May 27, 2011

An unlikely economic stability has returned

Eric Ellis

A year after the bloody red-yellow clashes, Thailand has stepped back from civil war in horror and the tourists have returned to Bangkok.

A CASUAL visitor to Bangkok, strolling through the downtown Ratchaprasong crossroads at the Thai capital's commercial core, could be excused for wondering what all this red-yellow chaos of recent years was about.

This iconic Asian intersection - imagine a Times Square/Champs-Elysees hybrid-in-humidity - seems like any throbbing Asian hub, only busier. Advertising hoardings demand attention to luxe brand names. The chic and fashionable sweep elegantly into well-patronised five-star hotels in expensive European limos. Hordes of consumers disgorge from the Skytrain, wallets and purses pointed at bargains in gleaming malls.

But it was only a year ago this week that 90 people died along this strip. They were killed mostly by the Thai military as it ruthlessly quelled a two-month blockade of the area by the red-shirted supporters of billionaire businessman Thaksin Shinawatra, furious at his ouster as prime minister by a royalist coup in 2006, and of the three pro-Thaksin governments they elected afterwards.

Though Thai factions still seethe, and will contest yet another bitter battle for power in a July election, it is impossible to imagine that anything more violent than a mad dash to a sale ever took place here. The only hint is a posse of cranes helping restore the Central Department Store torched by protesters, and a huge advertising placard concealing its scorched hulk.

Yet the Thais have not retreated into introspection. The Thai economy has enjoyed its most buoyant year in decades, its GDP expanding 8 per cent since last May, second only in the region to a Singapore rebounding from the 2008 banking crisis. Indeed, it has been so vibrant in Thailand that the baht rose with such gusto it prompted public comments from the government to the notionally independent Thai central bank that the buoyant baht was a risk to growth.

This is not what was supposed to happen after one of the bloodiest episodes in Thailand's coup-plagued history. Chronic instability - and Thailand is little closer to healing its red-yellow wounds than it was a year ago - doesn't usually result in an economic boom. Moreover, tourists spooked by the Bangkok bullets have returned in droves, no doubt lured by discounts of 50 per cent in the months after the failed putsch.

Foreign investors played their part. Thailand is an Asian Detroit, one of the world's biggest car-producing nations, and investment in plant has proceeded apace from US, Japanese and Korean car makers undaunted by politics, so long as the export line remains unaffected.

Indeed, for all the past year's demonisation of Thaksin and his reds, the irony is that the most serious impact on the Thai economy came in late 2008 when the establishment-backed yellow shirts blockaded Thailand's airports and economic supply lines for months. By comparison, the deaths in Bangkok last year, brutal though they were, merely proved a blip in their wider economic impact.

That Thailand has endured all this mess is a testimony to its resilience - the disturbances were geographically confined to a downtown core and did not spill over to labour agitation and to where crucial exports are manufactured in the sprawling Bangkok surrounds. It has also helped that Thailand happened to have safe hands steering the economy during this crisis, notably its British-educated Finance Minister Korn Chatikavanij, and two well-regarded technocrats helming the central bank, Dr Tarisa Watanagase - who stepped down in October - and her replacement as governor, Dr Prasarn Trairatvorakul, the Harvard-educated former chairman of Kasikorn Bank, the former Thai Farmers Bank.

In time-honoured Thai tradition, some serious government pump-priming also helped. Finance Minister Korn threw billions in micro-payments into impoverished rural areas, where support for Thaksin and the reds is at its fiercest.

That could prove politically savvy too, for it is from here that those manning the Bangkok barricades a year ago were drawn, the so-called ''prai'', a self-deprecating Thai term equating to serfs, the rural poor and factory fodder that earlier booms had missed as the yellow-tinted Bangkok elite got richer.

But it is also possible that with all the Thai blood drenching Ratchaprasong, moderate Thais got a preview of civil war, and were appalled. That is where the country seemed to be heading a year ago, the Thaksin reds pitted against the establishment royalist yellows. But Thais stepped away, for the moment at least, went back to work and now seem resolved to sorting out their differences at the ballot box on July 3.

Whether that tentative ceasefire holds remains to be seen, but the surging economy has enhanced the chances of the yellow-backed PM Abhisit Vejjajiva's Democrat Party. The Democrats are expected to win, if not a clear majority in their own right, then as the leading party in Parliament.

Whether that soothes simmering tensions is anyone's guess. With the semi-divine King Bhumibol ailing and 83, his 64-year reign comprising 15 military coups, 16 new constitutions, and 27 prime ministers, of greater concern to many Thais and foreign investors is how their pivotal south-east Asian country will manage the consequences of his demise, the past year possibly being the calm before the inevitable storm.