HDFF Weekly Thailand Review 11/7 – 17/7

HDFF Weekly Thailand Review
11/7 – 17/7

Summary
Thailand remains stable and peaceful this week. The expected future ruling Pheu Thai Party (PTP) is gearing up to take over and has both the media and citizens speculating over future decision making. Ms. Yingluck has announced some of her preparations including policy planning and cabinet formation but many sources have indicated the tremendous pressure Thailand’s first female prime minister will soon be enduring. The economy remains steady with signs of growth but key financial players are wary of the effect PTP policies that will impose. Security has been affected in the South of Thailand with a recent increase of violence. Although the emergency decree has been extended for 60 more days, there is noteworthy debate and dialogue relating to future action in the South by both the PTP and military.

Politics
The prime minister to be Yingluck Shinawatra has been working to establish her new cabinet, forming a coalition government consisting of five other small parties and a total of 300 MPs in an effort to encourage political stability. Sources are insinuating that Ms. Yingluck, who has very limited political experience, will be faced with an outstanding amount of political pressure. Aside from the hot button issue of Thaskin and “red shirt’s” political amnesty, the world is waiting to see if officials who were charged with criminal offences will be offered positions in the new government. This could potentially ensure a wide rift between the social divisions. Rumors’ surrounding cabinet members’ trips to visit and discuss the formation of the new parliament with Thaskin has already spawned negative discussion. There has also been significant debate surrounding the promised economic populist policies which could significantly impact the country’s fiscal stability. According the BBC, Ms. Yingluck has a long road ahead to appease the “military, bureaucracy, judiciary, Privy Council, middle class and intelligentsia” (Bangkok Post) (BBC).

The Pheu Thai party has noted its preparation in creating a detailed plan of action, expanding on its policy statements, to ensure effective implementation. The plans will include steps to be taken and time frames and will focus on eight specific areas: economy, social development, education, national security, foreign affairs, labor, energy and agriculture. Private versus public sector, decentralization and development projects were the focus in the past and sources have noted the need for a strong balance in policy formation. The PTP will be reviewing all related laws and revising them if they are incongruent with policy platforms (The Nation).

Economic

As Thailand has yet to fully recover from the global financial crisis, the environment is changing rapidly as the country becomes an enticing destination for various multinationals, especially major automotive companies wanting to manufacturing bases. Additionally, exports from key sectors such as agriculture, electronics, textiles and furniture are consistently rising with volume of goods and services predicted to rise by 8-9% from last year according to forecasts by the Finance Ministry. (Bangkok Post).

Moreover, there are other factors that may affect the Thai economy in the second half this year after the elections which will affect the 2012 budget bill. Factors that should be monitored include policies of the new government, confidence of the private sector, global economic direction, rising trend of the national inflation rate and domestic fuel prices. (Business Day)

Specifically in regards to inflation, SME’s are suffering the most with the rising inflation and increases in interest rates. The president of The Small and Medium Enterprise Development Bank of Thailand warned that the new government’s pledge to lift the daily minimum wage to 300 baht will raise SMEs’ production costs, particularly in labor-intensive industries. Yingluck Shinawatra however, maintains it would improve conditions for farmers, low-wage workers and young university graduates, in part by providing easy credit and lifting wages. To compensate employers paying higher wages, Yingluck has promised to cut the corporate tax rate to 23 percent next year and 20 percent a year later from the current 30 percent. In theory, billions of extra dollars pumped into Thailand’s rural economy will stimulate consumption, creating a Keynesian multiplier effect. Yingluck has vowed to push ahead the “Thaksinomics” revival by funneling into villages through a debt moratorium for farmers and cheap loans which had a knock-on effect on the whole economy, fuelling a boom in household spending. Raising concerns among economists and some business leaders over whether Thailand will see a dramatic increase in debt, and acceleration in inflation.
Thailand’s debt-to-GDP ratio already was expected to rise from a current 42% to above 60%– generally regarded as the safe limit for developed economies — within six years, according to the central bank. A Reuter’s poll on July 12th showed economists had upwardly revised expectations for interest rates following Yingluck’s election victory, and expected the central bank to tighten faster than previously anticipated. According to the average forecast of economists surveyed by Reuters, the benchmark one-day repurchase rate may rise to 3.75 percent by year-end, up from a forecast of 3.50 before the election. (Reuters)

Security

The South of Thailand has experienced a significant amount unrest and violence this week and has been a main topic of discussion in relation to future policy efforts. The Thai Army has announced its plans to create a regiment specially focused in aiding the Southern provinces by next year. The new regiment is an effort to change the approach in diffusing the insurgency. The soldiers recruited to be a part of the regiment will be from the areas of conflict and be familiar with the local Malay-Muslim languages and culture. (Channel NewsAsia) During electoral campaigning, Yingluck promised the three Southern Provinces special autonomy to control their policymaking and public services. The media has been stressing the need for the government and military to work side by side to establish political stability and a concise plan regarding the insurgency. (Eurasia Review).

Throughout the week, in Yala four bombs wounded 12 people at a rubber plantation including rubber harvesters and security unit personnel. In the Raman district, 10 people were injured in coordinated bomb explosions. A teacher was killed in a drive-by shooting and a pick-up truck was destroyed by a roadside bomb. Although no one was killed in the truck, a one meter deep crater was created in the road and scattered shrapnel around the area. In Narathiwat , an imam and his wife were shot at repeatedly and killed by motorcycle gunman 100 meters from their home. Some sources have stated that the increase in violence has been in reaction to the Pheu Thai Party’s win (Bangkok Post). As one of his final actions, Prime Minister Abhisit Vejjajiva extended the emergency decree for another 60 days. (MCOT)

Yingluck Shinawatra has announced that she will not additionally hold the position of defense minister and she will be bringing in new personnel to the cabinet. The nation will be notified of the completed new cabinet one week after the Election Commission officially announces the election results (Bangkok Post).

The International Court of Justice on July 18th will rule on Cambodia’s request to have Thailand withdrawn from the Preah Vihear land. If Cambodia’s request is granted, Thai troops will have to leave immediately and unconditionally. There will also be a ban on all Thai military activities in the area and Thailand will be prevented from impeding
Cambodia’s rights in the future (Xinhua).

HDFF Weekly Thailand Review
11/7 – 17/7

Summary
Thailand remains stable and peaceful this week. The expected future ruling Pheu Thai Pheu party is gearing up to take over and has both the media and citizens speculating over future decision making. Ms. Yingluck has announced some of her preparations including policy planning and cabinet formation but many sources have indicated the tremendous pressure Thailand’s first female prime minister will soon be enduring. The economy remains steady with signs of growth but key financial players are wary of the effect PTP policies that will impose. Security has been affected in the South of Thailand with a recent increase of violence. Although the emergency decree has been extended for 60 more days, there is noteworthy debate and dialogue relating to future action in the South by both the PTP and military.

Politics
The prime minister to be Yingluck Shinawatra has been working to establish her new cabinet, forming a coalition government consisting of five other small parties and a total of 300 MPs in an effort to encourage political stability. Sources are insinuating that Ms. Yingluck, who has very limited political experience, will be faced with an outstanding amount of political pressure. Aside from the hot button issue of Thaskin and “red shirt’s” political amnesty, the world is waiting to see if officials who were charged with criminal offences will be offered positions in the new government. This could potentially ensure a wide rift between the social divisions. Rumors’ surrounding cabinet members’ trips to visit and discuss the formation of the new parliament with Thaskin has already spawned negative discussion. There has also been significant debate surrounding the promised economic populist policies which could significantly impact the country’s fiscal stability. According the BBC, Ms. Yingluck has a long road ahead to appease the “military, bureaucracy, judiciary, Privy Council, middle class and intelligentsia” (Bangkok Post) (BBC).

The Pheu Thai party has noted its preparation in creating a detailed plan of action, expanding on its policy statements, to ensure effective implementation. The plans will include steps to be taken and time frames and will focus on eight specific areas: economy, social development, education, national security, foreign affairs, labor, energy and agriculture. Private versus public sector, decentralization and development projects were the focus in the past and sources have noted the need for a strong balance in policy formation. The PTP will be reviewing all related laws and revising them if they are incongruent with policy platforms (The Nation).

Economic

As Thailand has yet to fully recover from the global financial crisis, the environment is changing rapidly as the country becomes an enticing destination for various multinationals, especially major automotive companies wanting to manufacturing bases. Additionally, exports from key sectors such as agriculture, electronics, textiles and furniture are consistently rising with volume of goods and services predicted to rise by 8-9% from last year according to forecasts by the Finance Ministry. (Bangkok Post).

Moreover, there are other factors that may affect the Thai economy in the second half this year after the elections which will affect the 2012 budget bill. Factors that should be monitored include policies of the new government, confidence of the private sector, global economic direction, rising trend of the national inflation rate and domestic fuel prices. (Business Day)

Specifically in regards to inflation, SME’s are suffering the most with the rising inflation and increases in interest rates. The president of The Small and Medium Enterprise Development Bank of Thailand warned that the new government’s pledge to lift the daily minimum wage to 300 baht will raise SMEs’ production costs, particularly in labor-intensive industries. Yingluck Shinawatra however, maintains it would improve conditions for farmers, low-wage workers and young university graduates, in part by providing easy credit and lifting wages. To compensate employers paying higher wages, Yingluck has promised to cut the corporate tax rate to 23 percent next year and 20 percent a year later from the current 30 percent. In theory, billions of extra dollars pumped into Thailand’s rural economy will stimulate consumption, creating a Keynesian multiplier effect. Yingluck has vowed to push ahead the “Thaksinomics” revival by funneling into villages through a debt moratorium for farmers and cheap loans which had a knock-on effect on the whole economy, fuelling a boom in household spending. Raising concerns among economists and some business leaders over whether Thailand will see a dramatic increase in debt, and acceleration in inflation.
Thailand’s debt-to-GDP ratio already was expected to rise from a current 42% to above 60%– generally regarded as the safe limit for developed economies — within six years, according to the central bank. A Reuter’s poll on July 12th showed economists had upwardly revised expectations for interest rates following Yingluck’s election victory, and expected the central bank to tighten faster than previously anticipated. According to the average forecast of economists surveyed by Reuters, the benchmark one-day repurchase rate may rise to 3.75 percent by year-end, up from a forecast of 3.50 before the election. (Reuters)

Security

The South of Thailand has experienced a significant amount unrest and violence this week and has been a main topic of discussion in relation to future policy efforts. The Thai Army has announced its plans to create a regiment specially focused in aiding the Southern provinces by next year. The new regiment is an effort to change the approach in diffusing the insurgency. The soldiers recruited to be a part of the regiment will be from the areas of conflict and be familiar with the local Malay-Muslim languages and culture. (Channel NewsAsia) During electoral campaigning, Yingluck promised the three Southern Provinces special autonomy to control their policymaking and public services. The media has been stressing the need for the government and military to work side by side to establish political stability and a concise plan regarding the insurgency. (Eurasia Review).

Throughout the week, in Yala four bombs wounded 12 people at a rubber plantation including rubber harvesters and security unit personnel. In the Raman district, 10 people were injured in coordinated bomb explosions. A teacher was killed in a drive-by shooting and a pick-up truck was destroyed by a roadside bomb. Although no one was killed in the truck, a one meter deep crater was created in the road and scattered shrapnel around the area. In Narathiwat , an imam and his wife were shot at repeatedly and killed by motorcycle gunman 100 meters from their home. Some sources have stated that the increase in violence has been in reaction to the Pheu Thai Party’s win (Bangkok Post). As one of his final actions, Prime Minister Abhisit Vejjajiva extended the emergency decree for another 60 days. (MCOT)

Yingluck Shinawatra has announced that she will not additionally hold the position of defense minister and she will be bringing in new personnel to the cabinet. The nation will be notified of the completed new cabinet one week after the Election Commission officially announces the election results (Bangkok Post).

The International Court of Justice on July 18th will rule on Cambodia’s request to have Thailand withdrawn from the Preah Vihear land. If Cambodia’s request is granted, Thai troops will have to leave immediately and unconditionally. There will also be a ban on all Thai military activities in the area and Thailand will be prevented from impeding
Cambodia’s rights in the future (Xinhua).