Thai poll positive but people still cautious

by Mai Phuong

A stunning election victory by the Pheu Thai party, setting the scene for Thailand's first woman prime minister, Yingluck Shinawatra, has promised an end to the political divisions and instability that have roiled the nation for more than half a decade since the overthrow of Thaksin Shinawatra in a military coup in 2006.

The scale of the victory and broad support from the public, particularly from the vast rural population, provides room for change for the good in the country's economic and political development.

In the short-term at least it will help stem the tide of protests by different political parties and bring about some unity in the country which has been in crisis for a long time and sometimes even on the brink of civil war.

Good signs have already appeared in the first days. The message from Thailand's rural heartland, a bastion of red-shirt protesters who paralysed Bangkok last year, was that "Thailand will be peaceful".

Many had feared the election would deepen a divide in Thailand between the urban and rural poor on one side and the traditional elite on the other, a rift that drove Thailand close to full civil conflict last year.

That fear now surely has gone with the extremely encouraging news that Thailand's politically powerful military said it will accept the result.

Thailand's outgoing defence minister, himself a retired general, said the army accepted the election outcome, easing fears of fresh military intervention in a country that has seen almost as many coups as elections.

"I have talked to military leaders. We will allow politicians to work it out. The military will not get involved," General Prawit Wongsuwon said. "The people have spoken clearly so the military cannot do anything. We accept it."

Immediately after the victory, Yingluck, 44, a businesswoman, formed a governing coalition with four smaller parties.

"All five parties agreed to work together to run the country and solve people's problems," she said. "The first urgent issue is how to achieve reconciliation."

The swift formation of a new alliance through smooth negotiations with its potential partners proved the Pheu Thai party is ready to take control to protect against defections or the disqualification of some of its winning candidates in Sunday's vote.

Wiping away the fear that she will find it hard to avoid the influence in the new administration by her brother Thaksin Shinawatra – the former powerful leader of her party – the in-coming prime minister stated she would be independent.

"There is no role for Thaksin. He is only giving moral support and advice," she said.

Yingluck on Wednesday also dismissed mounting speculation that her brother would be given an official role under her tenure. She refuted media reports that said Thaksin, who lives in self-imposed exile in Dubai to avoid a jail term for corruption, is likely to become a government trade envoy, promoting the kingdom's exports abroad.

This is a wise step in her first days at the new post to help relieve the heat of her aggressive opposition which will take advantage of her weakness operating under the shadow of Thaksin.

However, there are big challenges facing the new government, including the push for economic recovery.

Nguyen Binh Giang from the Institute of the World Economics and Politics said the biggest challenge facing the new government in the short-term was the huge national debt.

Giang, who is director of the Department for Developing Countries studies, said the fiscal stimulus to recover from the adverse impacts of the global economic recession, as well as the populist programmes and even the national defence budget raising, had caused Thailand's debt to reach a warning level.

Thailand's central bank on Wednesday expressed concern over inflation, as business leaders fear a wage-price spiral if the new government goes ahead with billions of dollars in spending.

Another concern for investors is the future of the baht currency which Giang said should be managed.

Annual inflation in Thailand hit 4.19 per cent in May, its highest since September 2008. It stood at 4.06 per cent in June.

"High inflation will hurt people's purchasing power and as a result may affect consumption," said Governor Prasarn Trairatvorakul, adding that the new government's policies would be considered at a policy meeting next Wednesday.

Economists expect the Bank of Thailand to raise its policy rate by a quarter of a point to 3.25 per cent at that meeting and to see it at 3.75 per cent by the end of this year rather than the 3.50 per cent they had expected before the election.

Still, there are reasons for hope.

Yingluck's Puea Thai Party won the landslide election victory due to its high percentage of support from the public so a platform of populist policies which include wage rises, a household debt moratorium and better welfare and healthcare are easier to get support from the public.

One of the party's promises was a minimum wage increase to 300 baht (US$9.8) per day, as much as 90 per cent higher than the current minimum set for each province around the country.

Moreover, the influence of ex-leader Thaksin is still overwhelming due to the trust of a large group of people over his economic development policies, particularly those from North and Northeast regions. Thaksin's time in office was not long enough to see the results of many of his policies because he was deposed in a military coup, resulting in conflicts between his supporters and other coloured-coded supporters. Now those policies will have more time to produce results.

Thailand's economic competitiveness in recent years was negatively impacted by continuous changes in politics, thus to regain its strength in economic development should be a priority of the new government.

If not, signs of economic development in Thailand in the near future may only follow the common trend to recovery of the world economy instead from inner domestic strength. And this is surely hard in the current global economic situation.

Viet Nam's congratulations

As a neighbouring country with friendly relations with Thailand and as a member of the Association of the Southeast Asian Nation, Viet Nam congratulates the country and people of Thailand in holding a successful election on Sunday, said Vietnamese Ministry of Foreign Affairs spokeswomen Nguyen Phuong Nga yesterday.

Nga said Viet Nam always wished to see Thailand in consolidation of its development for the benefit of its people and for the cause of peace, stability and co-operation in the region as well as in the world.

She said the two countries had vast potential for bilateral trade co-operation. In recent years, the two countries constantly boosted relations in trading, particularly in the East-West economic development corridor. In April this year, a total turnover from bilateral trade reached US$2.4 billion, an increase by 24 per cent over the same period last year.

Viet Nam committed to create the most favourable conditions for Thai companies to boost their investment in the country, particularly in the central region, said Nga. — VNS