Thailand - Three Scenarios For The Next Decade

BMI View: Thailand's political situation will remain highly volatile and it is difficult to envision political stability over the next few years. In the event of prolonged social unrest, we do not preclude another military coup occurring, although this would by no means resolve matters.

Thailand's political woes remain deep-rooted and the survival of the existing system as a democratic constitutional monarchy is in question. Indeed, Thailand has a turbulent political history and was hit with frequent changes of government through several bloodless coups in the 20th century. After the end of military rule in 1992, Thailand experienced several short-lived coalition governments. The situation stabilised in the early part of the 21st century under former premier Thaksin Shinawatra from 2001-2006. However, growing opposition to his rule led to a military coup (the 18th since the country became a constitutional monarchy in 1932) in September 2006, demonstrating that there is an inherent instability in the system that has yet to be rectified.

Following the 2006 military coup, the confrontation between the pro-Thaksin (red shirts) and anti-Thaksin (yellow shirts) movements escalated and culminated in a series of large-scale street protests that occasionally turned violent. During the turbulent period, Thailand experienced a change of premier four times, before current Prime Minister Abhisit Vejjajiva took power in December 2008. Although the situation has calmed down over the past year, we do not foresee any major resolution going forward given the deep-rooted differences between the red shirts and the yellow shirts. At best, we expect the government to muddle through (perhaps over a period spanning several years) and find a delicate balance that is acceptable to both sides.

Threats And Challenges To Stability

The rift between Red Shirts and the Yellow Shirts:
This is the biggest source of instability in Thailand. Despite being in exile, Thaksin remains highly popular in the rural northeast by successfully marketing himself as the champion of the poor via a series of policies including low costs health care and monetary support for villages during his term. By contrast, the middle and upper classes (elites) in Bangkok have felt threatened by Thaksin's rise to power. Moreover, Thaksin is also accused of corruption and vote-buying. Judging from the disagreements regarding constitutional changes, the occasional street demonstrations and the appointment of Thaksin as Cambodia's economic advisor, we view the schism between the red shirts and yellow shirts to be a gulf too wide to be bridged in the short term.

The King's deteriorating health:

As Thailand's longest ruling monarch (since 1946), King Bhumibol Adulyadej, 82, has served as a source of stability amid the swings from military rule to democratic rule (and vice-versa) over the last six decades. We believe that his importance should not be underestimated. Currently, the revered King's health is very much in question and we are concerned about what will happen once he passes from the scene. His son Crown Prince Maha Vajiralongkorn is believed to lack authority, and without King Bhumibol acting as a moral arbiter, we see increased risks of unrestrained demonstrations by either the red shirts or the yellow shirts, disrupting the already troubled domestic political situation.

Thailand's military has a track record of stepping into politics, usually by staging a 'good coup' to rid the country of a government which is deemed to have lost support. Whether the coups are actually beneficial for governance is another question entirely, and while the 2006 coup was initially welcomed, the public soon turned against military rule. From our perspective, the frequent coups have a destabilising impact and may have unwittingly stunted the development of a more sustainable political power balance.

Persistent instability in the south:

Thailand's restive south (comprising four Muslim-majority provinces) remains a vexing problem despite concerted attempts to address the issue. The area was originally a semi-autonomous Malay Islamic region before it was annexed by Thailand in 1902. Since that time, there have been several occasions where separatist violence has flared up. A possible solution in the form of setting up 'special administrative zones' in the region was floated in July 2008, but the idea faced strong criticism from several Buddhist organisations. From the Muslim separatists' point of view, the concessions may not be sufficient, given their goal of independence. We believe that Abhisit's administration will continue to rely on military force to keep insurgents in check. Over the longer term, there is a risk that the insurgency will result in terror attacks in tourist areas, including Bangkok.

Thailand's scores a low 56.8 out of 100 in our long-term political risk (LTPR) ratings, dragged down by poor scores in the Characteristics of Polity (50.8) and the Policy-continuity (60.0) subcomponents. Indeed, with the constitutional framework still on shaky ground and no clear path forward towards reconciliation (between the red shirts and the yellow shirts), it is difficult to envision Thailand enjoying political stability over the longer term.

Scenarios For Political Change

The Thai government is seeking to amend the current constitution, which was adopted under military rule in 2007. However, in order to do this, it must win support of other parties, each of which has reasons either to support or oppose the change. This makes compromise difficult. Below, we outline key scenarios for the coming decade

Best-case scenario: Muddling through and reaching a compromise:

Although we do not foresee a resolution of the differences between the red shirts and the yellow shirts in the near term, it is conceivable that a workable solution can be found over the longer term. For this to happen, we need to see two critical steps. Firstly, the current government must make active moves towards engaging Thaksin and his supporters. Secondly, there must be an agreement between both sides to end (or at least minimise) any large-scale protests. Ideally, this would set the stage for negotiations and end the vicious cycle of either side using mass demonstrations as a means to topple the existing government.

Intermediate scenario: A military coup occurs, and an authoritarian government is established:

In the event of a prolonged period of large-scale protests, the military could stage another coup to restore order. Following the coup, Thailand then adopts a heavily managed one-party democracy (best epitomised by Singapore), with the new ruling party (which might absorb several existing parties) attempting to fashion itself as a catch-all umbrella group. While we acknowledge the flaws of such a system, an authoritarian government would have the advantage of being able to pass legislation more easily. This would ensure that the government takes a longer-term view towards the country and economy, allowing for better policy planning and execution, as opposed to the current fighting for political survival.

Worst-case scenario: A military coup occurs, and history repeats itself:

Similar to the intermediate scenario, a military coup occurs after a prolonged period of large-scale protests. However, this time round, there is no attempt to create a lasting authoritarian government. Instead, the military suspends democracy for a year or so, as happened in 2006-2007, but the political situation remains fundamentally unchanged, with society polarised between the red shirts and the yellow shirts. Eventually, democracy is restored, but Thailand finds itself enduring an extended cycle of frequent changes of government and military coups (either indirect or direct).