The Thai business sector welcomed the Constitution Court's ruling yesterday, saying it should lead to a political breakthrough. However, some said it was too early to celebrate, because whether the upcoming new election can return investor confidence depended on the policies of the new government.

The Constitution Court ruled yesterday to nullify last month's parliamentary election, saying it was unconstitutional. The ruling was a bid to end the prolonged political crisis, which has already dented economic growth and delayed budget disbursement.

The stock index rallied 1.91 per cent on investors' euphoric mood and expectations that the US Federal Reserve may soon call off its campaign for interest-rate hikes.

Santi Vilassakdanont, president of the Federation of Thai Industries, said yesterday's ruling responded to the wishes of the majority of the public. "The court's ruling brings more clarity to the situation. Investors will lose confidence in our economy if we have a caretaker government for too long," he said.

He said that although the government had to spend taxpayers' money to organise a new poll, the election should bring about economic well-being in the long term. The present political situation puts the country in limbo.

"From now on, consumers and investors should regain confidence," said Santi. "It doesn't matter which party becomes the government, but the poll should bring about the political stability to enable the new government to proceed with key economic policies, such as free-trade agreements and mega-projects."

Kasikornbank president Prasarn Trairatvorakul said he was not surprised by the court ruling and added that the ruling was a positive development compared with the murky political situation following the snap April 2 poll.

"Good. The situation has unfolded in a good way. It has broken the deadlock. Otherwise, there would be confrontation, which brings about never-ending conflict. But we still have other hurdles to cross," he said.

In spite of the additional budget required for a new poll, Prasarn said the ruling marked a good start. He said all political parties would participate in the poll, and that would make the political mechanism complete.

Bank of Thailand Governor MR Pridiyathorn Devakula said after the Constitution Court's ruling that the central bank would ensure economic and baht stability against any possible setbacks from political uncertainty.

"The central bank will not step in the foreign-exchange market, because the baht is quite stable at the moment, while the rise of the yen and the euro against the US dollar are gaining momentum. Political issues are beyond control, and we must act in accordance with the law," he said.

He believes that the economic situation will be under control if fuel prices do not exceed the current level.

Caretaker Prime Minister Thaksin Shinawatra called last month's elections three years ahead of schedule, in order to defuse anti-government street protests and growing calls for his resignation, due to allegations over scandals. The political stalemate has stalled a number of in initiatives, such as free-trade talks and public-works projects.

Dusit Nontanakorn, secretary-general of the Thai Chamber of Commerce, said it was too early for him to predict whether a new election would regain confidence on the part of consumers and investors, pending the formation of a new government. "We must see their economic policies," he said. "We don't know how long we will have to wait for a new election, and the business sector has immediate problems, especially rising oil prices and the appreciation of the Thai baht, which can erode the competitive edge of their exports."

Aat Pisanwanich, director of the Centre for International Trade Studies at the University of the Thai Chamber of Commerce (UTCC), said a new poll should help end the political crisis. That should in turn prevent GDP growth from sliding below 4 per cent, against the original expectations of 4.7 per cent this year.

"We can wait another three months for an election, in order to see a stable new government," he said, adding that Thaksin should not participate in any new election, to avoid an uproar among his opponents, since he already gave his word he would step down.

Thanawat Phonvichai, director of the UTCC's Economic and Business Forecasting Centre, said if the political situation were resolved, Thailand might still enjoy 4-4.5 per cent GDP growth. Moreover, Bt20 billion to Bt30 billion is expected to be circulated in a new election.

Thai Chamber of Commerce board member Pornpinit Pornpraphan said the political limbo already cost 20 per cent of the country's business opportunities. "Some investors have already turned to neighbouring countries," he said. "Now we have to work hard to maintain the 80 per cent we still have left."

Pornpinit said investor confidence also depended on the character of the new government and whether it would continue important policies like free-trade agreements - a source of criticism by Thaksin's opponents.

Siam City Securities assistant managing director Sukit Udomsirikul applauded the court's ruling for helping restore investor confidence to a certain level. He said investors would have to keep their eyes on the next government's policies and see whether Thaksin would participate in the next general election.

Thai Hotels Association (THA) vice president Prakit Chinamourpong said the tourism business would continue as usual. In spite of the political turmoil, foreign tourists are still coming to the Kingdom.

"During the first four moths, the overall hotel industry increased 7-8 per cent over the same period last year and is expected to keep growing throughout this year," said Prakit.

He added that the government should set a new election date soon, because Thailand would host celebrations for the 60th anniversary of His Majesty the King's accession to the throne.

Association of Thai Travel Agents president Apichart Sankary said politics did not hurt the tourism industry as long as there was no violence.

Business Reporters

The Nation