The Redshirt-Yellowshirt saga has taken a severe toll on the Thai economy, and there’s still no end in sight

The US $1.38 billion that Thailand’s supreme court recently confiscated from former Prime Minister Thaksin Shinawatra is mere pocket change compared with the financial damage inflicted on the country since the coup that brought down his government in September 2006.

Thai soldiers stop a convoy of supporters of deposed premier Thaksin Shinawatra at a check-point in Ayutthaya Province as they head to Bangkok for a mass anti-government rally on march 13. (Photo: AFP)

In the three and a half years since the tanks rolled onto Bangkok’s streets, the political and social upheavals that have consumed Thailand have been minutely documented. But so far, little effort has been made to add up the economic costs.

Economists say it will probably be impossible to truly calculate, but they agree it must run into tens of billions of dollars. One incident alone—the week-long Bangkok airports blockade by anti-Thaksin protesters in December 2008—cost about $8.5 billion, according to the Bank of Thailand.

That cost, in squandered air freight exports and tourism, does not take into account the lost income in the weeks and months following the airport siege, when many Bangkok and resort hotels were almost empty as visitors stayed away from the country for fear of a recurring blockade.

Other losses are even more difficult to assess, but are believed by most observers to be substantial. Apart from the periodic disruptions of normal economic activity caused by mass protests, there has also been a significant erosion of investor confidence. The governor of the Bank of Thailand, Tarisa Watanagase, blames prolonged political instability for a steady decline in non-government domestic investment.

Thailand’s economy has stuttered since the bloodless 2006 coup that removed Thaksin from power while he was attending a meeting of the UN General Assembly in New York. He has spent most of his time since then in exile to avoid prosecution and, later, a two-year prison sentence handed down to him in absentia in 2008 after he was found guilty of a commercial conflict of interest while he was prime minister.

The 2008 global economic crisis has also hit Thailand’s export-dependent economy hard. But even before many of the country’s major export markets, notably the US, Japan and the EU, went into a severe recession, Thailand’s performance was slipping behind that of fellow Association of Southeast Asian Nations (Asean) members Singapore, Vietnam and Indonesia.

The picture is even grimmer if you look beyond Asean. Although Thailand used to be compared with Taiwan in terms of economic development, today the country’s per capita GDP of $3,850 is only 25 percent of the Taiwanese average.

Thailand’s economy emerged from recession only in the last quarter of 2009, and economists are concerned that the nascent growth could slip in the first quarter of 2010 due to heightened political tensions.

The declaration of a state of emergency in the Bangkok region by Prime Minister Abhisit Vejjajiva in mid-March, giving the military special powers to deal with a massive pro-Thaksin march on the capital, underlined the continuing uncertainty in the country.

The Thaksin factor has not completely destroyed Thailand’s appeal as a place to invest, but it has given some pause to corporations worried about the country’s ability to weather the economic storms it has caused. Japanese firms have long been the biggest investors in Thailand, and a recent survey by the Japan Bank for International Cooperation confirmed that Thailand remains in the top five preferred destinations in Asia for Japan’s foreign cash. But the Japanese are also hypersensitive about anything that could adversely affect Thailand’s business climate.

“Japanese investors consider Thailand to have several positive factors. However, they were concerned about social and political instability,” Stock Exchange of Thailand President Pattareeya Benjapolchai told a Thailand-Japan business forum in February.

In 2009, Japan imported $15.7 billion worth of Thai-made goods and produce, making it second only to the United States as a market for Thailand’s exports.

Not all foreign investors are intimidated by Thailand’s messy domestic affairs, however. General Motors Corp announced in February that it will spend $455 million over the next two years on new vehicle production lines and a new diesel-engine factory.

But even such encouraging signs that Thailand remains an important regional economic player belie deeper worries about the long-term impact of the current political impasse.

Former thai premier thaksin Shinawatra (Photo: AFP)

“It’s the cycle of dislocation that is so damaging to the economy. The continuous pro- and anti-Thaksin infighting at the political and the street-mob levels has a cumulative effect,” a senior political economist at Bangkok University, who did not wish to be named because of the sensitivity of the issue, told The Irrawaddy.

“There is a perceived reluctance to invest in new business with all the uncertainty. We have been living under the shadow of coup rumors since the end of 2009 and this is just no good for investment.

“Add to that the constant threats of street demonstrations by yellow-shirted and red-shirted protesters and you have an undercurrent of anxiety permeating the whole of Bangkok life,” said the academic.

Of course, Bangkok isn’t the whole country, but in a nation as politically and economically centralized as Thailand, what happens in the capital is bound to send wide ripples, dampening hopes of a full recovery from the turmoil of the past few years.  

Before the Supreme Court assets seizure judgment against Thaksin in early March, the government had forecast that the economy could grow 4.5 percent this year after contracting 2.3 percent in 2009. Now the Thaksin-funded United Front for Democracy Against Dictatorship—the Redshirts—are threatening mayhem in revenge, prompting Finance Minister Korn Chatikavanij to warn that any further political unrest would hurt investor confidence and disrupt the economic recovery.

There is an almost comical irony in the fact that thousands of people with no wealth, power or influence are prepared to confront police and the army in defense of a man accused of colossal, self-enriching corruption while holding the highest office in the land.

Whatever the immediate effects of the March Redshirt protests, Thaksin’s specter looks certain to continue casting a shadow over Thailand, whether or not he returns to face his sentence and claim the $918 million the court says he can keep.

Love him or hate him, there is a view among some—and a fear among others—that the former police officer with a doctorate in criminal justice from the United States has changed the country forever, and that there is no going back.

Thitinan Pongsudhirak, a professor at Bangkok’s Chulalongkorn University, says Thaksin let the genie out of the bottle with his populist social policies, which for the first time in Thailand’s history spoke to the millions of rural poor.

“They [the Bangkok political and business leaders] should see this as a wake-up call instead of smearing or demonizing Thaksin,” Thitinan was recently quoted by London’s Financial Times as saying. “Thaksin was a catalyst for what needs to happen.”

But with the energies of the country still consumed by a seemingly endless standoff between the two sides in this conflict, many other things that need to happen, especially on the economic front, seem set to remain on hold for the foreseeable future.