After referendum, Thailand’s economic direction unclear

Reading Time: 3 minutes

Bangkok tuk tukThailand’s referendum on the country’s new constitution on August 7 brought a flattering result for the ruling junta. The ‘Yes’ camp accounted for 61.4 per cent of the voter turn-out, while the ‘No’ faction could garner only 38.6 per per cent, with 94 per cent of the votes counted on the day after.

This means that the majority of Thais gave a mandate to the military to continue running the country and made democracy a casualty in the vote. It also means that, although general elections will be likely held next year, Thai people will not be able to vote a prime minister directly but will get one who has to be approved, if not nominated, by an non-elected Senate with seats reserved for military commanders.

Analysts say that the result reflects the desire of Thai people for stability, which, for some reason, cannot be achieved in this country through an accountable, democratically elected government but just by authoritarian rule.

Thailand has issued 19 constitutions since a constitutional monarchy replaced an absolute one in 1932. Few countries have had more constitutions, and they also lasted only until the next coup of which Thailand had 19 since 1932, 12 of them successful.

Analysts are now split over what the referendum result means for the economy. While some say that it may boost the country’s struggling economy over the coming years as the political environment stabilises, others argue that the junta still has to come up with a viable economic roadmap for which it had no time yet as it was too busy with politics.

Up to now, Thailand’s economy has stumbled amid a lack of external demand for its exports given the sluggish global backdrop and China’s easing, while the political uncertainty within the country had slowed investments. Adding to that is low consumption and a continuously strong baht which is bad for both exports and direct foreign investment.

The World Bank earlier this year projected that Thailand’s economic growth will be the worst among the ASEAN countries, excluding Brunei and Singapore.

The government, however, has been trying to push the economy through infrastructure projects including railway lines and urban mass transport. But a real concept to transform the Thai economy away from its dependence on tourism, agriculture, low-tech manufacturing and industrial assembling is not in sight, limiting the county’s growth potential.

While proposals to move towards a more value-adding and creative economy have been applauded, there are a lot of structural obstacles to that, particularly a education system in dire need of reform, and too few incentives for research and development.

There have also been more obscure suggestion such as the recent one by Permanent Secretary for Finance Somchai Sujjapong that Thailand should become a “parasite economy” by economically clinching itself to other countries with healthy growth rates and cut the ties in an economic downturn. The idea has been quickly dismissed, though, not just because Somchai gave it the name of “Siamese Parasite Model” but because of the bad metaphor in general and the negative association it brings with it.

In turn, some analysts believe that investors look favourably at the outcome of the referendum as it at least buys Thailand some time of stability to get its economic things together and come up with a real, viable plan.

At least, the Thai stock index rose to its highest since April 2015 after the referendum vote, and the bath strengthened towards major currencies, certainly a sign of confidence, but not necessarily good for Thailand’s export-oriented economy.

Bank of Thailand Governor Veerathai Santiphrabhob also found that the ‘Yes’ vote was positive for the economy and investment in the mid-term. The central bank now expects that new record tourist arrivals and government spending on infrastructure will offset weak domestic demand for Thai exports for the rest of the year.

In fact, the military government has talked up plans for big infrastructure projects since seizing power in 2014, but since spent only little. That should change now big projects have gone to auction, Veerathai said, adding spending would increase again in 2017.

What comes after that will depend a lot on the competence of the new administration.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 3 minutes

Thailand’s referendum on the country’s new constitution on August 7 brought a flattering result for the ruling junta. The ‘Yes’ camp accounted for 61.4 per cent of the voter turn-out, while the ‘No’ faction could garner only 38.6 per per cent, with 94 per cent of the votes counted on the day after.

Reading Time: 3 minutes

Bangkok tuk tukThailand’s referendum on the country’s new constitution on August 7 brought a flattering result for the ruling junta. The ‘Yes’ camp accounted for 61.4 per cent of the voter turn-out, while the ‘No’ faction could garner only 38.6 per per cent, with 94 per cent of the votes counted on the day after.

This means that the majority of Thais gave a mandate to the military to continue running the country and made democracy a casualty in the vote. It also means that, although general elections will be likely held next year, Thai people will not be able to vote a prime minister directly but will get one who has to be approved, if not nominated, by an non-elected Senate with seats reserved for military commanders.

Analysts say that the result reflects the desire of Thai people for stability, which, for some reason, cannot be achieved in this country through an accountable, democratically elected government but just by authoritarian rule.

Thailand has issued 19 constitutions since a constitutional monarchy replaced an absolute one in 1932. Few countries have had more constitutions, and they also lasted only until the next coup of which Thailand had 19 since 1932, 12 of them successful.

Analysts are now split over what the referendum result means for the economy. While some say that it may boost the country’s struggling economy over the coming years as the political environment stabilises, others argue that the junta still has to come up with a viable economic roadmap for which it had no time yet as it was too busy with politics.

Up to now, Thailand’s economy has stumbled amid a lack of external demand for its exports given the sluggish global backdrop and China’s easing, while the political uncertainty within the country had slowed investments. Adding to that is low consumption and a continuously strong baht which is bad for both exports and direct foreign investment.

The World Bank earlier this year projected that Thailand’s economic growth will be the worst among the ASEAN countries, excluding Brunei and Singapore.

The government, however, has been trying to push the economy through infrastructure projects including railway lines and urban mass transport. But a real concept to transform the Thai economy away from its dependence on tourism, agriculture, low-tech manufacturing and industrial assembling is not in sight, limiting the county’s growth potential.

While proposals to move towards a more value-adding and creative economy have been applauded, there are a lot of structural obstacles to that, particularly a education system in dire need of reform, and too few incentives for research and development.

There have also been more obscure suggestion such as the recent one by Permanent Secretary for Finance Somchai Sujjapong that Thailand should become a “parasite economy” by economically clinching itself to other countries with healthy growth rates and cut the ties in an economic downturn. The idea has been quickly dismissed, though, not just because Somchai gave it the name of “Siamese Parasite Model” but because of the bad metaphor in general and the negative association it brings with it.

In turn, some analysts believe that investors look favourably at the outcome of the referendum as it at least buys Thailand some time of stability to get its economic things together and come up with a real, viable plan.

At least, the Thai stock index rose to its highest since April 2015 after the referendum vote, and the bath strengthened towards major currencies, certainly a sign of confidence, but not necessarily good for Thailand’s export-oriented economy.

Bank of Thailand Governor Veerathai Santiphrabhob also found that the ‘Yes’ vote was positive for the economy and investment in the mid-term. The central bank now expects that new record tourist arrivals and government spending on infrastructure will offset weak domestic demand for Thai exports for the rest of the year.

In fact, the military government has talked up plans for big infrastructure projects since seizing power in 2014, but since spent only little. That should change now big projects have gone to auction, Veerathai said, adding spending would increase again in 2017.

What comes after that will depend a lot on the competence of the new administration.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid