Bloomberg News

Thai Calm May Rely on Delaying Thaksin Return to Please Army

July 05, 2011

(Adds deputy prime minister’s comments in seventh paragraph, Standard and Poor’s statement in 11th.)

July 5 (Bloomberg) -- Thaksin Shinawatra’s allies plan to use their electoral mandate to address what they call injustices committed since a coup in 2006. Moving too fast risks conflict with the Thai military that overthrew them.

The win for Pheu Thai, led by Thaksin’s sister, Yingluck Shinawatra, boosted stocks and the currency as investors shed their pre-election jitters and hailed the formation of a stable government. The incoming administration must overcome resistance from Thailand’s military, courts and bureaucracy as it seeks to allow Thaksin to return from a three-year exile and change the constitution to reduce the power of non-elected institutions.

“The biggest risk is that they move aggressively, that they say ‘We have a mandate and will use that to roll back what’s happened since the 2006 coup,’” said Andrew Stotz, a Bangkok-based strategist at Kim Eng Securities (Thailand) Pcl, the nation’s largest stock brokerage. “If he goes too fast and aggressive, the protests will start.”

Yingluck, who has deflected questions on whether Pheu Thai would promote amnesty for Thaksin, called for “unity and reconciliation” at a press conference yesterday in Bangkok at which she announced the formation of a five-party coalition. Thaksin, who has lived in Dubai since fleeing a 2008 jail term for abuse of power, told reporters there that he had no immediate plans to go back.

Golfing Thaksin

“I should be part of the solution, not the problem,” Thaksin, 61, said, adding that he was considering a new career as a professional golfer. Asked if he aimed to reclaim more than $1 billion in wealth seized by the government after his ouster, Thaksin replied: “Don’t worry about it. I’m not starving.”

The prospects for stability depend on Thaksin staying away in the near future, said Kaewsan Atipho, a member of the panel that investigated his assets after the coup. Efforts to return or change the constitution in Thaksin’s favor could provoke more demonstrations, he said.

Thaksin should “shut up” and stay away from Thailand, outgoing Deputy Prime Minister Suthep Thaugsuban said.

“If Yingluck lets her brother control her, she will end up doing bad things like Thaksin had done including dominating government officials and interfering with the army, parliament and judicial process,” he told reporters today. “If she does, that will be the end of her.”

Fifth Straight Win

Pheu Thai won 265 seats in the 500-seat parliament on July 3, the fifth straight time a party linked to Thaksin has won the most seats in an election since 2001. The military ousted him in 2006 on grounds he failed to respect King Bhumibol Adulyadej, 83. The monarch’s 65-year reign has seen nine coups and more than 20 prime ministers.

Thailand’s SET Index was little changed at the mid-day break in Bangkok after posting the biggest advance in Asia yesterday. The baht, which jumped the most since February 2008 yesterday, lost 0.1 percent to 30.51 per dollar. SC Asset Corp. and M Link Asia Corp., companies controlled by Thaksin’s family, retreated after gains yesterday of more than 10 percent.

“The pace and the degree of restoration of political stability will have significant implications for our sovereign ratings on Thailand,” Standard and Poor’s credit analyst Takahira Ogawa said in a statement today. “Given the depth of the political divide, complete reconciliation of the country in the near future may be difficult.”

Overseas investors bought 10.7 billion baht ($351 million) more of Thai stocks than they sold yesterday, the most since Dec. 8, 2010. Credit-default swaps on Thailand fell 7 basis points to 121, according to CMA prices at 4 p.m. yesterday in London.

Constitution Tussle

During the campaign, Yingluck, 44, said she would seek changes to a constitution written after the coup that established a Senate to which half the members are appointed. It also includes a clause that disbands political parties and bans all executive members for five years if one person commits election fraud.

Almost a year after Thaksin’s allies won the 2007 election, the first since the coup, the article was used to disband their party and oust the government.

“The elite still have constitutional mechanisms that they can deploy,” said Chaturon Chaisang, a former cabinet minister under Thaksin and one of 220 lawmakers banned since the coup. “This is not just something in our imagination, it’s happened before. The fundamental problem is still there.”

Efforts by the last pro-Thaksin administration to change the constitution in 2008 were met with seven months of protests from his opponents, who wore yellow shirts to symbolize their loyalty to the monarchy. They seized the prime minister’s offices and stormed Bangkok’s airports as the military ignored requests from the pro-Thaksin government to disperse them.

Red Shirts

The street action and party disbanding paved the way for Prime Minister Abhisit Vejjajiva to take power in a parliamentary vote in late 2008. That has triggered protests ever since from Thaksin’s supporters, who wore red shirts.

The group’s demonstrations last year led to 91 deaths and prompted Abhisit to establish a committee to suggest constitutional changes. His administration later rejected the group’s proposals to strengthen political parties and make the Senate fully elected.

Abhisit, 46, resigned yesterday as party leader after his Democrat party lost the election. In conceding to Yingluck the night before, he said Pheu Thai shouldn’t pursue amnesty for Thaksin.

Thaksin, who founded what became Thailand’s biggest mobile- phone company, draws his support from poorer Thais in the north and northeast. They make up a majority of the population.

His opponents accused him of seeking to monopolize power during his five years as prime minister, threatening the monarchy.

“These people continue to hate Thaksin and they don’t want him back,” said Kevin Hewison, a professor in the Department of Asian Studies at the University of North Carolina. “If there is any move that looks like he’s closer to coming back or if there’s anything they interpret as a whitewash, they will be up for the fight.”

--With assistance from Tony Jordan, Suttinee Yuvejwattana, Anuchit Nguyen, Supunnabul Suwannakij, Vivian Salama in Dubai, Abigail Moses in London and Yumi Teso in Bangkok. Editors: Peter Hirschberg, Anne Swardson

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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