HDFF Weekly Thailand Review 27/6 – 03/7

HDFF Weekly Thailand Review 27/6 – 03/7

Summary
The Pheu Thai and Democrat parties will wrap up a spirited campaign on Friday with massive Bangkok rallies in front of tens of thousands and broadcast live on satellite TV and streamed online. Then, it’s time for the election. Some 2.6 million people, including 1.07 million in the capital, had registered to exercise their democratic rights ahead of the July 3 vote. The central bank is urging whoever wins the election to keep the current government’s pledge to balance the budget by 2015. The Cambodia government has insinuated that Thailand will not follow through on a formal withdraw because the withdrawal was being used as a ploy for political gain. . In the South, two men working on an irrigation project were killed and five others injured in a bomb explosion in Narathiwat.

Politics
General elections will be held on Sunday, July 3rd, while advanced voting on June 26th already led to a big turnout of voters, some of them therefore only able to cast their vote after the 3pm deadline originally set. (The Nation)
The Thai-Cambodia conflict over the Preah Vihear temple meanwhile continues to intensify and harden the two fronts with Thailand withdrawing from Unesco’s World Heritage Convention (WHC) this week over wording differences in regard to a draft agreement for a management plan for Preah Vihear temple. Prime Minister Abhisit Vejjajiva backed his Minister for Natural Resources and Environment Suwit Khunkitti walking out of the meeting in Paris. Political commentators argue this might be an attempt by the PM to attract voters of the People’s Alliance for Democracy (PAD). (Bangkok Post) Pheu Thai (PT), naturally, criticized Mr. Suwit Khunkitti’s decision to leave the meeting as well as the Prime Ministers backing.
PM Abhisit further used the border conflict to discredit PT and Thaksin Shinawatra claiming their personal relationship with Cambodia’s PM Hun Sen makes them unfit to protect Thailand’s territory along the border. (The Nation)

Economics
According to the National Economic and Social Development Board (NESDB), the Thai economy is expected to grow by at least 3.5% to 4.5% this year regardless of who wins Sunday’s election.
In terms of foreign direct investment (FDI), which is highly relevant to long-term activity in the economy. While we found that elections in general do not create any substantial impact, political unrest can badly damage FDI inflows to Thailand. On average, an event of political struggle leads to a sudden loss of 80% from potential investment inflows. Moreover, it typically takes at least half a year for foreign investors’ anxiety to dissipate and FDI flows to resume. Since FDI accounts for almost 10% of total private investment and also contributes greatly to transmission of know-how and technology, this certainly has detrimental consequences for our economy.

The story is more mixed on the foreign portfolio investment front. Foreign fund flows tend to favor Thai debt more than equity when it comes to political events. By and large, portfolio investment inflows tend to rise after an election.
The central bank is urging whoever wins the election to keep the current government’s pledge to balance the budget by 2015. Pimonwan Mahujchariyawong, an economist at Kasikorn Research Center, said a combination of reducing public holdings in state enterprises, private sector investments and state funds could help the next government meet its promises.”There is room to draw private participants into government investment projects, especially profit-making projects. That could help the government proceed with key public projects,” she said. (Reuters)
However, the air of change should induce more optimism than pessimism, and we have provided some evidence that supports the point. The crux is not the election, but what comes after. From a global standpoint, results are not likely to have a significant impact on the Thai economy particularly due to Asia’s good performance compared to countries such as the US, Europe and Japan which has been causing fluctuations in currencies and product prices. Positive factors also include the strengthening of the Thai Baht, employment growth, liquidity and government measures in lowering living costs. (Bangkok post)

Security
Controversy surrounding the Thai-Cambodia border conflict was heightened this week when Natural Resources and Environment Minister Suwit Khunkitti (supported by Chief Prayuth Chan-ocha) announced Thailand will withdraw from the World Heritage Convention. Thailand has stated that the proposed resolution is not possible because it could lead to the loss of Thai territory. Sources have reported that soldiers have prepped to take action and local inhabitants are preparing to leave their homes once again. UNESCO has announced their deep regret however the Thai government maintains that the army is still overseeing security, monitoring intelligence activities and observing the border. The Cambodia government has insinuated that Thailand will not follow through on a formal withdraw because the withdrawal was being used as a ploy for political gain (Bangkok Post).
As the July 3rd elections inch closer, the national and international community continues to await potential reactions. All major events including the Democrat rally last week and advance voting for those submitting a ballot outside their registered district remained peaceful. In the South, two men working on an irrigation project were killed and five others injured in a bomb explosion in Narathiwat. Second and third bombs at the scene wounded soldiers and bomb disposal units. A village headman was shot to death in front of his home in Yala. (Bangkok Post).
Several important events occurred this week including the shaping of an ASEAN Intergovernmental Commission on Human Rights to work towards creating a declaration on human rights for the Southeast Asian region. Thailand has nominated an international law expert Ms. Seree Nonthasoot as their representative. Sources have also reported a number of Thai army officers visited West Java to study Indonesia’s territorial security and rural guiding officers as a comparison guide for Thailand. Security in Thailand insofar does not reach rural villages. (MCOT.net). The Royal Thai Navy Counter Piracy Task Unit is setting up drills and preparing to leave for Somalia in the Gulf of Aden to fight piracy. The unit will be part of combined maritime forces (CMF) from 25 countries led by the United States. (Bangkok Post).
Energy security is endangered on several fronts as Thailand’s largest energy company, PTT found a leak in a natural gas pipeline. Gas supply has changed from 4.4 billion cubic feet per day to 660 million cubic feet per day. (The Nation). Sources have also discovered Laos has continued to confirm the Xayaburi project, 1 of 11 dams being built, with the support of China, to increase their ability to produce energy. Laos had previously agreed to defer the project after studies showed its potential for environmental damage and food security crisis in Thailand, Cambodia and Vietnam. (Reuters).