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Updated Thursday, December 4, 2008 10:12 am TWN, By Andrew Marshall, Reuters

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Thailand’s country risk ratings worsening despite temporary respite in protests

SINGAPORE -- Thailand’s country risk profile is worsening despite a temporary respite in protests that shut down Bangkok’s airports, because no solution is in sight to the fundamental power struggle undermining the country’s stability.

The royalist anti-government People’s Alliance for Democracy (PAD) has pledged to end its street protests and crippling airport sieges following a court ruling that disbanded the governing political party, backed by exiled former Prime Minister Thaksin Shinawatra, for electoral fraud.

But the court’s decision was long expected and Thaksin’s allies had already prepared a new “shell” party which can take over power and vote for a new prime minister. The struggle between the pro-Thaksin “red shirts”, with their strong rural support, and the mainly urban “yellow shirts” of PAD goes on.

“The anti-Thaksin forces have won a battle but the larger conflict is far from over,” said Chris McKee, head of the U.S.-based International Country Risk Guide.

“Ultimately, the problem with Thailand ... is that there is a class divide, largely between urban (bureaucratic elite and middle class) and rural elements of society, that appears irreconcilable for the moment,” he said.

Eurasia Group analyst David Kiu also said the court ruling had done nothing to resolve Thailand’s destructive divisions.

“New elections are now more likely, but the fundamental conflict between allies and supporters of ... Thaksin and the Bangkok middle class and elite remains intact,” he said.

Analysts said that although the court’s decision had provided a face-saving way to end the airport blockade and the immediate political crisis — which was having a serious impact on the economy — in the long run it just meant further instability.

IHS Global Insight analyst Kristina Kazmi said new elections were not a solution — pro-Thaksin groups would be likely to again win a majority thanks to their widespread rural support, anti-Thaksin elites would relaunch protests, and the “cycle of instability” that has trapped Thailand would continue.

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