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That Thaksin Shinawatra's Thai Rak Thai party claimed the largest electoral victory in Thailand in recent times, despite a previous administration that in 3 short years oversaw a steady recovery of the Thailand economy, and despite Thaksin's impending Constitutional Court review of a National Counter Corruption Commission graft indictment, should come as no surprise. Popular explanations include the Thai love of novelty and change, to the somewhat jaundiced view that corruption is so broadly entrenched in Thai politics that the whole bunch are crooks, so corruption becomes a non-issue... Thaksin did lead a very professional campaign. The promise of 1,000,000 Baht to each village if he was elected was a master stroke, if expensive. The promise of a moratorium on farmer's debts targeted those most affected and aggreived by the continued fallout from Thailand's financial crisis. To the poor farming communities of the North and North East especially, badly needed cash is the key motivator, and the closer it looks, the better it glitters. To traditional Thais, culturally attuned to looking after today rather than tomorrow, cash today is what matters. Tomorrow can look after itself. Thaksin also cleverly exploited nationalist sentiment in the wake of IMF intervention post crisis and the increasing foreign ownership of Thai companies, especially in the backing and finance sector. Thaksin also appealed to the considerably wealthier Bangkok, with a panache in campaigning contrasting to the "boring and traditional" Democrat campaign and diaplaying a penchant for throwing around cash that Bangkok yuppies, bored with declining incomes and looking for a saviour - could not resist. Finally his massive funding resources enabled him to "buy" political talent from other major parties - notably the Democrats and NAP. Indeed we have noted in a previous column that only English soccer players are quicker to swap loyalty for the almighty buck. All overcame the disadvantages of a party just a couple of years old, and indeed retained enough strength to propel it to victory on Saturday. Yet an even more credible explanation lurks in the Thai psyche. When the Rat first worked in Thailand, the copper on point duty on the route to work used to approach close by my motorbike taxi and touch my arm as we rode past. The first time it was disconcerting, making me think what possibly I could have done wrong, fingering the 500 Baht note ready to discourage any argument over perceived wrong-doings. A friend however explained that this behaviour, despite the general Thai discomfort with physical contact, was meant to "rub-off" some of my "luck" to the rubberer. Similarly, to many Thais (though certainly not all), symbols of wealth are the best indicator of substance. To visiting business people, the Armani suit, polished leather shoes, the Rolex watch, and designer briefcase are just as important, if not more, than your proposal. And so it is with Thaksin. Many Thais hope that the "luck" of Thaksin - reputably Thailand's richest man, amassing his wealth from a media empire from humble beginnings as a copper himself - will rub off on them. Predictably it was in the poorer Northern and North Eastern regions (the latter more culturally akin to neighbouring Laos than Thailand and Bangkok), which fell to Thaksin the hardest. In Thailand, nothing succeeds like success. The question is now whether Thaksin can deliver to his constituency the luck that I failed to rub off on my own neighbourhood copper - who I still regularly see on point duty on various intersections in the capital. Those who have added up the figures have already warned of the downside implications of Thaksin's expansionary economic vision and the cost of meeting his promises. And Chuan's Democrats, despite the disaffection displayed by many Thais at the ballot box, did as good a job as could be expected, and perhaps better, inheriting an economy showing all the symptoms of a terminal disease under the patronage of a previous administration that notably included Thaksin as Deputy PM. Things could have been much worse, and indeed the first year of Chuan "Mr Clean's" Leekpai's rule elicited great praise locally and internationally. When first elected, not only was Thailand the center of the South East Asian financial crisis, with the Baht and stock markets tumbling, it was also undergoing great change with a new Constitution, established in part to further establish democracy and attack money politics. The currency recovered, not to previous levels, but at least to manageable levels, and the stock market showed fast growth as well. Even as of last week, the Thai stock market had shown greater growth over the three year period than neighbouring Malaysia, where electors seem quite happy with their leaders. That Thai voters felt that Chuan was moving too slow and that the economy was in stagnation could be due in some part to the still unaccepted fact that Thailand's previous steadily rising standard of living, as many others in the region, was based on a bubble economy based on the greed and short-sightedness of both local and international business and investors. What hasn't sunk in yet is that the growth of the late 80's and much of the 90's, was based less on achievements in business profitability and cost-effectiveness, but an international investment system gone badly awry where fundamentals became secondary considerations. This period was the exception, not the rule. Like other countries, a lingering belief fostered by the leadership that the Asian crisis was not of local doing and therefore beyond their control, and businesses grown fat by achieving success without any major effort during the bubble decade, brought growth to a stalemate just as economists were crowing that the Asian crisis had ended. The truth was that the pendulum had only returned to the status quo. Continued growth however, was dependent on making the changes required to move from privileged investment centres to competitive investment centers. Restructuring, increasing transparency, productivity improvements, cost cutting, and increasing efficiency stopped in their tracks as South East Asia showed signs of recovery. Those changes that were implemented mainly affected the middle, working, and poorer sectors, rather than the ruling elites, leaving electors acutely aware of their loss of spending power, without any concrete evidence that things will get better in the future. Can Thai Rak Thai do better? The extent of Thakin's victory will see the Thai stock market increasing in value, perhaps by up to 10% this week, yet we don't expect a similar effect on the currency. The stock market has been held back the last few months by uncertainty on the election result already and some post election euphoria, particulalry on the past of local investors, and a market correction is inevitable. Currency value is a more taciturn and circumspect indicator of economic health. Nobody really knows what effect Thaksin's impending trial (Thaksin's defence of assets being transferred to accounts in the names of others is that of forgetfulness, and the mistakes of his employees), will have on the Thai economy. Conviction would mean that Thaksin would have to retire from politics for 5 years. Even if this occurs Thai politics has a way of working itself out, and the Generals are promising that coups are a thing of the past. In the meantime, the Thai Rak Thai party has returned an electoral victory so large that Thaksin has to do few deals with other parties, is able to govern on their own right, and Thaksin can handpick a cabinet from loyalists. In the unlikely event that Thaksin becomes marginalised or seen as a failure (a la Anwar Ibrahim in Malaysia who languishes in the big house), expect his support to decrease fast. The success factor, which got him into power, would no longer apply. The best thing that Thaksin has going for him is that he is a businessman (as CEO of Shin Corps), though success in business is not usually a strong predictor of success as a national leader. Managing a country of 60 Million is far more complex and different from any corporate enterprise, though some management skills are certainly transferable. In Asian Business Magazine in 1995, Thaksin said of his management style:
"...When you start a company, you need someone to propel it, to set a vision and force everyone to work like barbarians. But after a certain point you need a builder, who must be professional, so they don't need someone like me anymore, who might push too hard..."Thai Rak Thai's nationalist platform suggests cause for concern for current and potential foreign business owners, though we feel that Thaksin's pragmatism may well temper any emotional decisions in this arena, especially if his well-known delegation skills empower pragmatic and business-savvy advisers. Again a wait-and-see approach is advisable. Lurking in the background however is evidence of an "Asian values" style leader. Already journalists working for his ITV TV station, Thailand's only "independent" station have reported instructions from high on reporting priorities. Coverage of Thailand's biggest story of the last month - Thaksin's own indictment on graft charges by the NCCC has received almost no coverage. Given past behaviour and statements, also expect Thaksin to be a staunch supporter of the "non-interference" policy in ASEAN, the culture of secrecy which keeps discussion of PAN-ASEAN policy amongst the elite rather than the people. At stake may well be Thailand's hard fought reputation as one of the most democratic and free nations in Asia, opting for "strong leadership" and fast recovery rather than listening to all the disparate views in Thailand. Particularly he needs to listen to the Southern provinces, which remain the Democrat stronghold. Most importantly Thaksin has to convince Thais that continued prosperity requires more than voting in a successful person as Prime Minister and hoping the luck rubs off. Unfortunately, from the pollies he bought off, to the provincial farmers and the Bangkok yuppie dreamers that voted him in, it's going to be a hard grind.
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© Asian Business Strategy & Street Intelligence Ezine 2000
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