Bangkok Post & Finance Asia: One protestor was shot dead and 45 injured Tuesday, prompting Thailand’s prime minister, Samak Sundaravej, to declare a state of emergency yesterday. The declaration came after three months of protests by anti-government demonstrators demanding the prime minister’s resignation. Pro-government and anti-government protestors clashed overnight despite police intervention near the prime minister’s official compound.
Pro-government demonstrators were demanding the release of the compound after more than a week-long sit-in by demonstrators from the anti-government People’s Alliance for Democracy (PAD). While not unexpected, the state of emergency did put another dent in the investor confidence and media reports say the country’s central bank was forced to intervene to support the baht which fell to its lowest level against the dollar in more than a year. On the Stock Exchange of Thailand (SET), the benchmark index closed down 2.3%. Oil producer PTT, which is the largest stock in the SET index fell 2.3% while Thailand’s largest lender, Bangkok Bank, shed 3.4%. In the first seven months of the year, foreign investors on the SET have sold a net Bt86.2 billion (US$2.5 billion) worth of stocks, pushing the index 23% lower as of yesterday. Moody’s Investors Services and Standard & Poor’s maintained their sovereign credit ratings for Thailand. However, both warned of future downgrades if the political situation continues and S&P said events in the past two weeks have “raised the probability of a negative action on the sovereign credit ratings on Thailand.” The country is rated BBB+ by S&P and Baa1 by Moody’s.
“Escalating political uncertainties – in view of the stand-off between protestors and the country's coalition government – do pose a threat to not only the democratically elected government of Prime Minister Samak Sundaravej, but also to long-term economic stability," says Thomas Byrne, Singapore-based senior vice-president in Moody's sovereign risk group. Some observers say much of the current situation has already been priced in and note that international investors who are still invested in the Thai market are a hardy breed and well aware of the potential risks. Thus many are expected to keep their cool and monitor the development from the sidelines rather than embark on panic selling – at least for now.
The baht appears to be most at risk and currency strategists say it could drift lower towards 35 to the dollar (from a low of Bt34.49 yesterday) over the next few weeks if the protests don’t calm down. Despite the overnight dissolution into violence, army commander general Anupong Paochinda said at a press conference that “if the military has to get involved, it will not use force”. The state of emergency grants general Anupong the legal use of force against demonstrators.
It seems unavoidable though that the current state of unrest and political instability will not have a negative impact on economic growth and consumer spending. Data out Monday showed that the consumer price index was up only 6.4% year-on-year in August, versus 9.2% in July and expectations of 8.7%, suggesting that domestic demand is already tapering off. Forty-three PAD-led state-enterprise labour unions also announced that they would begin selective nationwide strikes in the water, electricity and transportation sectors on Wednesday.
Provincial government offices will be the target of water and electricity cut-offs, while all Thai Airways international flights will be delayed or cancelled and 80% of Bangkok buses will be parked. Over the weekend, PAD demonstrators successfully closed airports in Krabi and Phuket, two destinations popular with overseas visitors. Moody’s warns that another wave of airport shutdowns or street protests could seriously impact tourism receipts, putting into question Thailand’s balance of payments.
According to the Associated Press, both Singapore and South Korea yesterday advised their citizens against travelling to Thailand. The Bank of Thailand currently has US$102 billion in foreign exchange reserves, according to Standard & Poor’s. The PAD, an anti-government group lead by a five-person panel including media-mogul Sondhi Limthongkul and major general Chamlong Srimung, has accused Prime Minister Samak’s government of being corrupt and incompetent since its election in January 2008.
The PAD believes that the prime minister and his People’s Power Party are fronts for deposed former Prime Minister Thaksin Shinawatra and his dissolved Thai Rak Thai Party. Thaksin was deposed in a military coup in September 2006. At the time he was serving as caretaker prime minister after announcing his resignation during snap elections in April 2006. The PAD was a central force in the push for snap elections in 2006. Class issues are at the centre of the current dispute. The PAD is largely supported by middle class Bangkok residents while Prime Minister Samak’s People’s Power Party is supported by upper class business and financial elites but claims to represent lower class and rural issues.
People's Alliance for Democracy (PAD) core member Sondhi Limthongkul on Tuesday showed the first signs of a compromise to end the political stand-off following a fatal clash between protesters and the declaration of a state of emergency. The possibility of a solution came after army chief Gen Anupong Paojinda, who heads the committee to enforcing the emergency decree, refused to take tough measures to disperse PAD demonstrators from Government House. He also called for conciliation.
In an exclusive interview with the Bangkok Post Mr Sondhi said he was contemplating a four-point compromise as the political situation appeared at a dead end. But he stressed that the proposal would be viable only after Prime Minister Samak Sundaravej stepped down from office -- the core objective of the PAD's rally.
Mr Sondhi said the government must promise not to amend the charter in its favour; to observe the Constitution Court's order regarding Preah Vihear temple; to suspend all mega-projects; and to commit to political reforms and increased public participation in politics. Mr Sondhi said the four-point demand was strictly his own proposal, not the PAD's. He had yet to put the matter to other core members. "They must accept the four-point demand _ and only if the prime minister is either Somchai Wongsawat or Surapong Suebwonglee," said Mr Sondhi.
He predicted the emergency decree would backfire on Mr Samak, as although the army chief has been given control over Bangkok he is unwilling to wield the power. He expected Mr Samak would resign in the next few days.
At Government House, the PAD rally continued in defiance of the state of emergency, prompted by the clash early Tuesday which left one dead and 43 others injured. The dead man was identified as UDD member Narongsak Krobthaisong, 55, the Narenthorn Emergency Response Centre said. Gen Anupong told a press conference after a meeting between senior military and police officers that officials would not exercise the powers granted by the emergency decree to end the PAD demonstration. "Negotiations will be used in ending the problem, not simply the force of law," he said.
His committee's objective was only to keep the pro-and anti-government sides apart. The political stand-off could still be solved through negotiations. "If the people are united, the army is one with the people. When the people are divided, there is no place for the army. The army has to find an acceptable way out for the divided camps, and without any losses." He said unarmed military and police personnel would maintain law and order. "Only legal and democratic means should be used to solve the stand-off. Legislative branch or parliament should be responsible to end this problem," he said.
Mr Samak defended his declaration of a state of emergency, saying he carefully consulted all parties concerned for two hours before announcing his decision. The decree would not be enforced for a long period,he said, but gave no indication when it would be lifted. Mr Samak said he considered the decree to be the best and most gentle measure to restore law and order, even though it could cause some trouble for people. "I do this to douse the fire. When it is done, everything will return to normal. People went about their business as usual until [the Tuesday morning] incident. I had to use the instruments at my disposal. It will only be enforced for a short while," Mr Samak said.
The declaration of the state of emergency has triggered new calls for Mr Samak to resign. Academics, media outlets and civil groups issued statements, calling on the premier to quit. However, a group of Thammasat University lecturers broke ranks and demanded a House dissoluhtion instead.
PAD member Somkiat Pongpaiboon, speaking from the group's main stage, told thousands of demonstrators the alliance would only enter into negotiations after Mr Samak resigned. The alliance would not negotiate with Gen Anupong or any other individual or group appointed by the government.
PAD lawyers Nitipon Lamlua and Suwat Apaipak on Tuesday lodged a petition with the Supreme Administrative Court against the state of emergency order and seeking its temporary suspension until a ruling is given. They also urged the Supreme Administrative Court to refer the petition to the Constitution Court for a ruling if the matter is outside its jurisdiction. The move is echoed by a group of senators led by Somchai Sawaengkarn. Mr Somchai said the decree was not justified. Police did too little to prevent the violence between anti-and pro-government demonstrators. "Since the decree is not justified, the decree therefore tramples on civil liberties and is unconstitutional," he said.
They disagreed with the the argument an executive decree does not lie within the jurisdiction of the Administrative Court. The senators believe the government is exercising administrative power through the imposition of the state of emergency.
p/s photos: Aum Patcharapa Chaichua