into Thailand. The resultant panic caused a nosedive in the stock exchange and the policy was reversed, damaging the reputation of the Thai authorities.
In light of economic difficulties and the Temasek-Shin Corp debacle, Thailand is also reviewing how best to manage foreign ownership of assets in the kingdom, with the shareholder rule and policies on company management. However, to reduce the onerous impact, such rules will not have a retrospective effect while there is a one-year grace period to rectify any anomalous interests.
In his conclusion, Dr. Narongchai predicted that while the current political situation will inevitably affect the 2007 economy, Thailand’s growth will be on par with 2006 due to the drop in oil prices and interest rates.
In the Question and Answer segment, the first question posed related to the diversion of investment away from Thailand to other countries. Dr. Narongchai believed the “49% shareholding rule” for foreign ownership would not affect foreign investment in Thailand too much. He felt that while there may be tougher rules for a period of time, liberalisation would follow thereafter.
In response to the second and third questions relating to the capital controls of December 2006 and Surayud’s leadership, Dr. Narongchai stated that the Bank of Thailand’s (BOT) currency clampdown was due to the large paper losses as the currency account surplus was used to buy the US dollar, the Euro, and bonds, in a bid to stanch the volatile currency flows. He believed that the BOT will now use interest rates to manage inflation rather than to tweak the exchange rate, to avoid a repeat of December’s mis-step. As to PM Surayud’s position to maintain societal balance, Dr. Narongchai stated that this was not within his competence. As interim premier, Surayud’s job was to ensure the quickest and firmest way to free and fair elections. Managing societal balance was the mandate of an elected government, and only the new government could exercise this power.
The next question pertained to whether the next elected prime ministers would ever be as powerful as Thaksin was. Dr. Narongchai believed that every country has its own political model and that for Thailand, it is impossible to depoliticise the military and royalist influences. Reiterating the five foundational political pillars, Dr. Narongchai stressed that none of the five elements must be allowed to become too strong lest chaos arises.
As to the question of Thailand’s involvement in ASEAN, especially regarding the ASEAN Charter, Dr. Narongchai believed that the present government will behave like the post-Suharto Indonesia –passive regional involvement. He cited that Indonesia took a backseat in regional affairs until President Susilo Bambang Yudhoyono reversed the country’s policy. In the same way, Thailand’s regional involvement for the foreseeable future would not likely be as vibrant as it was under Thaksin as domestic affairs would be key priority for the Thai government.
With respect to the Privy Council and monarchy’s power, Dr. Narongchai felt that the monarchy would be firmly entrenched in Thai politics given the current political structure and the way Thailand has evolved.
On the final question of whether Thaksin’s political career was over, Dr. Narongchai believed it is not. Whether Thaksin could make a comeback would depend on his personal conduct and how he bid his time. Most definitely, however, is that the 2007 elections would be too soon to herald Thaksin’s re-entry into Thai politics.