SCENARIOS-Is there an escape route from Thailand's crisis?Mon Apr 20, 2009 4:42am EDT
By Andrew Marshall, Asia Political Risk Correspondent
SINGAPORE, April 20 (Reuters) - Bangkok was under a state of emergency for a ninth day on Monday to contain political violence that has seen troops clash with protesters, and an assassination attempt on the leader of the royalist pro-government movement.
Prime Minister Abhisit Vejjajiva has said it will stay until he is sure red-shirted supporters of former premier Thaksin Shinawatra have abandoned their anti-government protests.
Following are possible scenarios for what could come next, and their implications for markets:
ABHISIT HOLDS ON BUT THAILAND REMAINS TURBULENT Abhisit's government did not win a mandate at the polls -- it was formed in December after "yellow shirt" royalist protesters occupied Bangkok's airports and the courts dissolved the previous ruling party loyal to Thaksin.
But he easily survived a no-confidence vote in parliament last month, and while the cancellation of an Asian summit on April 11 was deeply embarrassing, he restored some confidence by bringing the Bangkok unrest to a relatively peaceful resolution.
This means his government looks likely to hang on to power for the moment. But pro-Thaksin protesters, supported by millions of rural poor, are unlikely to give up their struggle to disrupt the government and force elections.
The most likely scenario, analysts say, is that a weak government, which should be focusing on dealing with the global economic crisis, will remain distracted by political unrest.
Thailand would slip further behind regional peers as an attractive place to invest. The bahtwould weaken and the stock market .SETI would remain weighed down by political risk. Sovereign agencies and political risk analysts have been steadily downgrading their outlook for Thailand. Most recently, Fitch cut Thailand's sovereign ratings on Thursday.
ABHISIT'S GOVERNMENT CONSOLIDATES POPULAR SUPPORT
A less likely possibility is that Abhisit seizes the moment after ending the unrest and consolidates popular support. Many ordinary Thais are sick of the political turmoil.
If enough of them are prepared to give him a chance, and with Thaksin losing face after the protests fizzled out, the Abhisit administration may start to look less shaky.
Signs Abhisit is becoming more popular would be bullish for stocks and the baht, analysts say. If he calls elections and gets a stronger mandate, that would also be positive for markets.
Thailand's finance minister said last week the government will expand its fiscal stimulus package to try to restore confidence. If enough of that money is used in projects that benefit the rural masses, they may be won over.
And with the IMF and ratings agencies saying Thailand can safely borrow plenty more without causing concern, intelligent economic policymaking could help Abhisit buy his way to greater support while also tackling the impact of the financial crisis.
PRO-THAKSIN PARTIES REGAIN POWER
Given Thaksin's continued support among the poor, parties backing him could well return to government in an election. But the military, the judiciary and the royalist yellow-shirted mobs would almost certainly resume efforts to oust the government.
The result could be another military takeover, a return to mass protests on the streets by the yellow-shirts, or another judicial intervention that would leave Thailand's dispossessed more embittered and angry than ever.
Any of these developments would be deeply bearish for the baht and stocks. Investment would be further hit and sovereign ratings would almost certainly be downgraded. Thailand would remain locked in political crisis, with divisions only widening.
ANOTHER COUP
Coups are always possible -- Thailand has seen 18 actual or attempted ones since 1932, most recently in 2006. A coup could happen if pro-Thaksin parties regain power, if the military begins to regard Abhisit as insufficiently pliable, or if political stalemate continues with fresh unrest on the streets.
Analysts say another coup would not be good for markets, unless it was seen as an intervention to prevent major unrest.
A return to military government would further deter foreign investors and be unstable in the longer term, as it would do little to resolve Thailand's inherent political divisions.
"NATIONAL UNITY" ADMINISTRATION EMERGES
Analysts see a small chance a "national unity" administration could emerge from the turmoil, if Abhisit reaches a deal with Thaksin and his supporters, perhaps by offering to drop corruption charges against the ousted former premier and allowing him to return from self-imposed exile. But Abhisit has said he will not negotiate with his political nemesis.
A unifying political figure may also emerge with the clout to broker compromises. This seems a long way off.
THE WILD CARD -- ROYAL SUCCESSION
One unifying figure is King Bhumibol Adulyadej, widely respected by Thais whatever their political affiliation. But while the king is revered, the role of the monarchy in Thai politics is a deeply divisive issue. Royalists in the yellow camp support an interventionist monarchy, while many of Thaksin's supporters resent the power of unelected Thai elites.
Bhumibol's son and presumed heir, Crown Prince Vajiralongkorn, commands little of his father's popular support. And with the 81-year-old king facing regular health scares, the issue of royal succession could erupt at any moment.
Because of Thailand's lese majeste laws, public discussion of the monarchy's role in politics is banned. But privately, many Thais say they fear the country's divisions could worsen if the king dies, with a risk of violence between competing factions.
That would be the most bearish scenario of all for Thailand. (Editing by Bill Tarrant)
By Andrew Marshall, Asia Political Risk Correspondent
SINGAPORE, April 20 (Reuters) - Bangkok was under a state of emergency for a ninth day on Monday to contain political violence that has seen troops clash with protesters, and an assassination attempt on the leader of the royalist pro-government movement.
Prime Minister Abhisit Vejjajiva has said it will stay until he is sure red-shirted supporters of former premier Thaksin Shinawatra have abandoned their anti-government protests.
Following are possible scenarios for what could come next, and their implications for markets:
ABHISIT HOLDS ON BUT THAILAND REMAINS TURBULENT Abhisit's government did not win a mandate at the polls -- it was formed in December after "yellow shirt" royalist protesters occupied Bangkok's airports and the courts dissolved the previous ruling party loyal to Thaksin.
But he easily survived a no-confidence vote in parliament last month, and while the cancellation of an Asian summit on April 11 was deeply embarrassing, he restored some confidence by bringing the Bangkok unrest to a relatively peaceful resolution.
This means his government looks likely to hang on to power for the moment. But pro-Thaksin protesters, supported by millions of rural poor, are unlikely to give up their struggle to disrupt the government and force elections.
The most likely scenario, analysts say, is that a weak government, which should be focusing on dealing with the global economic crisis, will remain distracted by political unrest.
Thailand would slip further behind regional peers as an attractive place to invest. The baht
ABHISIT'S GOVERNMENT CONSOLIDATES POPULAR SUPPORT
A less likely possibility is that Abhisit seizes the moment after ending the unrest and consolidates popular support. Many ordinary Thais are sick of the political turmoil.
If enough of them are prepared to give him a chance, and with Thaksin losing face after the protests fizzled out, the Abhisit administration may start to look less shaky.
Signs Abhisit is becoming more popular would be bullish for stocks and the baht, analysts say. If he calls elections and gets a stronger mandate, that would also be positive for markets.
Thailand's finance minister said last week the government will expand its fiscal stimulus package to try to restore confidence. If enough of that money is used in projects that benefit the rural masses, they may be won over.
And with the IMF and ratings agencies saying Thailand can safely borrow plenty more without causing concern, intelligent economic policymaking could help Abhisit buy his way to greater support while also tackling the impact of the financial crisis.
PRO-THAKSIN PARTIES REGAIN POWER
Given Thaksin's continued support among the poor, parties backing him could well return to government in an election. But the military, the judiciary and the royalist yellow-shirted mobs would almost certainly resume efforts to oust the government.
The result could be another military takeover, a return to mass protests on the streets by the yellow-shirts, or another judicial intervention that would leave Thailand's dispossessed more embittered and angry than ever.
Any of these developments would be deeply bearish for the baht and stocks. Investment would be further hit and sovereign ratings would almost certainly be downgraded. Thailand would remain locked in political crisis, with divisions only widening.
ANOTHER COUP
Coups are always possible -- Thailand has seen 18 actual or attempted ones since 1932, most recently in 2006. A coup could happen if pro-Thaksin parties regain power, if the military begins to regard Abhisit as insufficiently pliable, or if political stalemate continues with fresh unrest on the streets.
Analysts say another coup would not be good for markets, unless it was seen as an intervention to prevent major unrest.
A return to military government would further deter foreign investors and be unstable in the longer term, as it would do little to resolve Thailand's inherent political divisions.
"NATIONAL UNITY" ADMINISTRATION EMERGES
Analysts see a small chance a "national unity" administration could emerge from the turmoil, if Abhisit reaches a deal with Thaksin and his supporters, perhaps by offering to drop corruption charges against the ousted former premier and allowing him to return from self-imposed exile. But Abhisit has said he will not negotiate with his political nemesis.
A unifying political figure may also emerge with the clout to broker compromises. This seems a long way off.
THE WILD CARD -- ROYAL SUCCESSION
One unifying figure is King Bhumibol Adulyadej, widely respected by Thais whatever their political affiliation. But while the king is revered, the role of the monarchy in Thai politics is a deeply divisive issue. Royalists in the yellow camp support an interventionist monarchy, while many of Thaksin's supporters resent the power of unelected Thai elites.
Bhumibol's son and presumed heir, Crown Prince Vajiralongkorn, commands little of his father's popular support. And with the 81-year-old king facing regular health scares, the issue of royal succession could erupt at any moment.
Because of Thailand's lese majeste laws, public discussion of the monarchy's role in politics is banned. But privately, many Thais say they fear the country's divisions could worsen if the king dies, with a risk of violence between competing factions.
That would be the most bearish scenario of all for Thailand. (Editing by Bill Tarrant)
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