New Crisis for Thailand?

There are growing concerns in Thailand’s business community that three-months of political chaos gripping the country may be about to enter a new, more dangerous phase that could require the military to step in at the behest of the caretaker government to preserve order.

It may well be, said a western banker, that a reluctant military could be dragged into the situation. So far, the army chief of staff, Gen. Prayuth Chan-ocha, has tried to stay out of the political arena, ostentatiously and publicly voting – in civilian clothes – in the Feb. 2 snap election that anti-government protesters tried to block.

It is considered unlikely that the military, having learned its lesson from many previous coups, will step in without being invited. But some in Thailand are starting to believe that a military regime, however temporary, may be the only alternative.

The country is being tugged in several different ways in addition to the continuing confrontation between protesters on the side of the opposition Democrats, led by Suthep Thaugsuban, and the government. Violence could dangerously escalate as the increasingly assertive Chalerm Yubamrung, a thuggish former police captain and lab or minister in the Pheu Thai government, tries to clear Bangkok's streets of Suthep’s fading legions. At least 19 arrest warrants have been issued for Suthep and his allies. Suthep has laughed at them.

The worsening situation could be seen in downtown Bangkok on Tuesday as police trying to clear protesters from government buildings were met with gunfire, resulting in dozens of injuries and four deaths, including one policeman.

With his protest forces diminishing by the day, according to a business source, Suthep is searching for new ways to escalate the crisis, possibly attempting to provoke a violent confrontation that would bring widespread bloodshed and re-energize the Bangkok elites through outrage. At the same time, said a source who met with Chalerm, the tough-talking official is itching for a confrontation to take out Suthep once and for all.

Another immediate problem is the thousands of farmers on the streets, demanding payment for rice shipped to the government under the abortive rice pledging scheme dreamed up by the Pheu Thai government. That scheme provides for subsidized payments about 50 percent above global market rates. The scheme has resulted in a government debt of nearly US$4 billion owed to up to a million farmers.

The government has been involved in a search for loans to pay off the farmers. However, Thailand’s commercial banks have largely ignored pleas for the loans on the theory that it is unsure what government would succeed the current caretaker government headed by Yingluck Shinawatra, the sister of the fugitive former premier Thaksin Shinawatra, who was ousted from power in a 2006 coup and who has largely run successive governments from a perch in Dubai.

The rice price scheme has also resulted in corruption charges against Yingluck that could see her charged by courts long thought to be sympathetic to the royalists and Democrats.

If somehow the opposition Democrats or some other form of government were to follow, there would be no legal requirement that the government repay the loans. Thaksin himself took a personal role in attempting to persuade the banks to loan the funds, a source who met with him recently said, but he was turned down.

The Government Savings Bank said last week that it had loaned the equivalent of US$150 million to the Bank for Agriculture and Agricultural Cooperatives, which administers the program. However, that is a fragment of the debt. The government has also been on a vain search to sell the 18 million-odd tonnes of rice it has accumulated under the rice pledging scheme. Because of its purchase price, the rice is uncompetitive on world markets.

Wanting their promised money, many of the farmers have added to the chaos by taking to the Bangkok streets to demand payment from a government that has no funds to take care of them.

That leaves the government with a handful of alternatives, none of them particularly appetizing: sell rice at global market rates, taking a huge loss with a lot of the rice already spoiled and, because of the volume for sale, driving down global prices even more. It could raise taxes, hardly viable on a citizenry already alienated from the government. It could cut government spending or simply print money, resulting in galloping inflation. One possibility might be to sell bonds, but once again the legality could be in question if another government comes into power. The farmers are unlikely to be mollified.

The farmers contrast with the relatively disciplined Suthep-led forces, said a businessman who has studied the situation. The pro-Democrat protests began with well-behaved middle class followers who were supplied with food, water and entertainment and directed by leaders with a concrete strategy to bring down the government; the farmers are leaderless, angry, increasingly penniless and potentially uncontrollable.

Other contending forces are the still-loyal pro-Thaksin Red Shirts, the United Front for Democracy against Dictatorship, who voted the Pheu Thai government into power and could see their political power stolen from them either by the courts or other forces.

The Constitutional Court last week sidestepped a ruling on the legality of the Feb. 2 parliament election that the Democrats failed to block. The Election Commission also ruled last week that another round of polls would be held in April in constituencies where the protesters blocked the voting, mostly in the southern part of the country and a few precincts in Bangkok.

In any case, the deadlock continues. Until the April election to fill the remaining seats, a new government can’t be formed and Yingluck’s government has limited control over policy. That leaves the Democrats in their own quandary. The Pheu Thai government overwhelmingly won the seats in the Feb. 2 government after the Democrats boycotted the election. If the election commission allows the polls to fill the remaining seats, the Democrats, at least by the numbers, will be consigned to oblivion in the parliament.

To some extent, the Democrats outsmarted themselves from the start.

The rice pledging program, with its bulging – and now rotting – warehouses, was inevitably going to present a crisis for the government that it would be unable to solve, meaning the farmers would be headed for the streets without any urging from Suthep and his backers.

The best course for the Democrats is probably to just sit tight and hope the pressure builds on the Yingluck government. April is a long way away. By that time a lot of unpaid farmers are going to be very upset. Even with the Red Shirt support from the northeastern part of the country, the Pheu Thai government and its puppet master, Thaksin Shinawatra, could be losing support.

This all takes place against the backdrop of the looming royal succession, with forces contending behind the scenes between the crown prince, Maha Vajiralongkorn, who is rumored to be using royal powers to create his own military, and his sister, the much more popular Maha Chakri Sirindorn, to succeed their ailing father. What the royalists aligned with the palace and the middle class in the streets do not want is for Thaksin Shinawatra, even from as far away as his exile perch in Dubai, to be in power when it comes time for the king to depart.