Thai Junta Boosts Economic Confidence at Home, Greater Concerns Abroad

One month after the military coup, the majority of the Thai population has unquestionably embraced the military regime. A recent poll indicated that the National Council for Peace and Order (NCPO), led by a decisive and charismatic General Prayuth Chan-Ocha, received a high approval rate of 8.82 out of 10 for its first-month performance. The survey also suggested that 41.3 percent of Thais would like Gen. Prayuth to step up as the next interim prime minister. Should there be a scorecard for the junta, the NCPO would easily pass for having brought back peace and stability to Thailand after the months-long impasse.

Under the sentimental campaign Returning Happiness to Thai People, the military impresses the public with its proper, expedient, and decisive use of power a stark contrast to politicians performance before the putsch that yielded nothing but political deadlock. Right away, the NCPO announced a three-phase road map that systemically lays out the militarys well-prepared plan to reconcile the deeply polarized nation, to draft a new constitution and set up an interim government, and eventually to hold an election by October 2015 in order to return Thailand to democracy. Or so it says.

But most striking is the juntas solid plan to mend the economy. Similar to its political roadmap, the junta laid out economic plans that entail ramping up government spending to jumpstart growth, improving government efficiency, and attracting and sustaining foreign investment. The juntas first successful evidence was the fast-tracked payments to more than 800,000 farmers under the rice-pledging scheme, a populist policy initiated by the previous government to fix rice prices through a government subsidy. The situation surrounding this issue was manipulated by the opposition as one of the ways to topple the previous government, since repayments on the rice subsidies were continuously delayed, causing anger among farmers. The junta chose to tackle this problem first, since it was a prime opportunity to increase its popularity. This move was quickly followed by other populist policies, such as plans to revive small and medium enterprises (SMEs), stabilize energy prices, and forward the 2-trillion-baht borrowing bill for transportation investment initiated by the previous Yingluck government.

These micro-level efforts are supported by decisive execution on the macro level. The military effectively eliminated legal hindrances to budget disbursement, boosted investment, and restored investors confidence by appointing Gen. Prayuth as acting chairman of the Board of Investment (BOI). Only ten days after board members of the BOI had been set up, 18 investment projects, with a total value of 120 billion baht, were approved. In addition, state-owned enterprises (SOEs) which have long been suffering from losses and widespread corruption will undergo serious reforms. Furthermore, a special economic zone committee has been put in place to promote trade and investment, while another committee is contemplating the creation of a new Ministry of Water.

To date, the business sector and the financial market have reacted positively. The Stock Exchange of Thailand has experienced little impact, and consumer sentiment climbed in May for the first time in 14 months. Though the Bank of Thailand has recently cut its 2014 growth forecast for Thailand from 3% to 1.5% after reports for H1 2014 showed a 0.5% contraction to the economy, it predicts that the second half of this year will bring annual growth to 3.4% to 3.5% due to fully functioning fiscal policy, normalized economic management mechanisms and a rebound in private sector confidence.

However, the hardest hit sector seems to be tourism. Evidence can be seen from the number of overseas visitors, which totaled only 1.73 million in May, down 10.66% from the same time last year. The Tourism Authority of Thailand revealed that the number of visitors from East Asia to Thailand is expected to drop by 24% this year. The junta is determined to quickly reverse the trend by green-lighting an extra one billion baht for the Tourism and Sports Ministry and inviting about 1,000 travel journalists and bloggers to Thailand to promote tourism and help restore confidence among international travelers.One foreign blogger suggested that tourists take this opportunity to visit Thailand because accommodation and travel fares are cheaper than usual.

The continuation of these policies, which have sparked economic optimism, depends on when and how the junta is going to form an interim government, expected in the last quarter of this year. The most important question is who will lead that government. Will it be Prayuth himself?

There is a price to the return to peace and order. The trade-offs are violated freedoms of expression and worsening relations with western nations, particularly the United States and European Union. Prominent politicians, leaders of political movements, activists, and academics who oppose the takeover have been summoned by the military. Some have been held in detention. Freedom of expression is severely restricted since the NCPO has set up five panels to closely monitor branches of the media in order to prevent distribution of false information, which could stir up violence and deepen political polarization.

While the NCPO wins popular support from domestic Thai majority, it fails to gain legitimacy at the international level, especially from democratic counterparts. Shortly after the military takeover, the United States announced suspension of military aids and exercises. In response to the takeover, U.S. Secretary of State John Kerry said that he was disappointed with the militarys decision to stage a coup and urged Thailand to quickly restore democracy. To date, $4.7 million worth of U.S. assistance to Thailand has been suspended, with more $10 million on the line for further suspension, and the annual Cobra Gold exercise scheduled to be hosted in Thailand has been cancelled for the next year, although it is still uncertain if it will be moved to a new venue. Further deteriorating the Thai-U.S. relationship, the U.S. Trafficking in Persons report downgraded Thailand to Tier 3 status for lacking efforts to suppress human-trafficking. A Tier 3 status may mean less money as the United States may use the designation to withhold or withdraw non-humanitarian and non-trade related assistance. Scot Marciel, Principal Deputy Assistant Secretary in the U.S. State Departments Bureau of East Asian and Pacific Affairs, told a congressional hearing that the administration does not see how the coup and subsequent repressive actions will produce the political compromise and reconciliation that Thailand so desperately needs or believe that true reconciliation can come about through fear of repression.

Furthermore, in June, the EU ministers announced they halted all official visits to Thailand and suspended the signing of a partnership and cooperation accord with Bangkok. Although the NCPO faced tough resistance from western nations, Gen. Prayuth assured that there will be no antagonism toward those countries. He also denied suspicions that Thailand is developing a closer relationship with China in retaliation, after China insisted to closely communicate and maintain strong political and business ties with Thailand during the putsch

The NCPO may receive high mark in its domestic scorecard at the moment, but the next challenge is how long it will sustain such a dynamic. While the junta is suppressing domestic opposition forces, the real challenges are coming from forces abroad. It appears that Washington and Brussels are not likely to regard the military takeover as business as usual, and this very fact will inevitably affect Thailands politics and economy for the time being.

For more information about APCO Worldwide in Thailand, please contact:

Pavis Devahasadin na AyutayaConsultantAPCOWorldwidePrima Sathorn Building2 Naradhiwas Rajanagarindra RoadYannawa, Sathorn, Bangkok 10120Thailandpdevahasadin@apcoworldwide.com

Sanittawan Nikki TanProject AssistantAPCOWorldwidePrima Sathorn Building2 Naradhiwas Rajanagarindra RoadYannawa, Sathorn, Bangkok 10120Thailandstan@apcoworldwide.com

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2014 APCO Worldwide Inc. All rights reserved. 3