Global Economics

How Thai Business Tunes Out the Protest Routine


Protesters gather at an anti-government rally in Bangkok, Thailand, on Nov. 24, 2013

Photograph by Wason Wanichakorn/AP Photo

Protesters gather at an anti-government rally in Bangkok, Thailand, on Nov. 24, 2013

In most countries, if antigovernment protesters besieged key ministries in the capital, business leaders would be worried. Thailand isn’t most countries.

Opponents of Prime Minister Yingluck Shinawatra have occupied the finance and foreign ministries this week and surrounded several others; the protest leader has pledged there’s more to come. But for now, investors have remained calm. The benchmark Thai stock index has dropped only about 3 percent over the past week, and the currency is down slightly. That’s largely because antigovernment protests are now as common as traffic jams in the Thai capital.

Yingluck is the sister of Thaksin Shinawatra, the populist former premier booted out of office by a military coup in 2006, and the unrest is the latest chapter in a saga between Thaksin’s rural-based supporters and his conservative, city-dwelling opponents. Among the low points in this power struggle were the occupation and shutdown of the airport in 2008 and a violent crackdown that led to the deaths of more than 90 people in 2010. So as bad as things are in Bangkok now, the Land of Smiles has seen much worse. “Widespread disturbances, especially in and around Bangkok, have become an ongoing feature of the political landscape since 2006 without gravely threatening economic or financial stability,” Fitch analysts wrote in a report published today.

The good news for Thailand is business leaders have learned to tune out the noise from the Red Shirts and the Yellow Shirts, the pro-Thaksin and anti-Thaksin groups that have been battling it out for years. “Previous episodes of political upheavals in recent years did not result in discernible outflows of domestic—or foreign … capital,” according to Fitch. “Nor did they widen sovereign credit spreads to the extent of hurting government debt dynamics.”

The endless battling does take its toll. For instance, Fitch notes that political instability has hurt growth by hindering efforts to improve the kingdom’s infrastructure. Yingluck’s government wants to spend $69.5 billion on high-speed rail and other infrastructure projects, but the opposition is challenging the plan in court. Yingluck’s opponents have also criticized her policy of paying inflated prices to rice farmers who are part of the pro-Thaksin movement’s political base.

The central bank seems to believe this new installment of the political drama will damage the economy, which grew at a disappointingly low rate of 1.3 percent in the third quarter. The Bank of Thailand today surprised observers by cutting the benchmark interest rate a quarter of a percentage point, to 2.25 percent. That’s the second rate cut this year. Of the 19 economists surveyed by Bloomberg News, not one predicted the bank would cut this time.

The next showdown comes tomorrow, when the legislature will have a no-confidence vote on Yingluck. She is likely to win, since Yingluck won a parliamentary majority in 2011: The anti-Thaksin forces may be good at protesting in Bangkok but they’re not so successful in appealing to voters in other parts of the country. Indeed, the pro-Thaksin side has won five elections in a row.

The fight is likely to keep going, however, since neither side is strong enough to knock out the other. “The most likely outcome will be a further continuation of a political confrontation that has preoccupied the country for many years,” Cornell professor of government Thomas Pepinsky said via an e-mail alert sent by the university yesterday. “The current protests reflect the fact that the conservative forces retain the ability to bring the country to a standstill when they feel that their opponents are gaining the upper hand.”

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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.

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