Thai Political Uncertainty Causes Investor Concern

Ron Corben | Bangkok22 February 2010

Photo: AP

Former Thai prime minister Thaksin Shinawatra (file)

Thailand's finance minister says the political uncertainty gripping the country could damage economic growth and investor confidence. Some investors are concerned a Thai Supreme Court verdict against former Thai Prime Minister, Thaksin Shinawatra, due later this week could lead to protests that could destabilize the fragile economy.

Thai Finance Minister Korn Chatikavanij warned Monday that political uncertainties in the country could adversely affect economic growth.

Korn's comments come just ahead of a Friday Supreme Court verdict on whether former Prime Minister Thaksin Shinawatra is guilty of corruption.

If the court finds Mr. Thaksin guilty of corruption, the state could seize up to two billion dollars worth of illegally acquired assets. Some observers believe a guilty verdict could also lead to fresh street demonstrations by his supporters, known for wearing red shirts.

Mr. Thaksin was ousted from power in a coup in 2006. Two years later he fled Thailand ahead of another conviction on corruption charges. A court sentenced the former prime minister to a two year jail term in absentia.

Thai business and industrial leaders say the business climate and the economy could be hit if protests erupt.

Krianglit Sukcharoensin, president of the 500-member Plastic Industries Association says the uncertainties have undermined investor and business confidence.

"The international market they are not confident we can supply product 'just in time' for their requirement of their demand. They will switch and then order from another place," said Krianglit. "Then the investor will suffer so we will have to see."

The concerns from business leaders come just as the economy appears to be recovering from the global recession, on the strength of strong exports. The government has predicted a better than four percent growth for 2010.

But analysts warn the gains may be lost amid fears a guilty verdict will lead to potential violence from pro-Thaksin supporters. The Thai share market has weakened due to the jittery climate.

Vikas Kawatra, head of institutional research for Kim Eng Securities, says the local share market's outlook depends on Thaksin's future plans after the verdict.

"It pretty much depends on what Thaskin will do next," said Vikas. "One thing is for sure, is that he's not going to like it and the extent of money confiscated will increase his frustration but diminish his ability to come back."

Concerns over possible violence has led to the United States, Britain and Australia to issue travel advisories warning their nationals to avoid locations where protests could occur. The tourism industry, with around 14 million arrivals annually, accounts for about six percent of Thailand's national output.

Richard Chapman, general manager of the Sheraton Grande Hotel, says the tourism industry has suffered in recent times because reports of political instability has undermined traveler confidence.

"I'm just hoping and praying that our friends in the world of communications and media will give a fairly good ride over the next few weeks and we can come out of it no worse that we are today," said Chapman.

Potential damage to the economy was evident in 2008 when anti-Thaksin protesters occupied a government administration building against pro-Thaksin government steps to open the way for his return to the country. Later the anti-government protesters occupied the international airport for a week at a cost of millions of dollars in lost tourism and trade revenue.

Mr. Thaksin gained popularity among the urban and rural poor for his populist economic policies. But the urban middle class, that largely backed the 2006 coup, accused him of corruption and abuse of power.