• 
• 

Published on September 17, 2007

That is not definitely the case. Consumer confidence remains lacklustre, hitting a new five-year low. Investment continues to be weak. Exports are slowing down. Even worse, more than 300 labour-intensive companies have closed down because of the rising baht and structural problems. The economy will grow at slightly over 4 per cent, much below the country's growth potential of 5-6 per cent.

Could we argue that without a coup, Thailand would have been better off today? Or would it have made no great difference in economic terms.

"In reality, we will never know what could have happened to Thailand if there had not been a coup," says Dr Supavud Saicheua of Phatra Securities. "But toward the end of last year, there were political shocks, demonstrations and gridlock. It was impossible for the [Thaksin] government then to implement any policies such as the free trade agreement with the US or others. Nobody knows how the situation then would have been resolved."

Supavud insists the political crisis should have been allowed to correct itself rather than have the military resorting to a coup.

However, the Surayud Chulanont government the military-installed has implemented several policies that distort the market or undermine confidence in Thailand. Supavud says capital controls have distorted the bond markets, the attempt to revise the Foreign Business Act has undermined foreign investors' confidence and the implementation of compulsory licensing has sent a signal that Thailand does not give priority to intellectual property protection.

"The situation before the coup was an impasse. But these economic policies only subtracted from what already happened," Supavud says.

Dr Teerana Bhongma-kapat, an economist at Chulalongkorn University, agrees nobody can say what would have happened if the political crisis had been allowed to drag on. "Would it have resulted in a bloody clash that could have hurt the country and the economy severely? Or, without the military coup, would the crisis have been resolved peacefully," he queries.

But since the coup is now in the history books, the question should centre around whether it has been worthwhile or is too costly for Thailand as a whole.

Teerana says the Surayud government and the coup leaders have failed to introduce political reforms that would help the country return to a normal path of democracy.

"They are managing the country idly, without any direction. Without a strong democratic foundation, there is no guarantee that a coup will not happen again in the future. Checks and balances are not only necessary, they must be accompanied by effective democracy too," he says.

Another shortfall of the Surayud government is that it set out to be a caretaker government - not an interim government. An interim government, much like the Anand Panyarachun government, would have set priorities and targets for what it would like to accomplish in a one-year time-frame. Then it would have earnestly implemented the policies to achieve the targets.

"But this caretaker government has lost its opportunity to achieve anything meaningful. It only wants to finish its term quickly," he says.

But it might not be totally fair to blame weak consumption and investment on the Surayud government as the Thai economy began to show troubling signs in 2005.

Dr Phairoj Vongviphanond of Dhurakij Pundit University says the Surayud government has made very attempt to undo the legacy of ousted prime minister Thaksin Shinawatra, such as pointing out the danger of economic populism.

"In fact the Thai economy, which was pumped up from early 2001, began to show signs from 2004 that the bubble could not go on any more. And this trend has continued ever since," he says.

"So it is not clear whether the coup, which resulted in political shocks, has dampened domestic consumption and investment because the problems started earlier. The closing down of the labour intensive businesses during this time is a result of the structural problems that were not dealt with in the past," he says.

Looking ahead, Thailand's economic prospects are not particularly bright, even after the election. The new government will be a coalition and it will not have a strong mandate to carry out the policies necessary to modernise the Thai economy.

A report from DBS Group Research (September 11, 2007) expects the Thai economy to recover in the second quarter of 2008 when the new government starts to implement policies.

"By [the second quarter of 2008], we believe Thailand should be settled politically and confidence should return to Thai consumers and businesses," the report says.

Nobody can quantify the cost of the military coup, but it does not seem to make a big difference as Thailand is likely to muddle through for some time to come.

Thanong Khanthong

The Nation