The business sector is hopeful the Constitution Tribunal will not dissolve the Thai Rak Thai and Democrat parties tomorrow, fearing violence which would further drag down the sagging economy.

Federation of Thai Industries chairman Santi Vilassakdanont said yesterday that Thailand's economy would recover in the third quarter as expected if all parties peacefully accept the tribunal's verdicts on the case involving electoral fraud by political parties, and no violence follows the judgements.

He warned that violence could dampen the investment climate, which has already been sluggish due to many negative factors.

"Not only Thais but even foreigners are anxious about the result of the verdict tomorrow. Honestly, I feel uncomfortable with this situation. However, I expect the tribunal to come up with a clear explanation for its verdict," he said.

Pornchai Chuenchomlada, president of Thai Gem and Jewellery Traders Association, said the tribunal should not dissolve the political parties and should instead punish only some wrongdoing executives.

"This would not stir violence. Importantly, we must have elections later this year," he said.

Pramon Suthivong, chairman of the Thai Chamber of Commerce and the Board of Trade, said that a meeting with members would be called if violence follows the verdicts tomorrow, aimed at finding measures to boost the economy.

The Stock Exchange of Thailand (SET) index yesterday ended at 727.93, gaining 8.79 points or 1.22 per cent. It has managed to stay above 700 points despite worries that foreigners would dump Thai shares ahead of tomorrow's verdict.

President Patareeya Benjapholchai said yesterday after meeting fund managers that foreign investors still showed interest in investing in Thailand, but they prefer waiting for a clearer political picture as well as regulations on foreign investment. They also urged the exchange to introduce new products, preferably privatised state agencies.

To woo more foreign investors, SET and partner Credit Suisse (Thailand) will take 12 listed companies to Singapore, London and New York from May 27 to June 3.

Deputy Prime Minister Kosit Panpiemras also came out to soothe public worries, saying the verdicts should not have any long-term impact on the overall economy.

"Personally, I think nothing should happen and there should be no long-term impact as the overall economic structure is in good shape. There could be a short-term effect as there are uncertainties. Certainly contraction could be seen in some places but then we need to see what are the true causes," Kosit noted.

Asked whether the verdicts would affect the financial market, Kosit said the stock exchange tended to respond quickly to news, and the verdicts could push the index up or down amid the volatile economic condition. Still, he insisted that they would not have a structural effect.

The Army has been prepared to exercise its power in stopping Thai Rak Thai Party supporters from gathering in the city ahead of the tribunal's meeting tomorrow, fearing they could spark violence if their party is dissolved.

The business sector is now hopeful that the tribunal will not dissolve the Thai Rak Thai or Democrat parties, to avoid stirring displeasure among the parties' supporters, and will only punish some of their executives.

Since last year, political uncertainties have cast a cloud over the Thai economy, as investment has slowed down along with a decline in domestic consumption. Many economic houses expected Thailand's gross domestic product to grow about 4-5 per cent, while the University of the Thai Chamber of Commerce came up with the lowest forecast at below 4 per cent.

At the present level, Thailand is at the bottom of the growth table compared to other Asian countries, and this comes amid several negative factors such as oil prices and the strong baht, which have hurt Thailand's competitiveness.

Reflecting the manufacturing sector's low confidence is the Industrial Confidence Index in April. The index sharply plunged from 86.8 in March to 77, the lowest level since the Federation of Thai Industries first conducted the survey in 2002.

"This clearly shows the evident slowdown in the manufacturing sector," said Adisak Rohitasun, vice chairman of the FTI.

The FTI started surveying the manufacturing sector and announced the index in March 2002.

The latest survey covers 432 respondents representing 35 industrial groups covered by the FTI. To the respondents, lower interest rates are the only positive factor while oil prices, the exchange rate and the global economy were negative factors which affect their operating costs and competitiveness.

It has been reported that most operators have started to look for an opportunity to invest in other countries because of lesser competitiveness caused by the stronger baht and the influx of cheap goods from China and Vietnam.

Chalida Ekvitthayavechnukul

The Nation