Interview = &nb= sp; = &nb= sp; = &nb= sp; = &nb= sp;

Troubled Thailand

Eric Ellis, <= span style=3D'font-size:10.0pt;font-family:"Tahoma","sans-serif";mso-fareast-fon= t-family: "Times New Roman";color:#666666'>01.29.09, 05:00 PM EST
Forbes Magazine da= ted February 16, 2009 <= /p>

Abhisit Vejjajiva is the latest to lead Thai= land in a tumultuous 12 months. Does he herald economic reform or simply a new r= ound of governmental intrigue?

3Dimage

Thailand's latest Prime Minister, Abhisit Vejjajiva, says he c= an't cook. Perhaps that's just as well. One of Abhisit's predecessors lost his j= ob last year after a Thai constitutional court ruled he couldn't also be a celebrity TV chef. But the 44-year-old Eton- and Oxford-educated Abhisit is= not running a restaurant, he's trying to run a country, a deeply fractured one = that is now plunging into a crippling recession.

Abhisit is the country's fourth leader in 12 months. The econo= mist son of an aristocrat academic, he came to power Dec. 17 after pro-monarchy demonstrators blockaded Bangkok's international airport until the government fell. That siege cost Thai businesses more than $8 billion in lost tourism = and trade revenue, and inflicted incalculable damage on Thailand's reputation.<= o:p>

He's pledged to restore Thailand's standing, but Thai and fore= ign investors, fatigued by all the strife, wonder whether the soft-spoken intellectual can succeed. They note that his immediate predecessors, and the Thai military, have failed to bring unity, peace or the rule of law to a country scarred by deep divisions-- between rural and urban, north and sout= h, the military and civilians. "The numbers are bad, and we need to turn things around," Abhisit says in an interview with FORBES ASIA in Bangk= ok's Government House, where the trampled dirt of the once-verdant grounds betra= ys the chaos wrought by the thousands of protesters who occupied the complex just weeks earlier. "But one month on we are certainly making progress in calming things down, in getting the business of government back to normal, = in putting Thailand on the map and saying we are back in business."<= /o:p>

"Obviously you can't expect all the remnants of the divis= ions to disappear in one month, or maybe even in six months. But I think people = can feel the difference. We are back here in Government House, we have a functioning government. Protests still exist but in smaller numbers, and the government certainly has not escalated any kind of division or conflict. Th= ere has been change, and I think people can feel it."

The task facing Abhisit is monumental, and there's no guarantee he'll last long enough in power to tackle it. His Democrat Party's parliamentary majority relies on a tenuous—some say unholy—deal with a feared power broker, Newin Chidchob. Abhisit gave Newin control of k= ey ministries after Newin switched his faction from the charismatic former pri= me minister, Thaksin Shinawatra, the billionaire who took on the entrenched establishment during his five years in power but was ousted in a 2006 milit= ary coup. That deal may have robbed the youthful Abhisit of an Obama-like sheen, but it's not just Parliament where his longevity is tested. He also relies = on backing from the powers that be: monarchists, the military and Bangkok's business elite, which are represented by a well-organized movement called t= he People's Alliance for Democracy.

The PAD showed its muscle by mounting the airport siege, and sustained blockades of Parliament and Government House that ousted two elec= ted Thaksin-friendly governments. Now with the monarchist Abhisit as prime minister, the PAD's "yellow shirts"--per their royal-hued uniform--seem willing to cut him some slack, and movement leaders have even become part of his administration. But Thais ponder for how long, and at wh= at cost.

Meanwhile, Thaksin remains a fugitive from corruption charges, running up big telephone bills as he lobbies for support from his floating exile in London, China, the Bahamas and Dubai. Thaksin stacked Abhisit's ci= vil service with supporters during his years in power and now he seems to have adopted the PAD's "people's power" methods, spawning a mass movem= ent of pro-Thaksin forces gathered in red. But as Thais struggle with a slumping economy, increasingly anxious foreign investors fear another airport seizur= e, or worse, from Thaksin's "red shirts." "It's yet another div= ision this country doesn't need," says Robert Penaloza, Thai country chief f= or fund manger Aberdeen Asset Management.

Comment On This Story

In the wide-ranging interview, his first with a foreign publication since taking office, Abhisit is adamant that= his government is secure. He says he doesn't fear Thaksin or his red shirts, the military or indeed his own erstwhile allies in the PAD. Far from be= ing a puppet of the military and the monarchy, as some contend, Abhisit ins= ists he is his own man with an unshakable commitment to democracy and the ru= le of law. He also says he will have zero tolerance for corruption, long regarded as a major obstacle for foreign investment.<= /p>
"They [the red shirts] can have a movement. They can speak their minds, they can spread their message, but they can't break the law; that's where we draw the line," he says, adding that he will press for Thaksin's extradition to face the corrupt= ion charges. He insists that his commitment to the rule of law "obviously" extends to his own yellow shirt supporters in the PAD, who are Democrat members in some cases. "I will reiterate, because there's been a number of reports and comments, particularly in = the foreign press, that somehow we are letting the cases [against the PAD leaders] remain idle. That is not true. All cases are progressing, and I told the police chief that he must be impartial.

"For a long time people felt that political instability hadn't affected policy direction and the economy so much. But I think that began to change two or three years back when systematic corruption and conflicts of interest were threatening the governance of the economy. And t= hen the coup affected the confidence of the international community, and then a= ll the protests, which looked to be more divisive and at times more violent th= an people had seen before in Thailand."

Abhisit outlines five priorities for his administration. The first, he says, is a quick restoration of order and stability. "Without that we don't have an environment to achieve anything else," he says. "I think we've done that, not completely, but we made enough progress = to make things function again."

Next comes the economy, which shrank by 3.5% in the fourth quarter, the finance ministry estimates. "Exports dropped heavily in November and December, so it's urgent that we turn that around," he sa= ys. "With the global financial crisis, we can't expect exports and tourism= to be the main drivers, so that means we turn to the domestic economy, and the priority is to ensure that we sustain people's purchasing power."=

Abhisit's finance minister is an old Oxford school chum, Korn Chatikavanij, also 44. A former Thai country head of investment bank JPMorg= an, Korn is well regarded by the markets. While his $3.35 billion economic stim= ulus package was criticized by business as not going far enough, the World Bank = said it was sufficient to shield Thailand from the global economic crisis in the short term but urged more action later. The measures are a mix of cast hand= outs for the poor, tax cuts, education loans and subsidies for transportation and utilities. Other moves in the works include a two-month extension of the one-month tourist visas. Korn told FORBES ASIA that he expects his package = to kick-start the economy in the second half of 2009, and that Thailand will p= ost 1.5% to 2% growth in gross domestic product this year. That's at the optimi= stic end of industry forecasts. Charl Kengchon, chief economist at Thai bank Kasikorn, expects 1% growth in 2009 and warns anything less could be "political disaster" for Abhisit and Korn.

Abhisit also pledges to defuse the gathering insurgency in Thailand's mostly Muslim south along the Malaysian border, where more than 3,000 people have died in a five-year separatist conflict. "For the pa= st few years the approach of the government has been that this was a matter for the security forces and that somehow you could use force to either contain = or reduce the problem," notes Abhisit. "The approach of my governmen= t is different. We said development is the key, justice is the key, and we alrea= dy have been down south. I went with a number of cabinet ministers, so we can pursue an economic, education and cultural agenda parallel to the work of t= he security forces. Our main message is that this issue is a high priority for= the government, and I am not leaving it to the police and the armed forces.&quo= t;

But that could put Abhisit on a collision course with Thailand= 's military brass. Thailand's south is regarded as a military preserve, and Thitinan Pongsidhurak, a political scientist at Bangkok's Chulalongkorn University, says that with his civilian background Abhisit will have to tre= ad gingerly to keep the generals happy (and at bay). "He won't do anythin= g to upset the military," says Thitinan. Asked if the era of military coups= is over--Thailand has suffered 18 in its 77 years as a constitutional monarchy--Abhisit says, "We hope so, I would have said, ‘Yes,' b= ut I've had a number of lessons. After 1992 we were very determined that the 1= 991 coup was the last one. But it's sad to say that during the Thaksin years th= ey were dragged back into politics. Every time there's a coup now, the military learn a hard and more expensive lesson that, though they might get cheers f= rom people when they come in to restore order, they are not in a position to govern.

"Part of the mistake of the Thaksin years," Abhisit says, "was involving the military as a political tool, creating the reasons or excuses, depending on how you see things, for a coup. If you look back at the history of coups, you can always list the reasons in the first announcement of the coupmakers: corruption is on top, division, violating t= he monarchy. It's always been like that. If we eliminate these conditions, the= re's no reason why there should be one."

<= span style=3D'font-size:10.0pt;font-family:"Tahoma","sans-serif";mso-fareast= -font-family: "Times New Roman";color:#990000;text-decoration:none;text-underline:non= e'>Comment On This Story

Another sensitive area is the monarchy. = The truth that dare not speak its name in Thailand is what will happen on t= he death of the increasingly frail King Bhumipol, who at 81 after 62 years= on the throne is the world's longest-reigning monarch. Any discussion of t= he royal family's status is sensitive, but foreign investors fear that his passing could prompt further political chaos between the monarchists struggling for power and any emergent republican movement. Abhisit says lèse-majesté laws that curtail criticism of the royal fam= ily have been "abused and misinterpreted" and that reform of the = laws is necessary. But he also knows he has the support of the palace and is careful when asked about any threat to the monarchy. "I think the = last few years have seen attempts to draw the monarchy into political confli= ct. It's not good for the country, and I've made clear that we would like to make sure that the monarchy remains above all kinds of conflicts becaus= e this is an institution that is revered by the Thai people."<= /span>

Completing the Abhisit agenda are education and government reform. "The country n= eeds to upgrade the education system, upgrade the skills of our people to remain competitive," he says. "And I don't want the current crisis to ma= ke us forget that we have to continue to make progress in a number of areas: taxes, public sector, governance issues, infrastructu= re, technology."

Economists agree on Thailand's urgent need for reform but argue that in the teeth of an economic and political crisis, now is not the time. Abhisit disagrees. "I don't want to make that mistake. When we were in government last time, we initiated a number of reforms: education, public sector reform, decentralization. When times are good, people don't see the = need to do things differently. When things are not so good is the time to motiva= te the public to see we need to make changes."

Analysts doubt whether Abhisit has the right stuff to crack he= ads if need be; they say he's not ruthless enough. "I don't think he's a particularly skillful politician," says Chulalongkorn's Thitinan. Abhi= sit counters that what is needed is hard work, and that Thais are sick of const= ant politicking and division. "A lot has been made of this urban-rural division," he says. "It's a misinterpretation of what's been going on. The division has been about how people see governance in this country. = Some groups put emphasis on majority rule, others on accountability and transparency, and I want to see both. We've had a series of by-elections an= d I think the results show a clear desire of people to get things back to norma= l. The mood of the people is, ‘Let's get to work.'"

Abhisit and Korn plan these economic moves:
--Implement a $3.35 billion stimulus package that includes direct cash hand= outs of $58 a person to the poor.
--Extend one-month entry visas to three months to boost the wounded tourism sector.
--Enact regulations to break industry monopolies.

But they'll delay these steps in the current crisis:
--Major tax reforms, such as lowering VAT.
--Privatizations.

3D"http://images.forbes.com/media/magazines/global/2009/0216/asia_0216_=

3D"http://images.forbes.com/media/story/storyCo12top_345.gif"

********************= ***********************