The fires that gutted several buildings including the Stock Exchange Thailand and the Central World in Bangkok may have been put out, but the city is left with a deep wound that will take a long time to heal. After weeks of street protests and violence, the city has restored law and order. More than 60 civilians were killed and hundreds wounded since the Thai military started their move to end the city occupation by the protestors.
No one will disagree that the unfolding of the events has badly affected the long-term investment climate as well as threatened the fragile recovery of the Thai economy. The unresolved political uncertainty has impacted and divided the Thai society between the urban middle class and the largely rural and urban poor and, equally important, the economic development of the nation.
Morgan Stanley has downgraded Thailand's economic growth outlook for 2010 and 2011 citing an increase in political risk ranking and a slowdown in tourism trade. The prime minister Abhisit Vejjajiva will be under renewed pressure to call for fresh elections and a mandate to govern - exactly what the whole political conflict is all about. The mostly rural and urban poor Red Shirts have consistently been accusing the present government of lacking a popular mandate and colluding with Thailand's royalist elite to subvert democracy.
The Gross Domestic Product (GDP) in Thailand has been growing at an annual rate of 3.6%. The World Bank puts the Thai GDP at a value of US$261bn. Thailand is very dependent on exports for its growth, and was dubbed as one the emerging 'tigers' of the east Asia economies. Thailand has a well-developed infrastructure, and is one of the most popular foreign investment destinations.
Signs of investors' uneasiness have nonetheless surfaced with the Stock Exchange Thailand index at its lowest since 20 April; the index shows no sign of improvement according to investment analysts. Last week, foreign funds sold 14.7bn bahts (US$454m) of Thai equities, and the price of insurance has shot up overnight.
CNBC has reported the immediate impacts of the escalating political conflict on tourism, and retail trade. Tourism easily accounts for 6% of GDP, and directly employs almost two million people. Tour operators have reported a very pessimistic outlook, and have started to see an immediate drop in tourist numbers and retail trade just as the summer peak season is starting. Many of the retail malls and shops including the upmarket Central mall were reported to be badly damaged. So far the political disturbance has had a minimal impact on the operations of foreign companies outside Bangkok, the capital city.
The Federation of Malaysian Manufacturers said that, so far, they have not received any adverse reports on Malaysian companies operating in Bangkok but cautioned that if the political tension is not resolved soon there would be an impact because it would spread and affect the entire economy. Similarly, Bloomberg reported that so far the conflict has been contained in the nation's capital, Bangkok. Also, the Singapore's Ministry of Foreign Affairs said, on its website of 15 May, 'that if political situation slips out of control and unless all parties exercise restraint and resume dialogue, the consequences for Thailand and for Asean will be extremely grave' (particularly as Thailand is the second-biggest economy in the 10-member Association of Southeast Asian Nations).
Beyond the Red Shirts protests, there are the unresolved political, social and economic tensions. To begin with, the problems facing the current Thai government can be traced back to the coup that toppled the previous Thaksin administration in 2006. Thaksin Shinawatra, who was later indicted for corruption, received considerable support from rural and urban poor due to his populist policies and healthcare programmes that have helped to reduce rural poverty and create jobs.
According to Finance Minister Korn Chatikavanij, the elections demanded by the protestors will not now take place until 'emotions have cooled'. However, in its March 2010 issue, The Economist said: 'Democracy [in Thailand] will work only when the parties that lose an election accept the outcome. And if, as might well happen, Mr Abhisit's government lost an election to proxies for Mr Thaksin, the same alliance of military and civilian elites that toppled him in 2006, and his allies in 2008, might again reject the popular verdict. Instability would persist.'
Secondly, the number of experts have also commented that the protest is also the manifestation of the income inequality where the gap is the one of the widest is the world. Although there has been a number of policies designed to reduce the gaps, the twin problems of poverty and income inequality continues to persist. The United Nations Development Programme (UNDP) report highlights that two-thirds of the country's 42 million workforce makes a living in the informal economy of family farms, casual labour and petty business.
The consequence leads to widening urban-rural divide - and is the root of rising political grievances and conflict. Access to credit, healthcare, education are what the previous populist government was attempting to do. Perhaps this should be a starting point for the government.
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