Thaksin's personal supervision of the relief effort earned him widespread praise and helped propel him to a landslide election victory. His Thai Rak Thai (Thais Love Thais) party has won an outright majority in Parliament -- unprecedented in the 73-year history of Thai elections.
Thaksin is on a roll. True, he has been criticized as an authoritarian leader and economic dreamer. But even before his performance after the storm, he was given credit for pulling Thailand out of the 1997-98 Asian financial crisis, for restoring law and order, and for kick-starting the economy by implementing a populist program that featured cheap medical care, a rotating credit scheme for villages, and a three-year debt moratorium for small farmers. "No other democratic government has launched such a comprehensive plan affecting such a large number of people -- people left behind during 50 years of development," says Pasuk Phongpaichit, an economist at Chulalongkorn University. "It raised his popularity no end."
When Thaksin took power in January, 2001, Thailand was still reeling from the financial crisis that began in 1997 with the collapse of the Thai baht. He used a combination of government pump-priming and populist handouts to return Thailand to growth. Skeptics predicted he would bankrupt the country with his $12 billion recovery program. But in fact, gross domestic product growth has averaged 5.2% annually since 2001. That strong expansion has actually driven down government debt from 57% of GDP to 48%. Unemployment, meanwhile, has dropped, from 5.7% in 2000 to 1.6% in 2004. One source of the new prosperity has been the auto industry, which grew 23.7% in 2004 to produce a record 928,081 vehicles. Bangkok's famous traffic jams, which disappeared for a while during the crisis, have returned with a vengeance.A WATERSHED
Will Thaksin be able to sustain growth for another four years? Daniel Lian, Morgan Stanley's Southeast Asia economist, thinks he will. "The first four years were very demand-driven," says Lian. "Now he wants to steer a policy toward supply creation." Lian says Thaksin will promote second-tier industries such as production of exotic fruits and seafood, plus medical tourism -- sectors where Thailand doesn't have to worry about getting flattened by the Chinese manufacturing juggernaut.
Thailand's success hasn't gone unnoticed by foreign fund managers. In the past five months they've plowed a net $2.5 billion into the stock market, which is up 16% since last summer. On the eve of the election, the California Public Employees' Retirement System (CalPERS) announced it was returning to Thailand after pulling out in 2002, citing lack of transparency. "After four years of stability, we will have another four years of stability," predicts Andrew Stotz, head of research at Macquarie Securities in Bangkok. He notes that no prior Thai Prime Minister has ever served out a full term. "It's a watershed for Thailand."
Still, no one expects the charismatic Thaksin, a billionaire businessman who started out as a Bangkok policeman, to have an easy second term. First he must find a way to suppress an Islamic uprising in the south that is only gaining in strength. More than 500 people died in Muslim-related unrest last year. Thaksin's inability to quell the violence explains the drubbing his party took in three Muslim-dominated provinces. He told reporters the result was "a wake-up call" to better deal with the problem.
And while nobody denies that Thaksin produces results, some still find his methods wanting. He has little tolerance for criticism from Thailand's vociferous media and has been accused of attempting to muzzle it by withholding government advertising. Thaksin's family also controls ITV, the country's leading television station. Human-rights advocates pilloried him for his violent crackdown on the drug underworld in early 2003 that left 2,000 people dead and for his refusal to blame police last year when 78 Muslims arrested during a demonstration died of suffocation in police vans. "I would give this government a B-plus on economic policy and an F on civil liberties issues," says Ammar Siamwalla, a senior economist with the independent Thailand Development Research Institute.
Thaksin's biggest challenge is to keep the economy humming. He plans to move ahead with a plan to spend $26 billion over the next five years on airports, mass transit, and an upgrade of the electricity network. "He has no choice -- if you want an engine of growth it has to be investment," says Supavud Saicheua, head of research at Phatra Securities in Bangkok. It's not clear how the whole thing will be financed, though Thaksin hopes to team up with private investors.
Even Thaksin's harshest critics can't deny his enormous popularity. "Thais always like a strong and decisive leader," says Siripan Nogsuan, a professor of political science at Chulalongkorn University. "But one man alone isn't capable of dealing with all things. For the benefit of the nation, he has to listen more." Eager to maintain his status as the country's most successful political leader in 50 years, the self-styled CEO of Thailand would do well to heed that advice. By Frederik Balfour in Khao Lak