Tue Dec 15, 2009
* POLITICAL INSTABILITY
Thailand remains bitterly polarised. A divisive political
conflict, between royalists, urban elites and the military on
one side, and mainly rural supporters of former Prime Minister
Thaksin Shinawatra on the other, shows no sign of ending. Since
Thaksin was ousted in a 2006 coup, Thailand has gone through
six heads of government and faced several disruptive showdowns,
including a damaging siege of Bangkok's airports late last year
and the forced cancellation of an Asian summit. Tensions have
been raised further by the overt support shown to Thaksin by
Hun Sen, prime minister of neighbouring Cambodia.
Key issues to watch: -- Strength of Prime Minister Abhisit Vejjajiva's coalition
government. Abhisit's coalition remains shaky and it is
uncertain whether it could win a second term when elections
areheld. If Abhisit's popular support increases, this would be
broadly positive for Thai markets. But if pro-Thaksin parties
look like returning to power, this would be market-negative
because efforts by "yellow shirts" to topple it -- by any means
-- would resume.
-- The next flashpoint will be January when the pro-Thaksin
United Front for Democracy Against Dictatorship (UDD), or "red
shirts", are planning a big push to oust the government, vowing
to stage a prolonged rally in Bangkok at a critical juncture
for the exiled billionaire. The protest is due to take place at
the same time as a televised censure debate against the
embattled government, where the UDD's parliamentary arm, the
Puea Thai party, will pile on the pressure in a bid to force
house dissolution. The rally will also take place just a few
weeks ahead of a verdict on whether Thaksin should be allowed
to get his hands on some $2.2 billion of his frozen assets.
* THE KING'S HEALTH The 81-year-old King Bhumibol has been in hospital since
Sept. 19. His illness has focused attention on what will happen
when his reign comes to an end. A central issue in Thailand's
political conflict is what role the monarchy and unelected
elites should have in running the country. Many "red shirts"
blame officials close to the monarchy -- in particular Privy
Councillor Prem Tinsulanonda -- for undermining Thaksin and
backing the 2006 coup. Bhumibol is widely respected by all
sides in Thailand's political conflict, so his political
influence is accepted by Thais. But his son and presumed heir,
Crown Prince Maha Vajiralongkorn, does not yet command the same
popular support as his father. Many Thais and political
analysts fear if the crown passes to Vajiralongkorn while
Thailand's political divisions remain unresolved this could
encourage opposing factions to intensify their struggle, with
highly destabilising consequences. [ID:nSP507497] Key issues to watch:
-- Updates on the health of the king. If his health
worsens, this would be negative for markets. A troubled
succession could have a major negative impact on stocks .SETI
and the baht THB= and raise the risk of a sovereign
downgrade.
-- Extent to which Prem remains a focus of protests.
Thailand's strict lese majeste laws mean any discussion of the
succession and the monarchy's role is heavily curtailed. Partly
for this reason, many "red shirts" have focused their protests
on Prem, the most senior royal adviser. If he continues to be a
flashpoint for protests, this is a sign the succession may be
less smooth and orderly than many hope.
MAP TA PHUT INDUSTRIAL ESTATE On Dec. 2, a court ordered the suspension of 65 plants at
the huge Map Ta Phut industrial estate, home to the world's
eighth-biggest petrochemicals hub, after a campaign by locals
and environmentalists concerned about health problems in the
area. The situation has arisen in part because of the failure
of government to set up a body tasked by the 2007 constitution
with ensuring industrial plants respect health legislation. Key issues to watch:
-- The episode has raised concern among investors about the
business climate and government competence. It could dent
profits at top conglomerate Siam Cement SCC.BK and leading
energy firm PTT PTT.BK. The central bank has said economic
growth could be cut by 0.5 percentage point in 2010 if the
problem drags on.
* CORRUPTION AND GOVERNANCE Thailand is widely perceived to have become more corrupt
during the past five years of instability. Investors closely
watch corruption perception indices from the World Governance
Indicators project, Transparency International and others.
Signs of a further worsening will not have a short-term impact
on markets but will damage investment in the longer run. Key issues to watch:
-- Latest estimates of level of Thai corruption. In
Transparency International's 2009 Corruption Perceptions Index,
released last month, Thailand fell to 84th place among 180
countries, from 80th the previous year.
* THE SOUTHERN INSURGENCY The insurgency by separatist Muslims in Thailand's southern
provinces has become more bloody in recent years, but violence
has been almost wholly confined to the south and so has had
little impact on markets. That looks unlikely to change, but
the conflict has the potential to become more worrying for
investors.
Key issues to watch: -- The danger of escalation. So far the insurgency remains
a local, ethno-nationalist conflict. There is no sign al Qaeda
sympathisers have been able to gain any influence over the
insurgency, or that militants have any intention of targeting
foreign businesses or the crucial tourism industry. If that
changes, Thai markets and the economy could be badly hit.
(Compiled by Andrew Marshall, Martin Petty and Alan Raybould)
Reuters India
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