There were renewed calls yesterday for caretaker Prime Minister Thaksin Shinawatra to stand down, for the sake of the suffering economy.

As it became increasingly clear that a large number of voters had rebuked the prime minister by casting protest votes, voices from the economic sector began warning that if Thaksin stayed on, a prolonged political crisis would severely dampen economic growth to less than 4 per cent this year.

A worried business sector agreed that Sunday's snap poll was not the end of the matter because many by-elections are expected to follow.

Federation of Thai Industries vice chairman Plengsakdi Prakaspesat said the protest vote had shown what people want. "If all parties still insist on not to showing any compromise, the country's economy will be worse than what we are experiencing right now."

He suggested that all sides should discuss a way out of the turmoil, once and for all.

"As long as there is a caretaker government, the country's economic growth will be very slow and the confidence of foreign investors and trading partners will drop to a vulnerable point," Plengsakdi said.

The country's three most powerful financial and economic bodies - the Thai Chamber of Commerce, the Federation of Thai Industries, and the Thai Bankers' Association - met yesterday at Dusit Thani Hotel, but they did not produce any common statement on the political issue.

However, the biggest worry of local businessmen is the effect the political turmoil is having on investors' confidence.

Bank of Thailand Governor MR Pridiyathorn Devakula said yesterday it was not surprising that the formation of a new government will be delayed. The central bank will try its best to stabilise the economy.

"We made up our minds earlier that political [turmoil] wouldn't be concluded [by the election]. Our duty is to maintain economic stability," he said.

Pornsilp Patcharintanakul, deputy secretary of the Board of Trade, warned that the uncompromising political stand-off would affect the country's growth. Not only will domestic consumption drop due to declining consumer confidence, but investment and productivity will also decrease.

"The Kingdom's economic growth will drop to below 4 per cent, instead of 4.5 per cent as earlier estimated," he said.

Pornsilp urged the government to convene Parliament within 30 days and, if Thaksin decides to step down, Deputy Prime Minister Somkid Jatusripitak should become the caretaker prime minister as he is the most suitable person at this point.

He said he is also concerned that the country's plans to pursue a number of bilateral free-trade pacts, including that with the United States, may collapse because of the extended political stalemate. "The US may not wait for Thailand to resolve its problems," he said.

Federation of Thai Industries vice-chairman Kiatpong Noijaiboon said he was afraid the intensifying political turmoil will affect investors' decisions to pour their money into Thailand.

"Currently, foreign investors and trading partners are holding their decisions to invest in Thailand. The private sector has also lost its confidence to start new investment," he said.

Kiatpong said that since abstentions outnumbered votes for Thai Rak Thai in many areas, the political wrangle would not end unless the opposition parties participated in upcoming by-elections.

Among the many worries is the 2007 budget.

Finance Ministry spokesman Somchai Sujjapongse said that because of the political turmoil, the budget for fiscal 2007 would be delayed by a few months. The government may not be able to implement the new budget by October as usual and this may slow down some spending on new investment. However, it is expected to have little impact on the economy, while government revenue still flows in.

Somchai said a new government should proceed with the mega-projects, including the mass-transit and logistics projects, to boost the economy.

"We cannot wait for political reform first," he said. "We have to do this together."

BT Asset Management managing director Anusorn Tamajai said that if those chosen to run the new government were respectable people attracting nation-wide trust, things would be alright.

"Government spending and its investment project may be slowed down a bit, but that's okay as the country's financial fundamentals remain in good condition.

"The priority task for the new government is to urgently retrieve the confidence of the people," Anusorn said. "It also needs to reform the political structure."

Somchai Jitsuchon, an economist at Thailand Development Research Institute, said a new government should find it imperative to regain the trust of the public amidst the current instability, but this mission will not be achieved as long as Thaksin holds on to power.

"The new government's priority is to build trust and demonstrate to the people that it is sincere in pushing forward on political reform. The impact on the economy will depend on whether that political reform succeeds," he said.

Aat Pisanwanich, director of the Centre for International Trade Studies for the Thai Chamber of Commerce, said that if the leader of the new government came from the Thai Rak Thai Party, the political conflict would not be solved and economic growth will slide to only 3.9 per cent or 4.1 per cent, due mainly to the broadening of the crisis.

Thai Garment Manufacturers Association president Tienchai Mahasiri said the election result showed that a majority of people were not confident with prime minister.

What business people now want most are a new government and a leader who will help drive of the country's economic growth, he said. He also supported Somkid as the next "caretaker of a leading position" because he is an expert on the economy.

Manit Lertsakornsiri, of Toys Retailing (Thailand), said that after seeing the result of the vote, Thaksin should see how the majority of people thought and should adjust his strategy to fall into line. Although there are a number of people who disapprove of what Thaksin has done, there is an upside to the current turmoil. He said Hong Kong business partners viewed the peaceful demonstrations in Thailand as the mark of a progressive step in democracy.

Kongkiat Opaswogkarn, chairman of the Federation of Thai Capital Market Organisations, said in an interview with Channel 9 that he disagreed with the proposal of a royally appointed prime minister.

"Otherwise, why did we have an election?" he said.

Kongkiat said a national government involving all parties was one possible solution. People with neutral views, with acceptable capability, and with no hidden agendas should be asked to participate in such a new government.

He said the stock market could rally due to short-term speculation on the election results. However, investors should not focus on short-term prospects, but should consider real positive trends.

"I hope that our economy can go ahead further," Kongkiat said. "Good policies should be kept, while bad policies should be reviewed. This will be good for the stock market in long term. We should have experts to review our Constitution."

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