Conflict raises Thai financial risk

He plans to join a “million man march” of supporters of deposed premier Thaksin Shinawatra in Bangkok on Sunday — the latest bid to reclaim power by the mainly rural “red shirt” mass movement that has transformed Thai politics. Even if the rally fails to unseat the government, he says, the struggle will go on.

“We will keep taking to the streets until we get justice,” said the 39-year-old. “I am not afraid to march.”

But even as the latest flashpoint in the five-year political crisis draws nearer, foreign investors are turning increasingly bullish on Thailand. They were net buyers of Thai stocks for 11 straight sessions to Tuesday, with foreign net buying since the start of 2010 now at 12.65 billion baht (US$387 million).

Their optimism is based on three factors — Thai assets are already trading at a substantial risk discount, the economy has rebounded well from the ravages of the global downturn despite bouts of unrest, and the government of Prime Minister Abhisit Vejjajiva is widely expected to survive the impending showdown.

Yet the mood in Thaksin's key strongholds in north and northeast Thailand suggests the medium-term risks for economic stability may be higher than some bullish investors realise.

Thaksin's allies are likely to win elections that must be held by 2011, just as they have in every poll held since 2001. The “yellow shirt” movement of royalist elites and military brass would almost certainly seek to overturn that result, possibly with a coup, as in 2006, or a judicial intervention, as in 2008.

“If it came to another election and Thaksin forces succeed and look like forming a government, there's a very credible risk of further intervention by the establishment,” said Nick Owen, an Asia analyst with the Economist Intelligence Unit.

And if a government they vote into power is turfed out of office for the third time in a row, the outrage among Thailand's rural masses could finally reach a level that threatened prolonged and widespread unrest and major economic disruption.

“If our votes are ignored yet again,” said Mhoo, “then Thailand will see no peace.”

The village of Ban Sa Phra, 300 km (186 miles) northeast of Bangkok, is typical of the rural heartlands where support for Thaksin is strongest. He swept to power in 2001 by promising policies to benefit the poor, and most still see him as a hero.

“All I know is, if Thaksin comes back, everything will get better,” said Doi, a farmer who added that he understood little about politics but was unhappy about fuel costs and the low price he received for his rice and fruit. “I'm 100 percent sure of it.”

Among Thaksin's most popular policies was a scheme offering affordable healthcare, charging just 30 baht per treatment. Saman Srising, another local farmer, rolled up his trouser leg to show a six-inch scar from surgery four years ago. “If it wasn't for Thaksin,” he said, “I could never have paid for this.”

The poor had long grown accustomed to being ignored by Bangkok's elites. Most saw their powerlessness as just an inevitable aspect of poverty. But in a fundamental change to the political landscape, many rural Thais emboldened by their role in putting Thaksin in power have begun to demand that their collective clout at the ballot box be respected by the elites.

Their opponents in the “yellow shirt” movement argue that the poor lack the education to vote sensibly, and so the monarchy, military and bureaucracy in Bangkok must play an active role in overseeing the government and removing it if necessary.

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