Thailand's new PM cannot fix political rift

Thailand has a new prime minister but the same old problems.
Thailand's ruling politicians yesterday elected Somchai Wongsawat as their new prime minister after a week of backroom haggling between various factions. He is a bizarre compromise candidate.

The People's Power Party (PPP) at first wanted to reinstate Samak Sundaravej, who was ousted from the job after a constitutional court ruled that appearing as a guest on a television cooking show represented a serious conflict of interest.

However, some members of the coalition refused to support Samak, fearing that his divisive presence would only prolong the political stalemate that has gripped the country for the past month û in effect, pitting supporters of the exiled prime minister Thaksin Shinawatra against those who would like to see him in a Bangkok jail.

Strange, then, that the PPP should finally settle on a candidate who is married to Thaksin's sister, Yaowapa, who was a prominent politician in Thaksin's controversial government.

Opposition politicians from the People's Alliance for Democracy (PAD) immediately denounced the move and vowed to maintain their protests against the government, which they accuse of corruption and of acting on behalf of Thaksin.

Politicians and government officials tried to put a positive spin on the outlook for the Thai capital markets at an investment conference in Bangkok yesterday. The event is normally opened by the prime minister and attended by asset managers from around the world, but both are missing this year û the deputy finance minister gave the keynote address and many foreign investors chose to stay at home after a state of emergency was declared two weeks ago following violent clashes between anti-government demonstrators and the police.

"Investors are clearly interested in how the recent events will affect the Thai economy," said Suchart Thadathamrongvej, the deputy finance minister. "But I believe the Thai economy is fundamentally strong. The current situation will fade away and Thai people and the business community will handle it. Life goes on as normal for most Thai people. We are witnessing the evolution of Thai society û people are learning to resolve their differences under the rule of law."

The central bank governor and the chairman of the stock exchange echoed Suchart's optimism in speeches that barely acknowledged the political crisis at all û and, when they did, characterised it as a temporary blip rather than a crisis of democracy.

It is certainly true that the events of the past few days have been mildly positive. With the state of emergency lifted and a new prime minister in office, there is at least some kind of return to stability, but investors hardly seem to care as news of Lehman Brothers' bankruptcy and the takeover of Merrill Lynch have depressed stockmarkets around the world.

The SET 100 index dropped 3.1% yesterday and is down 7.5% for the week, although some of the delegates at the Thailand Focus conference argue that the drop would probably have been far greater without the moderately good news on the political front.

The drop in share prices was not universal though. Some stocks rallied strongly when it became clear that Somchai would win the race û thanks to canny investors who have been betting that companies connected to Somchai's family will benefit from the same kind of cronyism that is alleged to have helped Thaksin's business empire grow during his tenure.

Shares in M-Link Asia, which is majority-owned by members of the Wongsawat family, soared 20.7% on Monday, and despite a drop over the past couple of sessions it is up 3.7% since the start of the week. Wyncoast Industrial Park, which used to be controlled by Somchai's family, is up 7% this week after a 32% gain on Monday, on the back of investors' perception that it is still closely connected to the Wongsawats.

Those investors reflect the reality of the political situation in Thailand today û Somchai is just another Thaksin crony who offers no hope of reconciliation with the opposition. Indeed, the list of prime ministerial candidates did not offer much hope from the start. Besides Somchai, the other candidates were Surapong Suebwonglee, the finance minister, who was a founding member of Thaksin's Thai Rak Thai party and a loyal ally, and Sompong Amornvivat, the justice minister and a former senior policeman, just like Thaksin.

The PAD were unlikely to have accepted any of them, but the obstacles to resolving the political rift are far greater than the PPP's choice of leader. The opposition, which is mostly supported by the Bangkok middle classes, is anything but a people's alliance for democracy û the party and its supporters would like to replace Thailand's free elections with a modified form of suffrage aimed at stopping the uneducated rural masses from voting for corrupt populists, but it is difficult to see how that goal will be achieved peacefully.

In the meantime, Thailand's political stalemate is set to continue. Suchart and the other government officials speaking at the Thailand Focus event are right that the country's businesses enjoy strong fundamentals, and that economic growth remains reasonably encouraging, but at some point the lack of effective political leadership must start to seriously hurt the country's future.
¬ Haymarket Media Limited. All rights reserved.
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