Thailand's Economic Recovery 9789812306401

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Thailand’s Economic

Recovery

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The National Thai Studies Centre (NTSC) of Australia, based at the Faculty of Asian Studies in the Australian National University, promotes the study of Thailand in all academic disciplines, Thai language instruction, and public awareness of Thailand. It also supports linkages with Thailand in a broad range of fields, including education, culture, public administration and business. Among its principal activities are the holding of an annual Thailand Update conference, which provides an in-depth examination of Thai political, economic and social developments in the preceding 12 months. Further details are available at . The Institute of Southeast Asian Studies (ISEAS) was established as an autonomous organization in 1968. It is a regional research centre dedicated to the study of socio-political, security and economic trends and developments in Southeast Asia and its wider geostrategic and economic environment. The Institute’s research programmes are the Regional Economic Studies (RES, including ASEAN and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social and Cultural Studies (RSCS). ISEAS Publications, an established academic press, has issued more than 1,000 books and journals. It is the largest scholarly publisher of research about Southeast Asia from within the region. ISEAS Publications works with many other academic and trade publishers and distributors to disseminate important research and analyses from and about Southeast Asia to the rest of the world. ii

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Thailand Update Series

Thailand’s Economic

Recovery Edited by Cavan

Institute of Southeast Asian Studies Singapore

ThaiR_half&titlepgs.indd 2

Hogue

Australia

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First published in Singapore in 2006 by Institute of Southeast Asian Studies 30 Heng Mui Keng Terrace Pasir Panjang Singapore 119614 E-mail: [email protected] Website: and National Thai Studies Centre Faculty of Asian Studies Australian National University Canberra © 2006 Institute of Southeast Asian Studies, Singapore All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies or respective copyright holder. The responsibility for facts and opinions in this publication rests exclusively with the editor and contributors and their interpretations do not necessarily reflect the views or the policy of the publisher or its supporters. ISEAS Library Cataloguing-in-Publication Data Thailand Update (Conference) (2004 : Macquarie University) Thailand’s economic recovery : proceedings of the National Thai Studies Centre annual Thailand Update 2004 / edited by Cavan Hogue 1. Thailand—Economic conditions—1986—Congresses. 2. Thailand—Politics and government—1988—Congresses. 3. Thailand—Foreign economic relations—Australia—Congresses. 4. Australia—Foreign economic relations—Thailand—Congresses. 5. Environmental policy—Thailand—Congresses. 6. Ethnicity—Thailand—Congresses. 7. Terrorism—Thailand—Congresses. I. Hogue, Cavan II. Macquarie University. III. Australian National University. National Thai Studies Centre. IV. Title V. Title: Thailand Update 2004 DS586 T367 2004 2006 ISBN 981-230-349-9 (soft cover) ISBN 981-230-352-9 (hard cover) Typeset by Superskill Graphics Pte Ltd Printed in Singapore by Oxford Graphic Printers Pte Ltd iv

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Contents List of Contributors

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Preface

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Introduction

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The Resilience of the Thai Economy Bhanupong Nidhiprabha

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Thaksin’s Thailand: Thai Politics in 2003–04 Michael Connors

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Intercultural Realities: Working in Thailand Tamerlaine Beasley

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Doing Business in Thailand Suchart Liengsaengthong and Glen Robinson

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Thailand–Australia Free Trade Agreement Bill Paterson and Sawanit Kongsiri

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Environmental Issues in Thailand: A Rural Perspective Andrew Walker

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Ethnicity and the Politics of Location in Thailand Yos Santasombat

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Terrorism in Thailand: How Serious is It? John Funston

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Index

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About the Editor

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List of Contributors [Note: Names are alphabetized according to the respective systems, so Thais appear under their first name and Australians under the second.]

Tamerlaine Beasley is CEO of Beasley Intercultural and majored in Thai at the Australian National University. Her company works with Australian and other businesses who want to do business in Asia. Bhanupong Nidhiprabha is Professor of Economics at Thammasat University. Michael Connors lectures in Political Science at LaTrobe University in Melbourne. He specializes in Thai politics. John Funston is Associate Director of the National Thai Studies Centre at the Australian National University and recently returned from ISEAS in Singapore. He has worked in government as well as academia. Bill Paterson is First Assistant Secretary for South and Southeast Asia in the Australian Department of Foreign Affairs and Trade. Glen Robinson is an Executive Director of ASEAN Focus Group. He works mainly with Thailand. Sawanit Kongsiri recently retired from the Thai Foreign Service after serving as Ambassador to Australia. He is now Country Coordinator for TAFTA in the Thai Chamber of Commerce. vii

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Suchart Liengsaengthong is Deputy Consul General at the Royal Thai Consulate General in Sydney. Andrew Walker lectures in Anthropology at the Australian National University. Yos Santasombat is Professor of Anthropology at Chiang Mai University.

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Preface The Thailand Update 2004 was held at Macquarie University in Sydney with the strong support of the Vice Chancellor, Professor Di Yerbury, the Centre for International Communication and the Department of Anthropology. I would like to express our most grateful thanks for their support. May I also thank Ajarn Sripan Rattakittikachorn for help with arrangements and Genevieve Freys, without whose organizing talents we would never have made it. I also wish to thank Thammasat University for funding Professor Bhanupong’s presence and the Australian Department of Foreign Affairs and Trade for funding the participation of Ambassador Sawanit and Mr Paterson. Special thanks are due to the Royal Thai Embassy in Canberra and the Consulate General in Sydney. Professor Tony Milner from ANU and Associate Professor Philip Hirsch from Sydney University chaired sessions and commented on papers with their customary eloquence and insight. Last but certainly not least I would like to thank my colleagues at the National Thai Studies Centre for their efforts. Dr John Funston not only presented a paper but also helped with the organizing and editing of this book, as did Jason Hall and Ajarn Chintana Sandilands.

Cavan Hogue Director National Thai Studies Centre Australian National University December 2004 ix

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Introduction The theme of the Thailand Update 2004 was economics and business but it interpreted that theme very loosely and the papers were varied. We began with careful, scholarly examinations of the last year in economics and politics by Bhanupong Nidhiprabha and Michael Connors and then moved into a rather more free-ranging session on business where the emphasis was on how Australians should go about doing business with Thais. Tamerlaine Beasley looked at the cultural factors, Khun Suchart gave the Thai Government view and Glen Robinson looked at things from the perspective of an Australian businessman with extensive experience in Thailand. A feature of this session was the presentations by one Australian and one Thai of how they saw the Thai-Australian Free Trade Agreement (TAFTA) affecting both countries. The third session focused on how rural communities were being affected by economic and political changes. Yos Santasombat and Andrew Walker made stimulating and controversial presentations which questioned some conventional wisdom. Finally John Funston discussed the currently relevant topic of developments in Southern Thailand. In this introduction, I will try to extract some themes from these diverse presentations as well as provide a summary of the main arguments. OVERALL VIEW If there is one common element in all these disparate papers, it is that of change. All see Thailand as a society in political, economic and social transition. Some stress the positive and some stress the negative aspects of change but all agree that it is happening. Some focus on the national picture and others on regional issues and some take a longer-term perspective than others. The political and economic analysts present a mixed picture, the business people xi

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are generally upbeat while the anthropologists focus on the village level where results are also mixed. There is also a feeling of uncertainty in most of the analyses especially when attempting to predict the future. The three chapters which discuss developments at a regional level provide some interesting contrasts. At the village level, Yos showed how what is variously called “modernization” or “globalization” is changing the lives of traditional people in northern Thailand whose traditional swidden cultivation is being attacked by environmentalists on the grounds that it denudes forests and creates flooding. Minorities are being pressured by government and by environmentalists to assimilate to the mainstream. However, Walker feels that mainstream Thai villagers he has worked with in Northern Thailand are adapting in a practical way to political and environmental changes. Unlike their minority cousins, they see change as positive. Selling new crops to large corporates gives them greater security and more money while attempts to make them return to traditional ways are not welcome. In the Muslim South, there seems to be a regression to the old (failed) tactics of force and assimilation which, in a more difficult post-September 11 environment, has led to a renewal of the violence that more tolerant policies had banished. Taken together, these three papers suggest that things vary from place to place depending on the circumstances so that you cannot sensibly speak of “the regions” as a whole. In a way, this local-level conflict between change and the old ways is also found at the national level. Thaksin’s attempts to mould a new kind of Thailand do not always encourage the growth of liberal democratic sentiment. Thaksin himself is not always consistent in this regard. Connors rightly points out that Thaksin is not some kind of deus ex machina but is a Thai formed by Thailand; he both acts on events and is acted upon by them. So he is part of the process of change. There is a clash, at least in theory, between those who want to reject foreign influences in favour of a traditional Thai way of doing things and those who want to make basic changes in the ways of the Thais. This clash between modernizers and traditionalists is, of course, hardly anything new in Thailand and is not confined to Thailand. It mirrors the clash between the Slavophiles and the Europhiles in Russia and is to be found in one form or another in most societies. The king’s ideas about rural self-sufficiency have some attraction but, as Walker shows, rural people are also interested in change. Thaksin’s controversial rural policies do seem to be having some success. Conditions are improving outside Bangkok, albeit slowly. The notion of change was also stressed by Tamerlaine Beasley. She noted that, while many traditional features remained important, Thai ways of doing xii

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business were changing. Many business people had been affected by their contacts with foreign business. This view is consistent with Bhanupong’s comments on how Thais had learned economic and business lessons from the 1998 crisis which had led to a stronger long-term economy. Similarly, Walker’s paper showed how peasants were willing and able to adapt to changing circumstances; they were taking advantage of offers from large firms to grow new products and they were making good use of the government’s subsidies. Yos, however, suggested that the minority people were closer to the traditional stereotype of the conservative villager who resists change. Change in the Muslim south was for the worse and looked more like a return to methods that had failed in the past. Participants were left with the impression that although the Thaksin government had been a mixed blessing and there remained many uncertainties, Thailand seemed to be moving forward in economic and social terms. The next elections will be an interesting indication of the popularity of the Thaksin government. In his survey of the economy, Bhanupong Nidhiprabha argued that the Thai economy was resilient and would continue to recover from the 1997 bust. He felt there were structural factors which ensured that Thailand would bounce back and that lessons had been learned from the crisis. He presents detailed arguments and statistics to support his case. He notes that unemployment has declined since 1998 and that inflation remains subdued, leading to a fall in interest rates which enabled Thai firms to restructure their foreign debts. Agricultural output responded positively to high prices for world commodities while the agricultural sector generates demand for manufactured products and provides a steady pool of labour for the manufacturing and service sectors. Open investment polices have led to inflows of FDI and export-oriented industries are performing well. International reserves have increased since 1998. The banking sector has restructured and solved the problem of non-performing loans. Nevertheless, Bhanupong concludes that while the economy seems resilient, some structural problems remain. Public enterprises must be reformed to make them more competitive and other monopoly industries must be forced to compete with imports as a means to compel them to restructure. Free trade agreements are useful in this regard. Thailand is also vulnerable to oil price shocks and exchange rates must be made more realistic so as to cushion the economy from external disturbances. However, should another shock occur, Thailand is much better placed to handle it than it was in 1997. Michael Connors argued that the Thaksin government was characterized by control of the state agencies by big capital and by his attempts to restructure xiii

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the bureaucracy to make it more efficient and more like a business. He is populist and nationalist. In the economic sphere Thaksin wants to create a nation of small and middle entrepreneurs and to alleviate rural poverty. Some of his critics argue that he confuses the interests of the nation with the interests of his cronies and he has certainly not managed to wipe out factionalism or patronage politics. The chapter considers in some detail the future of liberal elements in Thai society as well as discussing what Connors calls the “Thaksin project”. He argues that there are inherent weaknesses in the Thaksin camp that limit the possibilities of a complete transformation of Thai politics. He concludes that inasmuch as there is now a tendency to speak of “Thaksin’s Thailand”, it is useful to bear in mind that Thaksin is subject to the dynamic of change and conflict that emerges in the contest between multiple interests. In highlighting these limiting factors, we can also speak of “Thailand’s Thaksin”, which suggests “a man who is as much determined as he is determining”. Tamerlaine Beasley discussed the cultural factors that influence doing business in Thailand with emphasis on the approach of Australians. While acknowledging that an understanding of Thai culture made life much easier for foreigners in Thailand, she questioned common myths about the importance of politeness and the complexities of Thai culture. She noted that there are far greater business risks than being impolite and that the basics of Thai culture can be learned by outsiders. However, it was important to remember that cultures do not always stand still and that some Thais who talk about Thai culture do not always practise what they preach. Khun Suchart gave an upbeat presentation on the opportunities for foreign business in Thailand and defended the Thaksin government from what he saw as misunderstandings on the part of people who do not live in Thailand or really understand what is happening there. Bill Paterson identified the advantages for both countries in the TAFTA and argued that Thailand would benefit more because it had higher barriers to trade than Australia did. He said that ASEAN was in danger of developing into a two- or three-track grouping with three fast moving countries (Singapore, Malaysia, Thailand) and four developing countries. Those which had reverted to nationalist rhetoric instead of embracing the global economy were not getting FDI and were going backwards. Thailand’s positive approach to the market economy was bringing benefits in the form of greater trade and investment which were leading to increased standards of living for the Thai people. He went into some detail on trade and investment opportunities, providing figures to back up his arguments. Both governments are now discussing how xiv

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to put in place the detailed regulatory arrangements to implement the agreement but, ultimately, it is up to the private sector in both countries to take advantage of the opportunities offered. The changes being made in Thailand would make it easier for Thailand to negotiate agreements with other developed countries like the United States. Khun Sawanit thought that TAFTA would benefit Thailand and that it fitted well with Prime Minister Thaksin’s desire to restructure the Thai economy. In particular, by beginning an FTA with a developed but relatively small economy, Thailand could gain the experience that would enable it to handle FTAs with larger and more important countries like China, Japan, India and the United States; in some ways this was the most important aspect for Thailand. However, he noted that there was some doubt in the private sector about the benefits of the agreement, particularly from those who had been burnt by some dubious Chinese practices. Andrew Walker looked at how people in a rice-growing village near Chiang Mai perceived environmental issues and how they were linked with lifestyles. He suggested that we should focus less on the idea of environmental crisis and more on environmental risk and the way people adaptively manage risk. People in this village grew garlic during the dry season and their harvests had been getting worse because of poor seasons and poor soil quality. They complained about environmental changes but, in fact, statistics showed that there was nothing unusual about the current drought if you looked at rainfall figures over the last hundred years. Walker examined theories put forward by the king (implemented by EGAT), NGOs, Buddhist environmentalists and others, all of which focused in one way or another on traditional wisdom and traditional methods of agriculture. However, the peasants were not impressed by these theories and were far more interested in finding new ways of adapting to problems. Prime Minister Thaksin’s much criticized scheme for giving money to villagers was in fact quite effective because people used the money effectively even if not traditionally. The failure of the garlic crop had led to indebtedness but people had now turned to growing other crops on contract for large companies. While this upset some traditionalists, the villagers were very happy with the arrangement because it transferred the risk to the company. Walker concluded that there has been a long history of farmers managing variability and risk, so some idea of experimental and adaptive knowledge is perhaps a lot more useful to talking about environmental management in Northern Thailand than some idea of traditional or indigenous knowledge. The key to environmental sustainability in Northern Thailand is supporting xv

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and encouraging these processes of adaptation, innovation and diversification rather than going back to some idealized traditional practices. Yos Santasombat also dealt with Northern Thailand but he made a hardhitting attack on how government environmental policies were disadvantaging minority forest dwellers like the Lua. In contrast to Walker’s account of a classic lowland Thai village, Yos dealt with people whose traditional practices had been identified as bad by conservationists. Government discourses on the environment identified the forest dwellers as enemies of the environment and they were constantly bombarded with material that denigrated their traditional way of life. He described the Royal Forestry Department’s relocation and reforestation as spatial technologies of domination and argued that the way in which the created spaces and boundaries in the name of conservation amounted to spatial practices of oppression. He said that “in addition to these technologies of domination, the RFD also uses brutal tactics to suppress the expression of cultural identities or opposition by indigenous groups.” The tactics used to do this include the machinery of fear, surveillance, border guarding, controlling movement, dividing and ruling, pitching the lowlanders against the ethnic highlanders and through the imposition of a system of values which stress forest conservation for the entire nation, forestry protection for the common good and so on. For the marginalized people, it is not just a question of agricultural practices but of their whole identity. Ethnic identity is more than a byproduct of language, culture and genetic transmission; it is relationally and situationally constructed and reconstructed and formed by a network of social relations over time. Yos concluded with some comments on the wider implications of this local situation. “The essential point about understanding ethnic identity as relationally constructed is that there is no personal ethnic identity apart from a relationship with other identities. A post-modern concept of ethnic identity embraces consciousness of other worlds. It also calls for social action which requires a constant reflective monitoring of motivations and reasons that programme groups. The process of ethnic identity formation moves substantially beyond the notion of the autonomous oneself and embraces the notion of ethnicity as a contested cultural terrain; a ground for cultural struggle whose borders are constantly drawn and redrawn. This assumes a considerable degree of conflict over values. The increasing recognition of ethnicity on a global scale through the politics of identity challenges the conventional notions of a political structure. It also provides the social space within which the marginal local groups can effectively challenge and destabilize it. xvi

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John Funston argued that the resurgence of instability in the Muslim South since 2001 was essentially sparked by domestic factors. Organizations like JI almost certainly used the border regions for planning and organizational activities but their contacts with local Muslim leaders were minimal. The long-standing unrest in the South had eased greatly in recent decades because of more tolerant and realistic policies by the central government but the police had begun to take a tougher line which, in a more difficult international environment, had increased the problem. However, the South remained a region of complex and often interlocking ethnic, ideological, political and criminal groups. By definition, Thai Muslims cannot get support outside their small geographical region and it is not clear how interested outside extremist bodies are in Thailand. While the future is cloudy, it seems certain that harsh police repression will only create an aggressive reaction which will make things worse. (Events after this was written have borne out Funston’s prediction. — Ed.) Cavan Hogue Editor December 2004 POSTSCRIPT In the months since the Thailand Update 2004 the security situation in the South further deteriorated, the economy slowed, and southern Thailand was devastated by the Boxing Day Asian tsunami. These developments did not, however, result in any fundamental change to Thailand’s political trajectory — as overwhelming support for Prime Minister Thaksin’s Thai Rak Thai (TRT) party in the February 2005 election indicated. The escalation of violence in the South that began in January 2004 continued in subsequent months. Killings occurred on an almost daily basis, targeting particularly low ranking officials and members of the security forces (including defence volunteers), but also affecting innocent by-standers. A judge was killed in September, the first fatality among high-ranking officials; a car bomb was first used in February 2005, with six fatalities; and in April 2005 the conflict expanded geographically when bombs exploded in Hat Yai at the airport and near a Carrefour store, and at a hotel in Songkla. However, the incident that attracted most attention — both domestically and internationally — was conflict at Tak Bai in Narithawat on 25 October 2004. xvii

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Police fired on a large crowd protesting the detention of six village defence volunteers whose shot-guns had been stolen, killing seven; 1,300 protestors were then detained, and 78 suffocated during transportation in crowded trucks to an army camp in Pattani. The government looked largely to security measures to contain this conflict. It continued to use martial law, despite unanimous opposition from Muslim groups in the south. In early October Thaksin reconstituted the army-led Southern Border Provinces Peace Building Command, which had suspended activities after the Kru Se incident, giving it authority over all security actions. In mid-September the government announced the deployment of nine more army battalions (7,000 troops), nearly doubling troop numbers in the three southernmost provinces; in January Thaksin announced a new 12,000 strong army division would be established to deal with insurgency in these provinces. Finally, a week after the February elections Thaksin proposed classifying villages by colour (red, yellow and green), based on the extent of insurgent influence, stopping all government aid to red villages and reducing it to yellow. In the face of strong public opposition Thaksin eventually moved away from this colour scheme, and in March agreed to appoint an advisory National Reconciliation Commission (NRC) under respected former Prime Minister Anand Panyarachun. The 48-member group has been handpicked by Anand, and includes several prominent Muslims. It has been well-received, with a widespread expectation that its recommendations will result in new policies emphasizing political over security measures. On the economic front the growth rate dipped only slightly to around 6 per cent in 2004, but by early 2005 forward estimates were generally less than 5 per cent. Oil price increases, a potential problem identified in Professor Bhanupong’s presentation, were part of the reason for this. In addition, however, global economic slowdown, rising interest rates, drought and southern unrest contributed. To maintain momentum the government is relying on new mega projects costing up to B1.5 trillion (around US$35 billion) over the next four years. However, since announcing such projects in late 2003 none has yet been started. And with current plans to achieve balanced budgets analysts are beginning to conclude that the projects may have to be trimmed. The situation is not yet approaching a crisis, and as Professor Bhanupong observed, Thailand is now in a better position to deal with economic adversity having learnt the lessons of the 1997/98 crisis. The Asian tsunami did not hit Thailand as badly as some of its neighbours. Parts of the tourism sector were affected, along with infrastructure in six southern provinces that bore the brunt of the disaster. Fortunately it did not xviii

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strike provinces already beset by security problems, and estimates of the overall impact on the economy were for a decline of around 0.5 per cent. The tsunami was a humanitarian disaster with some 5,300 casualties, half of them foreign tourists. Thailand was, however, able to turn this to diplomatic advantage. The government worked quickly to address the humanitarian needs of tourists, cooperating closely with foreign governments and aid agencies. Thais from all walks of life rallied selflessly behind this effort, in a manner that gained wide international appreciation. Coming just weeks before the general election the tsunami also worked in the government’s favour. It concentrated media attention on Prime Minister Thaksin, who led the relief operation from the front. And in the face of such a tragedy the opposition, and their particular concerns, were given little prominence. The tsunami did not determine the election result, but probably did make the government win more emphatic. The election was the first in which a government had completed a full term in office, the first where a governing party was returned to power by democratic election, and the first in which a single party was able to gain an absolute majority in its own right. The TRT gained 377 seats, the Democrats 96, Chart Thai 25 and Mahachon 2. The TRT swept all before it in all parts of the country, except in the 14 southern provinces where it gained only one of 54 seats. In the Muslim southern provinces the TRT entered the election holding 10 of 11 seats but lost all, 10 falling to the Democrats. Nonetheless there was a positive message in this for the government — against widespread expectations that voters would stay away in protest or because of security fears the voter turnout was higher than it had been in 2001 and above the national average. The new cabinet announced after the election demonstrated continuity, with mainly familiar faces. However, only eight of the 35 cabinet members were elected representatives, unlike Thaksin’s first term when more than half were — perhaps a further sign of the prime minister’s determination to stamp his personal authority on Thailand’s political future.

John Funston May 2005

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The Resilience of the Thai Economy

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The Resilience of the Thai Economy Bhanupong Nidhiprabha

INTRODUCTION The Asian currency crisis that followed Thailand’s decision to float the baht in July 1997 has become a chapter in the history of Thailand’s economic development. We have learned a great deal about what went wrong and what could have been done to prevent the crisis.1 Pundits warn that history might repeat itself and that we might experience another crisis in the near future, because Thailand has not completely restructured the economy to prepare for the next crisis. Economists are sceptical about the benefits of the pork-barrel spending of the government and fearful of enlarging public debt. It is argued in this chapter that there exist certain mechanisms in the structure of the Thai economy that would lessen the impact of the next economic crisis, if any, whether the shock is internal or external. It is impossible to rule out various shocks in the future such as oil price hikes, realignments of major currency values, or some other kind of crisis contagion. This chapter argues that these shocks would not have a long-lasting impact and that they would simply reduce Thailand’s economic growth temporarily below a stable growth path. The Thai economy is resilient enough to regain its pre-shock growth path in a few years’ time, just like it worked itself out of recession in 1998.

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Bhanupong Nidhiprabha

This chapter provides an analysis of the underlying changes in the structure of the Thai economy that help Thailand to recover immediately after a year of economic crisis. Some of the structural changes have been adopted after the crisis along the lines of the second-generation reforms;2 some of them have been developed over several decades through appropriate policy implementations similar to policy prescriptions by the Washington Consensus.3 The next section explores the relationship between growth, price stability, and the sustainability of current account by analysing the trend of the saving-investment gap. Section 3 discusses fiscal balances and their implication on the public debt. Section 4 explains the development in the financial sectors that makes Thailand become less vulnerable to future shocks. Section 5 analyses the dynamic aspects of the real sector that make the Thai economy recover rapidly after the currency crisis. Section 6 highlights the importance of the export-led strategy that enables Thailand to take the opportunity to grow following an upturn in the world business cycle. Concluding remarks are provided in the last section. GROWTH WITH PRICE STABILITY The three main traditional macroeconomic policy goals are growth, price stability, and sustainable current account deficit. Since there are always trade-offs among these goals, policymakers may have to choose to strike a balance between growth and acceptable levels of internal and external stability.4 As the Thai economy has become an integral part of the global economy, these goals have become affected by external factors such as world business cycles and oil prices. Figure 1.1 provides a stylized picture of Thailand’s macroeconomic performance. There is a positive relationship between growth and current account deficit. During the boom years in the early 1990s, high growth rates led to a widening current account deficit. However, during a slowdown and moderate growth period, current accounts become surplus. High growth induces more imports of capital goods and intermediate inputs for production in manufactures. Because growth is driven by exports and investment, surges in imports and a widening current account deficit become the natural consequences of a high growth rate episode. When growth collapsed in 1998, Thailand experienced current account surplus for the first time in the history of Thailand’s economic development. The surplus should become smaller and eventually peter out as the Thai economy regains its pre-shock growth path after 2004.

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The Resilience of the Thai Economy Figure 1.1 Macroeconomic Performance 25 20

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There is also a trade-off between growth and inflation. With a moderate growth rate of around five per cent, the pressure on the price level is not as great as during the period when the economy rose above the trend growth path dictated by output capacity. As can be seen from Figure 1.1, during the double-digit growth in the late 1980s and the early 1990s, inflationary pressure began to build up even when the growth rate slowed down. Inflation inertia has played an important role in delaying price adjustments. Once inflationary expectations are formed, their impact on wage and price adjustments will be felt in subsequent years. It should be noted that price stability is a natural feature of the Thai economy, originating from built-in-fiscal structures and institutional factors. The second oil price shock in 1979–80 resulted in double-digit inflation, reaching 19 per cent in 1980. Another extraordinary year was in 1998; inflation increased to only 8 per cent despite a massive devaluation of the baht. Nevertheless, these two episodes bode well for a low-inflation prone economy like Thailand. Inflation rates went up sharply during these two events, but they also came down remarkably well within subsequent years. There is no mechanism such as wage indexation that allows spiral inflationary expectations to emerge. Because of low inflation, there is no need to create interest and bond indexation. Printing money to finance a budget deficit is not practised by the Bank of Thailand. Although the government runs a budget deficit, most of the deficit is financed through issuing bonds; therefore it has no impact on the expansion of the monetary base.

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Bhanupong Nidhiprabha

When the Thai economy was hit by the oil price shock again in 2003, oil price adjustments were delayed through public subsidies to stabilize domestic oil prices and to keep inflation at bay. The motivation behind this policy was to control key commodity prices that might ignite widespread inflationary expectations to the rest of the economy. Because of the downward rigidities in the price level, this strategy is appropriate as long as the oil prices increase is temporary. However, it would be a mistake in terms of revenue loss and an inefficient use of energy if the prices were kept artificially low when the increase in the oil prices is permanent. By September 2004, the consumer price index had already risen by 3.8 per cent on a year-on-year basis. Note that the core inflation rate, that is, the Consumer Price Index excluding food and energy prices, increased by a mere 0.6 per cent. Inflation in 2005 will be higher as the impact of higher oil prices is released through gradual withdrawals of the oil price subsidy. However, there will be no spectacular increase in the inflation rate like the one seen in the last oil shocks. During the economic crisis, in 1998 GDP contracted by 10.5 per cent as a result of negative contributions of 6.3 percentage points from consumption reduction and 17.4 percentage points from investment shortfalls. It was the positive contribution from net exports by 12.8 percentage points that prevented Thailand from plunging into a deeper recession.5 After the currency and banking crisis, the Thai economy experienced a shift in investment financing when, from 1980 to 1997, investments exceeded savings (Figure 1.2). The residual resource requirement for investment came from foreign savings or current account deficit. Since 1999, savings have exceeded investment due to investment contraction caused by reduced rates of return from private investment. Consequently, as shown in Figure 1.1, the current account was surplus as a result of the slowdown in private investment. There is another implication from this shift in financing pattern. Investors rely more on tapping domestic financial resources, thereby reducing their dependency on foreign borrowing. In addition, risks from fund withdrawals, exchange rate fluctuations, and rises in foreign interest rates can be substantially reduced. It should be noted that despite the large current account deficit in the early 1990s, saving rates in Thailand were still high. They actually rose above 35 per cent in the year prior to the crisis. These high saving rates were generated by strong income growth of households, positive real interest rates, and confidence in the banking system. The root problem of the unsustainable current account deficit lay in the excessive investment rate. Despite the high rate of saving, the investment ratio was even higher, climbing above 40 per cent for the seven years prior to the crisis. Then Thailand experienced a precipitous fall in investment from the height of 42 per cent of GDP in 1996

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The Resilience of the Thai Economy

45.0

160.0 150.0 140.0 130.0 120.0

Per cent to GDP

40.0 35.0 30.0

110.0 100.0 90.0 80.0 70.0

25.0 20.0 15.0

I/GDP S/GDP S/I

19 8 19 0 19 81 19 82 8 19 3 19 84 19 85 8 19 6 19 87 19 88 8 19 9 19 90 19 91 9 19 2 19 93 19 94 9 19 5 19 96 19 97 9 19 8 20 99 20 00 0 20 1 02

10.0

Per cent

Figure 1.2 Investment Saving Gaps

to only 20 per cent in 1998. A large part of the investment went to inefficient investment in the non-traded sector. The saving rate fell subsequently as a result of a public deficit caused by revenue shortfalls and the government’s bailout of ailing financial institutions. However, the decline in the saving rate was marginal compared to the fall in the investment rate, resulting in a significant positive saving-investment gap in the aftermath of the currency crisis (Figure 1.2). To correct an unsustainable current account deficit, output contraction is necessary and the exchange rate adjustment was not enough to correct the imbalances. These imbalances originated from the private sector and not the public sector which still ran a budget surplus prior to the crisis. STRENGTHENING THE FISCAL POSITION When Thaksin came into office in 2001, populist policy programmes were employed to inject money into rural areas and the grassroots economy. These programmes aimed to provide social safety nets and target poverty reduction. The Thai Government has attempted to reduce reliance on external demand by boosting domestic demand through promoting local enterprises and developing indigenously-owned production capacity. Housing projects for the poor, village funds and one-village-one-product projects are examples of this dual-track development strategy. As pointed out by Felipe (2003), the shift to domestic demand-led growth can be compatible with export-led growth because what Asian countries need are policies to stimulate demand. The Thai Government’s focus is on five sectors where Thailand can develop niches: A world centre of graphic design; the Detroit of Asia; tropical fashion; kitchen of the world; and tourism capital of Asia. Within these five competitive

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Bhanupong Nidhiprabha

areas that the government wants to develop, one cannot depend solely on domestic demand because of the inability to exploit economies of scale. Critics argued that this kind of spending to promote competitive strength and social safety nets was ineffective, inefficient, and would lead to chronic fiscal balances. After four years in power, the Thaksin government’s budget deficit turned around into a marginal surplus in 2004. As shown in Figure 1.3, both spending and revenue declined after the 1998 recession, but they trended upward after rapid recovery in the early 2000s. However, revenue rose faster than spending, resulting in a narrowing budget deficit. This came about as a result of the fact that utilization of the allocated budget is not high. A new rule has been introduced which does not allow the budget to carry over into the next fiscal year. As such, planned expenditures are always greater that the actual budget spending. On the revenue side, the buoyancy of the revenue always guarantees that tax revenues rise faster than the GDP level. Despite the fact that the value added tax rate has been maintained at 7 per cent, instead of returning to the pre-crisis rate of 10 per cent, VAT revenues increased rapidly as a result of strong growth in consumption. In the first six months of the fiscal year 2004 (October 2003–March 2004), excise tax, VAT, and income tax exceeded the target by 20 per cent. Trade reform has been undertaken since the early 1970s by slowly dismantling tariff walls that protect domestic industries. Customs revenue as a percentage of total value of imports declined to only 3 per cent in 2003. The surge in imports enhances revenue collections, although tariff rates have been

1,200

150

1,000

100

800

50

600

0

400

-50

200

-100

0

19

-150

91

19

92

19

93

19

94

19

Revenue

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95

19

96

19

97

19

98

19

Expenditure

99

20

00

20

01

20

02

20

03

Blance(RHS)

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Billion Baht

Billion Baht

Figure 1.3 Strengthening Fiscal Position

7

The Resilience of the Thai Economy

reduced regularly in line with trade liberalization and the move to establish free trade areas with ASEAN countries. Achieving high GDP growth of around 6 per cent for three consecutive years, from 2002 to 2004, guarantees that the budget deficit is sustainable. It should be noted that inflationary pressure from money financed budget deficit is not plausible in the context of the institutional setting in Thailand, due to existing laws limiting the size of the deficit and the ceiling on public debt. In 2004, the public debt ceiling was reduced from 55 per cent to 50 per cent of GDP, while the debt-service ceiling was set at 12 per cent of the annual fiscal budget. This fiscal discipline was institutionalized to prevent ballooning of the budget deficit. Figure 1.4 shows that, as a result of the rapid growth achieved over the past three years, fears of explosive public debt were exaggerated. Both domestic and foreign public debts started to decline in 2003. There is also a change in the composition of debt. Reliance on foreign debt was reduced, thanks to the development of the government bonds markets, during the time when domestic interest rates are low. In addition, the composition of foreign capital flows has changed in favour of long-term flows or cold type of foreign capital. Heavy reliance on short-term foreign borrowings and other types of short-term capital flows, which are more volatile than foreign direct investment,6 has been cited as a cause of the currency crisis. The severe contraction of output in 1998 can be attributed to a sharp decline in consumption and investment during the period of risk and uncertainty. The decline in consumption expenditures was due to the revised Figure 1.4 Sustainable Public Debt

Billion Baht

2,000 1,500 1,000 500 0 1997

1998

1999

Domestic

01 ThaiEcoRecovery Ch 1

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2000 External

2001

2002

2003

Total

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Bhanupong Nidhiprabha

downward of expected incomes by households, while the sharp decline in private investment spending was due to a fall in the rate of return from investment as well as high interest rates caused by the tight monetary policy. During the boom era, the interest rates would have been raised more had it not been for the continued inflows of foreign capital that dissipated the upward pressure in the local money market. RESTRUCTURING THE FINANCIAL SECTOR A few ailing commercial banks have been merged with strong financial institutions and some foreign banks have acquired some troubled Thai commercial banks. The solvency of the Thai banking system has been enhanced through the injection of foreign capital. Although the level of non-performing loans is high, it is declining as the economy has maintained strong economic growth since 2002. Thai banks have reported a significant amount of profit in 2004, after having to set aside a large amount of retained earnings to cover non-performing loans. Portfolio investments from abroad can stir up activities in the stock market but they are simply short-term capital flows. Capital flight can occur with rapid changes in investment sentiment caused by random arrivals of good news and bad news. Figure 1.5 illustrates this point. The movement of stock prices is a leading economic indicator because stock prices are determined by expectations of dividends. The expected payments are affected by expectations of corporate performance in the future but, in the short run, stock prices are subject to volatilities caused by random shocks of good news and bad news. In 2003, The Stock Exchange of Thailand was the world’s second best performer, climbing from 356 points in 2002 to a peak of 772 points in 2003. Its capital gains were more than doubled in that year, leading to high hopes and expectations in 2004. But since January 2004, the SET declined sharply by nineteen per cent in October, due to the avian flu scare and unrest in the Southern parts of Thailand. The Price-Earning Ratio that climbed to 13.6 in December 2003 dropped to just 9.2 in October 2004. Daily turnover for the first nine months of 2004 averaged 21.2 billion baht, compared with an average of 18.9 billion for 2003. The declining trend of interest rates has had important impacts on the Thai economy. The decline encouraged the boom in the bond markets as investors looked for alternative assets to hold as sources of fixed income. The bond market has emerged as an alternative source of financial resources for firms. Although Thailand is still basically a bank-based economy, availability of resources from the capital market can provide funds when

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The Resilience of the Thai Economy Figure 1.5 Volatility of Stock Market Prices Index

Turnover Value

Mil.Baht

SET Index

1,100

Effect of bird flu (Jan 2004)

Concern about unrest in Southern Thailand (Mar. 2004)

Expectation of better company performance (Dec. 2003)

1,000

900

Credit upgraded by Moody’s (26 Nov. 2003)

High net buying value of foreign investors (May - June 2003)

800

100,000

80,000

Announcement to curb day trading (17 Nov. 2003)

Credit upgraded by S&P (8 Oct. 2003)

60,000

Baht appreciated in 3-year highest record (Sep. 2003)

700

40,000

The worst outbreak of SARS (Apr. 2003)

600

500 20,000 400

300 04

04 22 -M ar

03

03

03

03

03

03

04

20 -F eb

23 -J an

24 -D ec

24 -N ov

27 -O ct

26 -S ep

29 -A ug

31 -J ul

03 3Ju n

31 -M ar

03 2M ay 03

0 3 l0 Ju 2-

bank loans are not available during a credit crunch. Households also enjoyed high fixed incomes from holding bonds as the real interest rates from bank deposits became negative (Figure 1.6). Holding bank deposits becomes exceedingly unattractive when fixed deposit rates are below one per cent, notwithstanding a fifteen per cent withholding tax rate on interest income. Consequently, the bond market has performed remarkably well during the period of low interest rates. The fact that the government budget deficit is financed by issuing bonds has helped the bond market through establishing the benchmark for bond yields with various maturities. The reference yield curve was not available during the years when the government ran a budget surplus in the 1990s. High interest rates are the results of high inflation and an over-heated economy. The prime lending rate was on the rise in 1995 but it was too late and too little to curb excessive investment. When it was realized that the tight monetary policy applied in the aftermath of the crisis was too severe, causing a contraction in bank credit, the Bank of Thailand relaxed its restrictive monetary policy as the world interest rates began to fall. The prime lending

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Bhanupong Nidhiprabha Figure 1.6 Real and Nominal Interest Rates

20.0 15.0

5.0 0.0 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03

Per cent

10.0

-5.0 -10.0

Real Deposit Rate

Prime Rate

Nominal Deposit Rate

rate of commercial banks had been declining since 1999 until 2003 (Figure 1.6). Because low inflation translates into low interest rates, economic growth can be sustained if the interest rates can be maintained at low levels for a considerable period. The period of low inflation and low interest rates in Thailand coincides with the general trend in the world.7 Low interest rates in Thailand enable large corporations to refinance their external debt with cheap loans from domestic banks. Consequently, the vulnerability to currency shocks in the future has been reduced considerably. This is true for both the private and the public sector. Declining inflation and interest rates have paved the way to future sustainable recovery. The nominal deposit rates trended downward (Figure 1.6), because of excess liquidity in the banking sector. Investors were not willing to borrow, while banks are still embedded with large non-performing loans. The resulting excess liquidity led banks to cut their lending and deposit interests. Note that the interest spread between the two rates remains rather constant. Profit in the banking sector depends crucially on the interest spread and, in turn, profitability in the banking sector indicates the solvency of the entire banking system. Banks have begun seeking non-interest income from services to compensate for the shortfall in their interest income due to sluggish lending activity. The continued decline in interest rates has also stimulated households’ consumption as financing durable goods has become cheaper. Credit availability

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The Resilience of the Thai Economy

induces households to consume more by using future resources, while liquidityconstrained borrowers enjoy additional financial resources which were not previously available to them. This means that the recovery of the Thai economy becomes possible once consumers have regained their confidence and started spending on durable items such as automobiles and housing. The amount of commercial loans extended to consumption increased gradually as the economic recovery became permanent (Figure 1.7). On the other hand, credit extended to the real estate sector has been shrinking since the property bubble burst after 1998. The decline in manufacturing loans became stabilized and showed signs of recovery in 2004. Credit allocated into this sector will increase gradually as long as many industries have not increased their capacity utilization above 75 per cent.8 With expansion in export demand, the utilization rate was raised to 70 per cent in September 2004. It is not surprising that agriculture receives smaller amounts of credit compared to other sectors because of its smaller size in GDP and its lower capital-labour ratio. Speculative bubbles are largely created by over-confidence and reckless investment during a period of continued rises in property and share prices. However, sustainable increases in asset prices are made possible by credit expansion. Thus an early warning signal of bubbles is property credit. With available funds, property developers engage in land transactions and start building new housing projects and condominiums. Figure 1.8 clearly demonstrates that the number of new housing units and condominiums in

Billion Baht

Figure 1.7 Extension of Commercial Bank Loans

2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0

97

01 ThaiEcoRecovery Ch 1

(Q

Real Estate Consumption Agriculture Manufacture

1) 98

(Q

1) 99

11

(Q

1) 00

(Q

1) 01

(Q

1) 02

(Q

1) 03

(Q

1)

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Bhanupong Nidhiprabha

200,000

1,000,000

180,000

900,000

160,000

800,000

140,000

700,000

120,000

600,000

100,000

500,000

80,000

400,000

60,000

300,000

40,000

200,000

20,000

100,000

0

Million Baht

Units

Figure 1.8 Property Bubbles

0

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20

New Housing

Condominiums

Property Credit

Land Transactions

Bangkok and surrounding areas increased rapidly prior to the bubble burst in 1998. The values of land transactions as well as the credit extended to the property sectors by commercial banks declined sharply until 2002, when the first signs of recovery appeared in the property market. All these four indicators in Figure 1.8 started to turn around after five years of a long slump. The recent boom in the property sector gave rise to a demand for intermediate inputs. The linkages to other sectors are high both backwards and forwards. The sector itself depends crucially on bank lending and low interest rates have given rise to greater demand for housing. Nevertheless, the Bank of Thailand is trying not to repeat the mistake made during the previous boom when bank credit expanded at an alarming rate. In November 2004, the Bank of Thailand raised the fourteen-day repurchase interest rate by 25 basis points to 1.75 per cent in line with the rise in the federal funds rate. The repurchase rate is a policy instrument of the inflation targeting process of the central bank. Because commercial banks still have excess liquidity, the increase rate should not have any impact on the prime lending rate of commercial banks in the near future. Nevertheless, tight monetary policy is required as the repurchase rate is below the inflation rate. The negative policy rate implies accommodative monetary policy. With the pressure on the price level, interest rates in Thailand will be on a rising trend although the adjustment will be gradual as loan growth is slowly catching up with deposits.9

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The Resilience of the Thai Economy

DYNAMISM OF THE REAL SECTOR In 1997 Thailand witnessed its lowest level of unemployment rate (1.5 per cent) although the official figures seem to be biased downwards and may not take proper account of open and seasonal unemployment in the economy. Notwithstanding the natural rate of unemployment, the series of official unemployment rates can be used to trace the movement of unemployment over time. The output contraction in the non-agricultural sector of 11.4 per cent in 1998 corresponds with high unemployment in the same year (Table 1.1). However, the resilience of the Thai economy has become apparent and the unemployment rate has been declining steadily and gradually since 1999. Flexibility in wage rates is a major contributing factor which prevented Thailand from suffering massive unemployment after the economic crisis.10 There has been no downward rigidity in both real and nominal wage rates in Thailand; both real and nominal wage rates were cut during the high unemployment.11 Although there are minimum wages, they are largely nonbinding in the sense that some workers are paid above the minimum levels. In addition, lags in adjustment of the minimum wage levels result in a delay in wage adjustment during tight labour market conditions and rising inflationary expectations. The overall index of the manufacturing sector’s capacity utilization points in the same direction of economic growth as in the non-agricultural sector (Table 1.1). The mild recession of the world economy in 2001 led to a lower rate of capacity utilization at 53.5 per cent.12 Since 1998, the degree of capacity utilization has been higher than the lowest level of 52.8 per cent in 1998. As non-agricultural growth expanded above 5 per cent in 2002 and 2003, capacity utilization was raised to 59 per cent and 66 per cent respectively. By 2004, the utilization rate went up to 72 per cent, as GDP growth in 2004 will register 6.6 per cent — despite oil price shocks and the adverse impact of

Table 1.1 Salient Features of Thailand’s Real Sector 1997 Unemployment Rate Capacity Utilization Per Capita Income Agriculture Output Growth Non-Agriculture Growth

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1998

1.5 4.4 64.9 52.8 100.0 96.0 –0.7 –1.5 –1.4 –11.4

1999

2000

2001

2002

2003

4.2 3.6 3.2 2.2 2 61.2 55.8 53.5 59.3 66.3 96.0 102.1 105.5 111.2 119.9 2.3 7.2 3.5 3 6.9 4.7 4.5 2 5.7 6.7

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Bhanupong Nidhiprabha

the avian flu epidemic. When the capital utilization rate is high, firms start expanding their plant sizes if they anticipate a permanent increase in the demand for their products. Compared with the level of per capita income in 1997, the crisis led to a fall in per capita income, but by 2000, the Thai economy was able to regain its previous peak income level. By 2003, income increased by 20 per cent from the peak in 1997. Because of the dynamism of the agricultural sector, agricultural income increased at a higher rate than non-agricultural sector from 2000 to 2003. The agricultural sector has been able to respond effectively to rises in commodity prices in recent years because of the improvement in the sector’s productivity. In 2003, farm output rose by 7.8 per cent in response to a 16.5 per cent increase in the price of agricultural products. Table 1.2 summarizes the industrial sector’s performance as Thailand regained the pre-shock growth path. Except for the iron and steel industry, all sectors have achieved solid recovery. Using 1995 as the benchmark, the total manufacturing output declined by 3.5 per cent in 1998. Vehicles and components suffered a dramatic output fall of 65 per cent in 1998, while petroleum, textile, and jewellery registered strong growth due to the exchange rate depreciation. By 2000, all sectors, except the steel industries that still suffered from the collapse in the property sector, had recovered and expanded their output. Propelled by the increased exports, manufactured outputs in jewellery, electronic and electrical appliances, such as air conditioners, have been rising continuously at a very high growth rate. Textile products did not experience

Table 1.2 Manufacture Production (Percentage change from 1995)

Overall Index Food Textiles Petroleum Steel Vehicles Electronics and Electrical products Jewellery

1998

2000

2003

–3.5 –1.5 5.2 43.6 –28.4 –64.7 -8.6 20.1

12.1 17 7.3 45.3 –7.3 20.7 34.7 76.6

38.4 42.4 7.5 57.8 20.5 54.6 50.7 87.1

Source: Bank of Thailand

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The Resilience of the Thai Economy

output expansion significantly due to the problem with export quotas and high production cost. It becomes clear that sectors that depend more on exports can rebound successfully and faster than domestic oriented industries. The automobile industry suffered during the slump because the industry relied heavily on domestic markets. Now that the industry has become more export-oriented, it is in a better position to take advantage of the expansion phase of the world business cycle. Figure 1.9 illustrates that output of passenger cars, commercial vehicles, and motorcycles moved in the same direction since they are sensitive to the growth of domestic demand. The industry experienced a gradual reduction in output in 1997 and a sharp fall in 1998, because of its reliance on domestic sales but after the industry had become more export-oriented, production growth rates were even higher than their past decade’s average growth. The growth of the manufacturing sector has been driven by exports. Regional integration can enhance market excess of Thai exports to countries in Asia. Export growth also depends crucially on output capacity. The inflows of foreign direct investment over the past three decades have enabled the Thai industry to build up export capability. Industrialization in Thailand followed the development path earlier taken by other newly industrialized economies, along the lines of the flying geese model described by Akamatsu (1962). However, the inflows of FDI have started to decline (Figure 1.10) in particular the flows of foreign direct investment into industrial sector. FDI has been

Figure 1.9 Production of Vehicles and Equipment, 1995=100

200.0 150.0 100.0 50.0

Passenger

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Commercial

03 20

01 20

99 19

97 19

95 19

93 19

91 19

89 19

19

87

-

Motorcycles

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Bhanupong Nidhiprabha Figure 1.10 FDI and Net Capital Flows

10 8

Per cent to GDP

6 4 2 0 -2

90 991 992 993 994 995 996 997 998 999 000 001 002 003 1 1 1 1 1 1 1 1 1 2 2 2 2 -419 -6 -8 FDI

Portfolio

Other Flows

diverted to China, while other countries in Asia are also experiencing dryingup of foreign direct investment. EXPORT-ORIENTED INDUSTRIES Exports contribute to growth because firms can exploit economies of scale by expansion of production runs to fill demand from external markets. In addition, firms are subject to a competitive environment so they must constantly improve their efficiency in order to compete abroad. The demand constraints in industrial countries can be ameliorated by a progressive shift of industries and in successful developing countries into more capital-intensive exports, while they would in turn import skill-intensive manufactures from other developing countries at a lower level of development (Balassa 1989). The export-led growth strategy is a desirable development strategy since it is pursued in the context of laissez-faire (Krueger 1997). Empirical evidence from ninety-five developing countries between 1976 and 1985 seems to point to the conclusion that outward-oriented development strategy makes developing countries grow faster (Dollar 1992). When analysing the performances of firms classified by their degree of export orientation, we find that firms which exported more than 60 per cent of their output suffered less in the recession of 1998 and were able to recover faster than firms with a lower level of export dependency. Firms classified as moderate export-oriented in 2003 were able to produce 21 per cent higher output than the pre-crisis level of 1995, while those classified as high export-

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The Resilience of the Thai Economy

orientation were able to raise output by 55.5 per cent above the level of 1995 (Table 1.3). Nevertheless, the low export orientation group was able to raise its output by 42.8 per cent during the same period. This level was even higher than the level achieved by the moderate orientation group because the automobile sector was classified in the low export-oriented group by taking their situation in 1995 when domestic markets were still the main focus of that sector. As previously discussed, exports depend on imported capital goods and intermediate inputs. It is not surprising that imports move together with exports over time as they exhibit a non-stationary nature of time series. To see the long-term relationship, we have to subtract the time trend elements from the level of exports and imports by focusing on their rates of changes. Figure 1.11 illustrates that the rates of change of both imports and exports are highly correlated. In other words, there exists a long-term relationship between the two series. In addition, the demand for imports of Thailand is highly income elastic in the sense that percentage changes in imports are always greater than the percentage changes in GDP. Rates of change in imports are usually larger than exports. During the recession in 1997–98, imports fell sharply, resulting in a larger current account surplus than Thailand had ever experienced before; this is not surprising since Thailand has never experienced such a severe contraction in output. During the expansion path of the business cycle, imports tend to grow faster than exports. In consequence, current account deficit will always accompany periods of high economic activity. Current account surplus is a sign of weakening economic activity and so a current account deficit indicates the

Table 1.3 Output Performance of Export-Oriented Industries

Overall Low Moderate High

1998

1999

2000

2001

2002

96.5 96 94.7 100.2

108.6 110.3 101.7 115.7

112.1 98.1 109.5 139.6

113.6 111.1 109.8 123.3

123.2 122.8 115.7 134.8

Note: Index of Industrial Production, 1995=100 Low: Exports are less than 30% of output Moderate: between 30 and 60 % of output High: Exports are above 60% Source: Bank of Thailand

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Bhanupong Nidhiprabha Figure 1.11 Long-run Relationship

40.0 20.0

03

01

20

99

20

97

19

95

19

93

19

19

91

89

19

87

19

85

19

83

19

81

19

-20.0

19

79

0.0 19

Percentage Change

60.0

-40.0 Export Growth

IMP Growth

strong growth of the Thai economy. Furthermore, tax revenues are generated from excise taxes and customs can make the tax revenue move anti-cyclically, thus providing a stabilizing effect during the boom. We have discussed the supply factors that make Thailand’s exports respond to an increase in demand from the world market. Given the elastic supply response of Thai exports, growth in export demand very much depends on market access and on demand factors. Redding and Venables (2003) found that more than half of the quadruple increase in Thailand’s exports between 1982 and 1997 stemmed from an improvement in internal supply-side conditions. In addition, own region foreign market access and other region foreign market access contributed to 43.6 per cent and 17.3 per cent of total export growth, respectively. Because key exchange rates did not change significantly, the major determinant of Thailand’s robust exports in recent years has been basically the increasing income levels of industrial countries. Figure 1.12 depicts rates of changes in world GDP and Thailand’s exports between 1996 and 2004. The world GDP growth rate is represented by the GDP growth of the United States, Japan, and the European Union. The striking coincidence between turning points of the two variables suggests that global markets have a strong impact on Thailand’s export performance. During the past five years there has been an emerging new pattern of international trade. Thailand exports are increasingly expanding into Asian markets, while the share of exports going to the United States and Europe has been declining (Table 1.4). Thailand has been integrating more into Asia, in particular with ASEAN countries. The same can be said about Japan, China,

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The Resilience of the Thai Economy

and South Korea. The new regionalism trend points to economic cooperation between ASEAN and the three countries in East Asia. Globally, volumes of trade within regional blocs are much larger than inter-bloc trade. According to Rugman (2000), intra-blocs export trade in NAFTA, the EU, and Asia intra-bloc exports was 49, 60, and 53 per cent respectively in 1997. There has been a proposal to form an Asian Economic Community by the year 2020 and free trade agreements between ASEAN and Japan, China, and South Korea would be a pre-condition for such a grand undertaking. The reason behind the increasing volume of trade among countries in Asia is the fact that these countries experience growth together, while they have different levels of economic development. Their economic activities are more complementary in general rather than competing with each other.

4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

30.0 25.0 20.0 15.0 10.0 5.0 0.0 -5.0 -10.0 1996 1997 1998

1999 2000 2001

World GDP

Thai Exports Growth

World GDP Growth

Figure 1.12 Global Influence

2002 2003 2004

Thai Exports

Table 1.4 Changing Export Destinations

Japan USA EU ASEAN

1980

1990

1995

2000

2003

14.2 12.6 26 16.4

17.2 22.7 21.5 11.4

16.8 17.8 15.1 19.1

14.7 21.3 15.8 19.3

14.2 17.0 15.1 20.6

Source: Direction of Trade Statistics

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Figure 1.13 shows that when Asian economies suffered a recession in 1998, Thailand’s exports to Hong Kong, China, Taiwan declined accordingly. But this is not the case for Australia, where imports from Thailand increased in that year. Nevertheless, when the world experienced a mild recession in 2001, exports of Thailand into these new markets suffered a shortfall accordingly. The export rebound afterward in these markets followed the same pattern. As conventional wisdom suggests, diversifying export markets geographically is a way to minimize risks when there is no synchronization of business cycles. The real effective exchange rate, which reflects the incentives for export production, has improved significantly following the onset of the financial crisis. The econometric evidence provided by Athukorala and Suphachalasai (2004) confirms that real exchange rate depreciation is an important factor contributing to the post-crisis export recovery. Exchange rate depreciation thus has a role to play in stimulating exports to these new markets, where the baht has depreciated. Japan and the United States are traditional major trading partners whose combined shares of Thailand’s exports were more than 30 per cent. As shown in Figure 1.14, the value of the baht has been maintained close to the yen and the dollar. Intervention takes place regularly to prevent the baht appreciating against the dollar, resulting in a large accumulation of international reserves.13 By August 2004, international reserves rose to US$44.8 billion. Thailand is Figure 1.13 Thailand’s Exports to New Markets

Billion U.S. Dollar

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Ratio to Value in 2001 Q1

Figure 1.14 Fluctuations of the Baht

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1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 01 001 001 001 002 002 002 002 003 003 003 003 004 004 004 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Dollar

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not the only country that is trying to prevent currency appreciation through intervening in the foreign exchange market. The fear of floating has become an epidemic. Many countries attempt to maintain fixed exchange rates despite the claim of adopting a flexible exchange rate system. In fact it might be less risky to allow exchange rates to reflect changing market conditions rather than holding onto a fixed rate against a major currency.14 Because of the continued strength of the euro and Australian dollar against the U.S. dollar in 2004, the baht depreciated against the euro and the Australian dollar by almost 30 per cent since the beginning of 2001. The weakening of the dollar vis-à-vis other currencies implies the weakening of the baht against the yen, the euro and other currencies, while the baht still appreciates marginally against the dollar. With the problem of twin deficits in the United States, the baht might be actually undervalued. In the future when the dollar declines, the U.S. economy will have to undertake output contraction to resolve the unsustainable current account deficit; the inevitable sharp appreciation of the baht against the U.S. dollar cannot be postponed. The fear of baht appreciation against the dollar is a cause for concern, but we should remember that maintaining unrealistic fixed exchanged rates was one of the causes of the crisis in the past. CONCLUDING REMARKS The flexibility of wage rates in Thailand helped mitigate the damaging effect on a sharp fall in output in the aftermath of the currency crisis. Unemployment

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since 1998 has been declining as the economy is slowing recovering. Inflation remains subdued compared with global inflation and the resulting fall in domestic interest rates enables Thai firms to restructure their foreign debts, thereby reducing the degree of vulnerability to a future currency crisis. Furthermore, the development of bond markets should reduce the heavy dependency on bank loans which was a factor that lead to sharp output contraction when Thailand suffered from a banking crisis. The agricultural sector has been supporting the Thai economy by generating a high income throughout the early 2000s. Agricultural output responded positively to high prices for world commodities. In turn, the agricultural sector generates demand for manufactured products and provides a steady pool of labour for the manufacturing and service sectors. The dynamism of export-oriented industries, which have focused more on foreign markets, has raised the output level far above the pre-crisis period. These industries are able to respond to the growing demand generated by the upturn in the world business cycle. The role of foreign direct investment is crucial to the industrial development of Thailand. The consistent open policy towards FDI has contributed to continued flows of technology transfer and spillover effect into local industries. Fiscal budget deficit is under control, thanks to the built-in-automatic fiscal stabilizer of taxation and the nature of budget utilization. The reorientation of public expenditures provides social safety nets and targets poverty reduction. It remains to be seen whether these programmes can provide positive social net benefits. International reserves also increased significantly from 1998, indicating sufficient coverage for short-term debts. Commercial bank credits are expanding into non-speculative investment, unlike the lending pattern in the early 1990s. The financial crisis has given valuable lessons to good corporate and banking governance. The banking sector has become efficient as a result of industry restructuring and getting rid of the problem of non-performing loans. Adherence to international financial standards has improved the quality of bank loans. The Bank of Thailand has been aware of the possibility of asset bubbles and has taken precautionary measures. Although the Thai economy seems to be resilient, riding on the expansion of world trade, there are still some structural problems. Public enterprises which enjoy monopoly power and high economic rents must be reformed to make them more efficient and competitive. Other monopolistic industries can be subject to competition if they are forced to compete with imports as a means to force them to restructure. Thus free trade agreements with other countries can help speed up the structural reform of inefficient sectors. The

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government has negotiated multiple free trade agreements with countries with various sizes and different levels of economic development. Thailand’s current trade strategy implies a new regionalism that will commit Thailand to structural reform by creating efficiency through adaptation to the forces of globalization. Its dependence on imported oil makes Thailand vulnerable to oil price shocks. The adverse impact of the oil shocks has been postponed through public subsidy but the surge in the inflation rate and the loss in competitiveness will become apparent as wage and prices adjustments begin to take place. For this reason, the exchange rates must be made more realistic with little intervention so as to cushion the economy from external disturbances. If Thailand happens to experience another economic crisis, whether it is generated by internal or external sources, it should not be as painful as the brief episode in 1997–98. Thailand has an underlying economic structure and institutional factors that will make the impact of the crisis remain temporary. The Thai economy is resilient enough and will soon return to the pre-shock growth path once again as it had done after 1998, except that the economy will become more efficient and stronger than before. NOTES 1. For an excellent account of the crisis, see Warr (2005) and Siamawalla (2005). 2. According to Rodrik (2003), these reforms encompass corporate governance, flexible labour markets, adherence to WTO disciplines, prudent capital opening, independent central banks and inflation targeting, social safety nets, and target poverty reduction. 3. Williamson (1990) coined the term “Washington Consensus” which includes among others, fiscal discipline, interest rate liberalization, tax reform, trade liberalization, openness to FDI, and realistic exchange rate. 4. Inflation targeting mechanism of the Bank of Thailand is an example of such policy responses through changing the policy interest rate. 5. See Nidhiprabha (2003) for a detailed analysis of the decomposition. 6. At the peak of the crisis, short-term debts amounted to 35 per cent of total debt. The amount has been declining gradually as firms have rescheduled their debt structure. The percentage of short-term debt stood at 23.4 per cent in August 2004. 7. The average global inflation stands at 2 per cent, the lowest for half a century. 8. At the end of 2003, the overall capacity utilization of the Thai manufacturing sector stood at 66.3 per cent. 9. In August 2004, bank loan expanded at 9.6 per cent, compared to the deposit growth of 3.8 per cent. Loan growth has started to outpace deposit since January 2004.

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10. See Manning (2002) for a detailed discussion on the comparison of labour adjustment to the crisis in South Korea, Thailand, and Indonesia. 11. The average real wage rate was cut by around 4 per cent both in the second half of 1998 and in the first half of 1999. 12. The Bank of Thailand’s index of capacity utilization covers only 45 per cent of industrial sector, ignoring some important industries such as textile and clothing. 13. In terms of the sufficiency of reserve coverage, the US$44.8 billion is equivalent to 3.8 times the size of short-term foreign debt. 14. According to Calvo and Reinhart (2002), the probability that changes in reserves fall within a relatively narrow band is a declining function of the degree of exchange rate rigidity. REFERENCES Akamatsu, Kaname. “A Historical Pattern of Economic Growth in Developing Countries”. The Developing Economies (March–August 1962): 1–25. Athukorala, Prema-Chandra and Suphat Suphachlasai. “Post-Crisis Export Performance in Thailand”. ASEAN Economic Bulletin 20, no. 1 (2004): 19–36. Balassa, Bela. New Directions in the World Economy. New York: New York University Press, 1989. Calvo, Guillermo A. and Carmen M. Reinhart. “Fear of Floating”. Quarterly Journal of Economics (May 2002): 379–408. Dollar, David. “Outward-Oriented Developing Economies Really do Grow More Rapidly: Evidence from 95 LDCs, 1976–1985”. Economic Development and Cultural Change 39 (April 1992): 523–41. Felipe, Jesus. “Is Export-Led Growth Passé? Implications for Developing Asia”. ERD Working Paper no. 48, Asian Development Bank. Manning, Chris. “Lessons from Labour Adjustment to the East Asian Crisis: The Case of South Korea, Thailand and Indonesia”. East Asian Economic Perspectives 13 (March): 62–96. Kruger, Anne O. “Trade Policy and Economic Development: How We Learn”. American Economic Review 87, no. 1 (1995): 1–22. Nidhiprabha, Bhanupong. “Thailand’s Macroeconomic Policy after July 1997”. Asian Economic Papers 2, no. 1 (2003): 158–71. Redding, Stephen and Anthony J. Venables. “South-East Asian Export Performance: External Market Access and Internal Supply Capacity”. The Japanese and International Economics 17, no. 4 (December 2003): 404–31. Rodrik, Dani. “Growth Strategies”. In Handbook of Economic Growth, edited by P. Aghion and S. Durlauf. Amsterdam: North Holland, 2005. Rugman, Allan M. The End of Globalisation. London: Random House Business Books, 2000. Siamwalla, Ammar. “Anatomy of the Crisis”. In Thailand Beyond the Crisis, edited by Peter G. Warr. London: RoutledgeCurzon, 2005.

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Warr, Peter G. “Boom, Bust and Beyond”. In Thailand Beyond the Crisis, edited by Peter G. Warr. London: RoutledgeCurzon, 2005. Williamson, John. “What Washington Means by Policy Reform”. In Latin American Adjustment: How Much has Happened?, edited by John Williamson. Washington: Institute of International Economics, 1990.

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Thaksin’s Thailand: Thai Politics in 2003–04 Michael Kelly Connors*

The stars are looking good for Thailand’s Prime Minister, Thaksin Shinawatra — at least they were in late 2003. Amidst some dire predications of a difficult year ahead for the ruling coalition government, Thaksin upset fortune-teller circles by applying CEO criteria, suggesting that if they made wrong predictions they should quit. At least one fortune-teller still ventured that should the government hold elections at the beginning of 2005, Thai Rak Thai (TRT) — the dominant party in the increasingly quasi-coalition government — would easily win over 400 seats in the 500-seat House of Representatives.1 This was not just stargazing. Thaksin’s claim that TRT would win 400 seats was his chosen sword of 2003, used to threaten coalition partners with impending irrelevance, and to taunt the beleaguered Democrats with the possibility of permanent opposition. Of course, Thaksin had little need of the stars, having already expressed astounding confidence that he will last two full terms as prime minister, and, furthermore, “when I step down a new leader of the party will be prime minister for another eight years… and then the people will give us another four years, that is twenty years. Then I will ask the people to choose another party, which will have waited in the wings for so long.”2 Thaksin has not always been so brazen. In a reflective moment several

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years ago, he confessed, “I am just a human being. People who are in power for a long time may acquire a self-delusion that they’re the best.”3 Events in late 2003 and through to the first half of 2004 have somewhat deflated Thaksin’s ambition of leading Thailand’s first elected single party government. Indeed, at the time of writing, it appeared as if the Thaksin star was quickly fading to a dim light surrounded by the burning flames of unresolved social, economic and political questions that Thaksin’s style of quasi-CEO managerialism has failed to quell. These problems include the crisis in the Muslim South, the mishandling of the avarian flu crisis, increasing questions on the legality of the “war on drugs”, and the rising wave of opposition to privatization. This chapter has the modest aim of highlighting the key political developments over the last year (April 2003–April 2004), and to relate these developments to the broader framework of the so-called “Thaksin project”. THAKSIN’S THAILAND Understanding what has been happening in the last year requires an appreciation of the Thaksin phenomenon. The electoral success of TRT in the 2001 elections was partly fuelled by nationalist reaction to the savaging Thailand experienced under IMF tutelage. It was in offering solutions to these dire problems that TRT gained traction. The crisis imperative allowed for the unique conditions under which Thaksin could emerge with broad support from erstwhile conflictive capitalist groupings, and from rural and provincial populations (Hewison 2001). In this unique conjuncture, Thaksin has moved to create a massive overhaul of Thailand’s state, political and economic apparatuses in order to achieve a more viable Thai capitalism. Control by big capital over state agencies via cabinet or by appointment is what characterizes the Thaksin regime. Under Thaksin, there has been a relentless attempt to penetrate and restructure the bureaucracy as an efficient machine. The advent of the CEO governor is perhaps most emblematic of this (Pasuk and Baker 2004). The development has also been marked by increasingly personalized appointments to key posts — the most notorious of which was the rapid advance of Thaksin’s cousin General Chaisit Shinawatra to Commander-in-Chief, Royal Thai Army, in August last year.4 The second aspect of the Thaksin regime is in the economic arena. The regime earned the label “populist” for pursuing a number of innovative schemes that have a Keynesian edge. Commentators also label it populist

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because of its various appeals to nationalism, Thainess, and “the people” (Hewison 2002; McCargo 2001; Pasuk and Baker 2000). Thirayut (2003) suggests that Thaksin pursues a strategy of liberal populism (seriprachaniyom). The government does not simply dish out funds in the manner of Keynesian pump priming, but it aims to create a new layer of local entrepreneurs and small-scale capitalists. Thus, the government targets millions of relatively middle-income families in the provinces for its various credit packages to stimulate small-scale economic activity (National Economic and Social Development Board 2003). The policies have had some success in modest stimulation of demand, but less so in creating new sources of income. They have also tended to increase the proportion of income dedicated to consumption over savings.5 The government is also developing further economic policies so that poor people will identify their fate with that of the governing party. This is especially so with the Poverty Registration scheme. By April 2004 some 7.2 million people had signed up for the scheme.6 Thaksin has promised to restructure over 123 billion baht worth of poor people’s debt by the end of the year, so that people are not subject to mercenary interest rates.7 I have written elsewhere that in some ways Thaksin might represent the emergence of a new historic bloc of recomposed capitalism in Thailand; the government genuinely seeks to construct sustainable linkages between the export economy and the localized market provincial economies — the so-called dual-track strategy (Connors 2001). This possibility remains. However, as Glassman notes, this is not a strong economic nationalist strategy, for it is largely supportive of ensuring the survival of an already internationalized capitalist class (Glassman 2004). Another feature is the government’s unusual interest in generating support for nationalism. It has passed new regulations about flying the flag and it established the new Ministry of Culture in 2002. Pasuk and Baker (2004, Chapter 3) have also identified a group within TRT that actively works to promote nationalism. Nationalism and its various symbols are not marginal to the Thaksin project. Nationalism provides the ideological basis upon which the government presents particular interests as national interests. In August the government finalized its last debt payment to the IMF ahead of schedule. Some critics saw this as putting “nationalist symbolism” ahead of economic prudence, as the government is still servicing debts at higher rates of interest than that required by the IMF. In announcing the end to the IMF debt, Thaksin declared that: This government needs to give all Thai people confidence and pride in Thainess. Today we do not have any obligations… the things we must now do is have the economy reach the grassroots, and create work and incomes.

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The significant factor is to adjust the policy of the dual track, which depends mostly on the domestic economy, not just exports, investment and tourism as was done in the past.8

Several inherent weaknesses of the ruling bloc limit the realization of the Thaksin project. The first limit is the increasing criticism from broad sections of society that the government has muddied the waters as to what constitutes serving the interests of the nation and serving the interests of specific groups of capital associated with Thaksin. This raises doubts among some of Thaksin’s ability to effect a thoroughgoing state-assisted recomposition of Thai capital, separate from his own interests. Thaksin’s wealth is both his strong and weak point. While it brings him political influence and allows control over TRT, it is the further pursuit of his own interests, and associated capitalist groupings, that may bring him into conflict with other groupings of capitalists (Pasuk and Baker 2004, Chapter 8). Key examples from 2003 alone are the Board of Investment granting of tax breaks on foreign currency earnings in various satellite projects of the Shin Satellite Plc,9 as well as substantial breaks on Thaksin interests in telecommunications and the licensing arrangements for ITV. These are worth billions of baht. As the economy rebuilds, the crisis imperative that brought different capitalist groupings under the umbrella of TRT, recedes. The potential exists for independent groupings of capitalists to move towards limiting Thaksin’s aggrandizing impulse, resulting in a face-off against the government’s oligarchic tendencies. The crucible in which this opposition may exert itself is in the political party system, which remains subject to old-style money politics, and prone to further mutation, despite the efforts to consolidate a form of “Grand Coalition” (Ockey 2003). Thaksin has failed to wipe out old-style patronage politics, although he has shifted the goal posts — absorbing many of its elements into TRT’s larger structure. Of course, old-style politics where cabinet posts are viewed as personal fiefdoms persist in some quarters. Although much has been made about the possible emergence of a two-party system in Thailand (that is, the Democrats and TRT), the fact is that both parties, TRT more so, are factionalized along mostly patronage lines rather than ideological lines (see Sungsidh and Pasuk 1996; McCargo 1997). TRT then might best be seen as a blanket cover that temporarily lies over a number of enduring patronage networks. While these persist, Thaksin attempts to break them down and to diminish the standing of the faction’s respective leaders. This means coalition government is not just about how TRT manages its relations with Chart Thai, or Chart Pattana, but also how it plays off faction against faction in distribution of the booty. Thinking about TRT in this manner makes it clear that former New Aspiration Party leader General Chavalit Yongchaiyut really

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deserves credit for the idea that led to TRT. In 1997, he suggested that the best kind of party for Thailand was something like the LDP in Japan — a party that has managed a heavily factionalized patronage system internally and succeeded in holding power for most of the post-war period. Another feature of TRT is the heavily personalized funding of the party, which suggests this is not a “modern” party of interest articulation and aggregation (see Corporate Thailand “The Inner Circle” Issue 84). Apart from undeclared funding from business and individual figures, the official sponsor of the party is Thaksin’s wife, to the tune of millions of U.S. dollars. Another feature is the increasingly patron-like role individual MPs are establishing with their constituents. One report notes that TRT MPs receive an extra 200,000 baht a month to distribute in their respective electorates. This is not state funding — and its status is legally grey. MPs refer to this as pasi sangkhom or a social tax. They use it to help constituents, or at least are instructed to do so.10 The centrality of local disbursal of funds suggests the importance of locality and an MP’s capacity to offer support. This is to say that despite the inroads made by TRT as a national party, Thai electoral politics retains its localized flavour (See Nelson 2001). This indicates that hopes of a modern political system of party identification and policy articulation are nowhere near being fulfilled. For TRT to thrive, Thaksin still needs to tap into the networks that exist beyond his own, and while he works with them in order to draw them towards his own aims, the outcome is never certain. This explains his dependence on faction leaders and coalition partners. This dynamic of accommodation, contest and precarious balancing is evident in the recent Provincial Administration Organization elections in March 2004. The elections witnessed great infighting between factions and the coalition partners, past and present.11 The election contests seem to suggest an unstoppable TRT, with it winning forty-seven of the provinces, the Democrats winning thirteen, and the rest being divided among Chart Thai, Chart Pattana and Independents. However, different factions within TRT fought heated campaigns against each other, hardly reflecting a consolidated and unified party. The provincial elections do not however, provide a reliable guide to the state of national politics. Firstly, there was no full deployment of the TRT party apparatus. Often the TRT logo was simply appropriated by local politicians seeking to bask in the party’s prestige. In one documented case, it appears that a provincial team distributed election material with four different party logos, depending on the site of electioneering. This pragmatism on party affiliation also

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extends to the millions of people who are formally registered as members of political parties. The Electoral Commission reported last year that their was overlapping membership of political parties, upwards of six million, and rued the fact that genuine party development in terms of meaningful local branches with stable organizational bases had not yet occurred.12 Thaksin’s limits are also evident in the renewed insurgency in the Southern provinces, and the “war on drugs”. The increasing politicization of the security arms of the state has led to the emergence of reconstituted predatory interests ((Pasuk and Baker 2004, Chapter 6). In a sense, what the war on drugs and more recently the military reaction to the Southern crisis indicates is the persistence of these forces as a kind of shadow state able to determine their own rules with impunity. This is to suggest then that the constitutional state apparatus is not a strong and pervasive force with absolute power to determine the nature of social, political and economic life. There remain areas of life where different logics are at work and where the constitutional state recedes. Thaksin, in a sense, straddles both states, while simultaneously seeking to transform them while serving his own interests. Thaksin looks more and more like a transitional figure in Thailand’s awkward road to political reform. Without these broad framing comments about the Thaksin project, the discussion below would simply be about mere epiphenomena, seemingly driven by the mystical processes of “Thai-style democracy”. As would others, I suggest that there is much more logic to it than that. POLITICAL PARTIES Having absorbed the New Aspiration Party in early 2002, TRT holds an absolute majority in the House of Representatives, with close to 300 seats. The party now aspires to winning over 400. The party rules in coalition with the Chart Thai Party (the majority of its 39 seats being in the Central provinces and the Northeast) and, until it was dropped from the Coalition in November 2003, Chart Pattana (the majority of its then 31 seats being in the Northeast). The fact that Thaksin has reshuffled the cabinet eight times since 2001 attests to the continuing relevance of factional and coalition bidding for influence, although the reshuffles have also been performance related. In his bid to secure 400 seats, Thaksin continued his courtship of the two coalition partners, seeking to merge them with TRT. With Chart Thai leader Banharn Silapacha already on record as opposed to merger, and an expected mass defection from that party to TRT in 2004, efforts centred on Chart

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Pattana. Despite intense pressure, and support within the party for merger, Chart Pattana under the new leadership of Suwat Liptapanlop proved antagonistic to Thaksin’s designs and failed to respond positively to an “ultimatum” to merge.13 During 2003, Chart Pattana ran against TRT candidates in the Nonthaburi by-election. Matters came to a head when Thaksin expelled Chart Pattana from the coalition in November, leaving its members who had occupied cabinet posts out in the cold, as all cabinet members must forfeit their parliamentary seats. Thaksin explained the expulsion by referring to the need to deal with “enemies within, before the next election”.14 Several pro-merger Chart Pattana MPs, including party cofounder and former leader, Korn Dabbaransi, left and joined TRT. Chart Pattana subsequently unseated the TRT-supported Korat Mayor in March 2004 municipal elections.15 This set the scene for a reconciliation between TRT and Chart Pattana, as Thaksin recognized that Chart Pattana was still likely to do well in future elections in the Northeast. In April 2004, Chart Pattana was back in favour, with Suwat being invited to accompany Thaksin on a tour of the Northeast. While 2003 was also awash with rumours of a Chart Pattana and Chart Thai merger, the idea of smaller parties becoming “subsidiaries” of TRT was floated in April 2004. Supposedly modelled on the Malaysian ruling organization, UMNO, the idea is that minor parties maintain their own party organizations and identity, but would be more securely embedded in a coalitional relationship with TRT. While TRT had practised a strategy of “merger and acquisition” throughout 2001–03 (Rangsan 2003), Nophakhun (2004) notes that having failed, TRT is now willing to opt for the less optimal but politically expedient solution of becoming a holding company of the minor parties. It would provide resources to the parties, but in return would gain guaranteed support. Thaksin has also had to contend with forces within TRT. When the NAP merged with TRT in early 2002, some commentators saw it as the swan song of its leader General Chavalit, who could no longer carry the financial burden of his party. Apart from gaining MPs with a base in the South (the Wadah faction), Thaksin’s motive in bringing Chavalit into the party was partly about balancing the power of the Wang nam yen faction (sixty to seventy strong) led by Snoh Thiengthong. This objective has been a constant theme of TRT internal politics. Snoh has been a constant critic of further mergers, fearing the dilution of his factional influence. Thaksin has attempted to both accommodate and marginalize Snoh Thiengthong, depending on the relevant contingency. Thaksin’s most dramatic move against Snoh, in August last year,

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involved his removal from a direct role in electoral strategy in the party’s Northeast stronghold.16 Rumours that Thaksin might call, under pressure, an early election are attributed to disaffected forces in TRT who fear that an overwhelming victory in the next election will further marginalize their bargaining power in the party. This places TRT in a difficult position, with its paramount leader seeking a massive electoral windfall for its so-called populist policies, and key figures within the party allegedly wanting to thwart that ambition. For outsiders looking in, why Thaksin seeks an overwhelming parliamentary majority is something of a riddle; unravelling it requires several responses. The first response is that TRT is a volatile political formation, born of crisis and subject to break-up pressures. In other words, despite Thaksin’s dominance, the party may simply implode. If Thaksin reasonably assumes the possibility of TRT party losing fifty to a hundred MPs in a crisis, then having MPs in reserve is a logical insurance policy. The second is that Thaksin, by declaring the objective of 400 seats, is simply playing the old game of luring “grasshopper politicians” in other parties to jump into TRT. Thailand’s notoriously fickle politicians can be lured by the prospect of joining the governing party, and benefiting from its generous supplementary payments to its sitting MPs. A more sinister answer to the riddle, and one that is commonly accepted, is that Thaksin wants to win over 400 seats to ensure that a future government under his leadership would not be subject to any censure motions.17 Currently, Thaksin is in the “enviable” position of not being subject to censure motions from the opposition, because it lacks the 200 votes required to launch such a motion. However, cabinet members can be subject to censure motion as only 100 votes are required. Last year five cabinet members faced censure motions and most performed abysmally; this year there is an expected nine censure motions to be launched in late May. The overall effect of these censure debates is to make the government look sleazy. Going for outright control in the house of representatives makes sense given the current close relationship between business and government and the possibility of conflict of interest, concerns about policy corruption, and the continuing existence of patronage politics. Having 400 votes in the house of representatives would provide a protective embrace around the entire government. Thaksin, however, is not just counting on an overwhelming parliamentary majority to safeguard the government. He has moved to quell legal and political opposition — continuing his previously observed tendency to neutralize the institutions of checks and balances established by the 1997 Constitution.

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ON CHECKS AND BALANCES Firstly, the government has overseen, through influence in the senate the neutralization of independent institutions set up to oversee government actions (see Suriyasai 2003). The National Counter Corruption Commission was amongst those targeted. Influence in the proceedings of the NCCC might be judged expedient as several figures associated with the Coalition have cases before it. Five of the seven new faces selected to the NCCC in December last year are in some way associated with TRT.18 There has also been further politicization of the senate, with the former senate president, who was critical of the government, being replaced by an elected senate president close to TRT.19 Secondly, the government has continued to undermine the role played by non-governmental organizations (NGOs) in Thailand. In May last year a rare media scoop in The Nation revealed that the government had attempted to get the Ministry of Foreign Affairs to stop funding to NGOs involved in the Assembly of the Poor and specifically around the Pak Moon dam protests (see Pasuk and Baker 2004, Chapter 5). Thaksin, in light of these revelations said, in an almost Mahathirian fashion, “NGOs are social groups that help bridge the gap between the government and the people. If such a gap no longer exists, the role of NGOs will be automatically diminished and foreign donors will not need to fund them any more.”20 Thaksin, of course, believes his government has done much to bridge the gap. Furthermore, interference in broadcasting and the print media is growing — the list is extensive but a few highlights illustrate the point well. Late last year there were reports that the government has instructed radio stations not to criticize the government’s privatization policy, and there have been occasional blackouts during programmes when criticisms have been made of the government (Pasuk and Baker 2004, Chapter 5). Perhaps most notorious is the recent removal of the editor of the Bangkok Post after threats to remove advertising from business groupings close to the government. The move against the English language press is interesting as it has traditionally been left alone (relatively speaking). Thaksin is one of the few Thai national leaders who harbours ambitions as a regional leader, he cares about the image it paints of him. Of this, he is certainly aware, as he told several journalists in May last year, “I told you several times to think about the country when you write. Other people are watching us.”21 TEACHING A LESSON The narrative thus far seems to suggest that the Thaksin juggernaut is unstoppable. Indeed, Thaksin has perhaps sensed this. In August 2003 he

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ignored the Coalition’s own parliamentary majority and opted to issue an executive decree to amend the Penal Code and the Money Laundering Act. The government was heavily criticized for not bringing the relevant legislation to parliament. In the wake of the Marriot Hotel bombing in Jakarta, Thaksin defended the decree as a matter of national security. The Democrats challenged the constitutionality of the decree, but in February the constitutional court ruled the action legal.22 Parliament finally passed the amendments in late March. The episode raised serious concern about Thaksin’s willingness to dispense with parliament. In a related matter, in November 2003 the king returned an education bill that had been rammed through parliament. It had over forty technical errors. This was an unprecedented move by the king: While the level of errors was high, many pieces of flawed legislation have been allowed to pass in the past.23 The return of the bill to the house was interpreted by some as a sign of discontent regarding Thaksin’s cavalier dealings with parliament. While the government had the right to resubmit the bill and have it passed, it chose not to. Instead, it sought guidance from the constitutional court on whether the bill could be amended even though it had already been subject to three readings in parliament. The court ruled that amendment was possible. Further tensions between the palace and the government were hinted at during the king’s birthday speech in December 2003. The speech highlights how the king is willing to use his unassailable position to gently, almost graciously, probe Thaksin and edge him to positions that are more reasonable. Clearly possessing a keen eye for Thai political shenanigans, and with members of the government in attendance, the king observed that: A cracked bone can be mended…, but cracks among people are problematic…the entire front row of seats is occupied by leading figures. They too have many cracks. Though they sit close together, they are not united. (Bhumiphol 2003a)

On Thaksin’s declaration a day earlier that the war on drugs had been victorious at Sanaam Luang, the king implied that Thaksin would be well advised not to “float” above the ground, giddy with success. Furthermore, the king prodded Thaksin to listen to other people. In a discourse on modern education policy related to inquiry-based learning and the relationship between teachers and students, a transparent analogy for the relationship between rulers and ruled, the king spoke about older style learning he had experienced abroad where teachers welcomed questioning from their students, without feeling their credibility was under attack, nor students: Proper teaching can equip students to teach teachers, however: Teachers must allow students to ask questions. The question ‘Ah! What is this?’ is

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how a student teaches the teachers. Teachers are often angry and punish the students because they view the question as questioning their knowledge. Education reform means the encouragement of questioning. One should not misconstrue questioning as casting doubt on teachers, on directorsgeneral, on permanent secretaries, on ministers — excuse me: I of course mean vice ministers — then on deputy ministers and on ministers. Children are entitled to ask questions, and they have the right to be listened to. They ask because they don’t know and want to learn.

He concludes this part of the speech with observations about Thaksin’s own form of teaching. There are still many good teachers who can guide students. Such a good teacher is the prime minister himself. I notice that although the prime minister aims to implement a system whereby students teach teachers, when he taught a class he refused to be questioned by the students, so his efforts were in vain. I am sorry to say I saw the prime minister resorting to old-fashioned teaching… I am preparing myself for the latest computer model. I think I shall have to start studying how to use a modern computer…but there are no teachers left, they have all retired, and so I will have to depend on Teacher Thaksin, as there are no other teachers, just Teacher Thaksin. Soon there will be trouble, the prime minister will be distressed, because he must come and teach, and he has no time to do other things but teach. As we do not understand, he has to teach again until finally Prime Minister Thaksin says “I, teacher, must listen to students”. We must teach Teacher Thaksin it is thus. (Bhumiphol 2003a)24

Who might “teach” Thaksin? Apart from coalition partners and factions within TRT, who may or may not be hatching plots this very moment, all eyes are on the parliamentary opposition, the Democrat Party. The last several years have been bleak for the Democrats. Fortune-tellers predict the party’s fortunes will continue to slide until August 2004 when an old hand returns and eventually becomes leader (Chuan?). The doom and gloom analysis for the Democrats has some plausibility. In November last year, a statue of Mae Phra Thoranee, the Democrat party symbol, collapsed and fell into a pond. Democrat advisor Sanan Kachornprasart joked that Mae Phra Thoranee just wanted a swim, while others saw it as a bad omen.25 Worse still, in March of this year when a new marble statue was being installed, it fell over and shattered — again many saw this as a bad sign. However, new Democrat party leader Banyat Banyathan saw it differently, brilliantly quipping, “It happened in line with scientific laws. That is, when a heavy thing falls down, it will break apart.”26 Since April 2003, this sometimes witty, but often invisible politician has led the Democrats. Backed by the veteran politician

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Sanan Kachornprasart, and largely seen as representing moneyed interests, Banyat won the leadership contest against Chuan Leekpai’s preferred successor Abhisit Vejjajiva, who is seen as representing the policy-driven liberal wing of the party. When Banyat won it was rumoured that the party would enter the Coalition government.27 Several significant developments sum up the year for the Democrats. The first is the party’s August 2003 articulation of concrete policies aimed at winning seats in the Northeast with the slogan, “Adjust, reduce and eliminate debt, revive Thai farmers”.28 One opposition MP claimed that the Democrats would fight the TRT “air war strategy” of winning 400 seats with its own “e-den” strategy (e-den is the colloquial term for a cheap, slow and clunky Thai-made vehicle that moves a bit a like a rhinoceros). Although not a formal description of the party’s approach, the “e-den” imagery suggests a long hard slog against the glittery hi-tech strategy of the government. Imitating TRT policy boldness, the Democrats have declared policies aimed at the aspirant “poor”, promising attention to debt eradication on a sustainable basis, as well as offering permanent organizational representation through the formation of a National Farmer’s Council (for details see Democrat Party 2004a). These developments should be seen in the context of the Democrat Party’s attempt to build a base in the Northeast. Progressive organizations and farmers groups campaigned against the Democrats in the 2001, and urged a vote for TRT. In issuing farmer friendly policies, the party is undoubtedly trying to remove memories of their wilful suppression of protests and their failure to deal with mass grievances while in office. At its official election campaign launch in April 2004 (although no election had yet been called), Banyat tried to out-do TRT promises, with promises of free health care, reduced university fees, and debt abolition for those who have acquired debts under the current government’s various micro-credit schemes, and so on.29 The party has also attempted to project an image of itself as a liberal party with concern for the independent functioning of a vibrant civil society.30 However, if the party is beginning to speak to real people on the ground, there nevertheless remains a strong element of aristocratic disdain for ordinary people among some policymakers in the party. The urban liberal wing in the party is sceptical about the party’s attempt to emulate TRT-style policies. For such liberals, the success of TRT in the 2001 election was unrelated to Democrat’s image as a party of the IMF (Kasian describes the party as pushing a policy of “globalization or death” 2002, p. 326). Instead, they argue, the party lost power because the people were not sufficiently enlightened to elect responsible leaders. Former deputy leader Drairong summed up this kind of thinking, arguing that Thaksin’s only weapon against

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the Democrats was money, “Khun Thaksin misunderstands the word naiyokrathamontri, which in English is called Prime Minister, and is abbreviated as PM, Thaksin understands this to mean ‘POWER and MONEY’.”31 The philosopher kings at Democrat party headquarters regular express disgust at the way many provincial people have accepted the many offers of debt relief and new credit by the TRT — seeing this as leading to further problems down the track. Indeed, constant statements are made by the Democrats about the increasing state of indebtedness of ordinary people under the current government.32 In a sense, despite their stronghold in the South, Democrat Party liberals despair of ever winning “upcountry”, viewing the people as too unsophisticated to make a good political choice. In this vein, Anek Laothamatas, a deputy leader of the party, commented that the Democrats are the party of the city because city electorates are more mature and knowledgeable than the provinces.33 The problem of course is that vast majority of parliamentary seats are in the provinces. Anek has previously given this problem perceptive academic treatment (Anek 1996). Democrat elitism concerning the rural electorate takes many forms, perhaps the following remark from Anek is the best example: “At the moment the people (chao ban) are only good at transferring debt, they are not skilled at production. Before, they could be compared with a house chicken (kai ban) that was able to look after itself, but now they have become like a weak CP chicken, waiting for the government to treat them [CP is an agri-business company with close links to the government] …”34 However, no matter how much disdain the philosopher kings have for the chao ban, under Banyat’s leadership, the party is responding to the TRT policy challenge. At an organizational level, the party has welcomed back former party strongman Sanan Kachornprasart, whose five-year ban from politics is soon to end, as the party’s election strategist for the expected election in 2005.35 A number of signs are promising for the Democrats, although a comeback to government seems unlikely, even though Chart Thai and Chart Pattana have reportedly put out lukewarm, and promiscuous, feelers for a possible future coalition. In the late February 2004 by-election in Songkla, a new Democrat candidate managed to hold the party’s seat against a forceful TRT campaign. The Democrats also won the Hat Yai municipal election, into which TRT was said to have expended considerable energy and money.36 The Democrats own exit polling on the day of the Songkla by-election revealed several interesting results, including: 54.2 per cent of people voted for their preferred party, while 45.8 per cent voted for the individual candidate; 76.3 per cent of people were dissatisfied with the government’s handing of

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the Southern issue, while close to 40 per cent mentioned the cover up of the avarian influenza virus. Interestingly, 35 per cent of those questioned said they had voted for the Democrats because of the role of Chuan Leekpai (Democrat Party 2004b). Whether Chuan will return as Democrat Party leader is likely to be the guessing game of the second half of 2004. While too much cannot be extrapolated from these results, they do reflect that TRT’s electoral fortunes will be based partly on performance, not just the practice of vote-buying (on vote-buying see Callahan and McCargo 1995). WILL THE CENTRE HOLD? There is no doubt that 2004 has thrown up unexpected challenges to which the government has thus far failed to respond adequately. Apart from the severe loss of face over the bird-flu crisis when the government misinformation momentarily made Thailand an international pariah, the real impact was on thousands of small businesses whose stock was forcibly destroyed while big business groups close to the government were protected because of privileged prior action. On the question of privatization, the government has faced a wall of opposition that seems to get broader everyday. This is especially so in regard to attempted privatization of the Electricity Generating Authority Thailand. State enterprise unionists have staged continuous protests in the last few months against the government’s corporatization plan. By March, the protests grew as different social activists and groups joined to question the plan. Following union demands, the National Social and Economic Advisory Council, called on the government to suspend implementation37 — and it looks like this is what has happened for the moment. It is in the South, though, that the government is facing its gravest crisis, bringing into question its style of governance, its complicity in human rights abuses, and the continuing influence of state apparatuses in illicit operations of various kinds. Thaksin began 2004 looking unassailable, but in the following months his position, and that of the compact of forces he represents, has eroded and splintered. While it is possible Thaksin will fall of his own accord, it is most likely that this is a long way off — unless further crises unfold. The government may yet see the benefits of its so-called innovative populist policies reap an electoral windfall in the next election, although the size is likely to be less than expected. One development that may affect Thaksin’s future is the development of an extra-parliamentary opposition, although the strength of such opposition cannot be predicted. Thaksin’s rise demonstrates how weak and dependent

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Thailand’s progressive social forces are. Bereft of a unified political strategy, they tailed the Thaksin government into the election of 2001, just as they had tailed the liberals in the political reform movement in 1995–97; and just as political reform unexpectedly provided the constitutional underpinnings for strong government, so Thaksin unexpectedly turned on his erstwhile supporters in the NGO and social movement sector. In less than a decade, the failure of progressive social forces to build independently of elite forces has led to two phases of reactionary assaults on the burgeoning forces for social change. The question now is whether such forces can work with, but independently of, elite liberal forces, and advance their own progressive policies. These entail a localized economic agenda and national economic sovereignty, a recognition of the resource management crisis, a desire to create new modes of management, consumption and living, and a democratic reform of the state (see Kasian 2002, pp. 337–38). Certainly, the conditions for a coalition of progressive and liberal forces exist. What is more, such forces now exist within para-statal institutions such as the National Human Rights Commission, which has been outspoken in relation to the extra-judicial killings that accompanied the government’s war on drugs, and it is now acting as an advocate for over 200 families whose relatives have been killed (See National Human Rights Commission 2003). Such developments indicate a changed strategic environment. Such forces are beginning to gain confidence after being demobilized during the first year of the Thaksin government, and then subsequently intimidated for the last two years. They have continued to struggle around various local issues, but they have not positioned themselves as a national oppositional force to Thaksin. It would seem that a nucleus is now taking shape around the issue of privatization which has seen over one hundred civic organizations, development groups and trade unions join together to oppose not just privatization, but the politics behind policy processes and policy corruption.38 In the recent past progressive social forces have moved to the spotlight when significant segments of the Thai establishment were also seeking political change, such as during the movement for political reform against money politics between 1995–97 (see McCargo 2002). Indications of a potential elite opposition to Thaksin are present. Already there has been talk of amending the constitution to ensure that the NCCC and the NHRC remain neutral. In December the Democrats, Chart Thai and Chart Pattana agreed to push for such an amendment.39 Even Amon Chantrasombun, who partly defined the politics of the political reform movement, has called for a second movement against the re-emergence of “parliamentary dictatorship”.40 Such a movement

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may take shape in the coming year or two. Indeed, in some respects 2004 looks a lot like 1995, except that instead of the old-style money politics, any potential coalitional force faces a new form of grand money politics. Should such a movement emerge, it is likely to be characterized, as it was in 1995–97, by liberal elites and progressive activists occupying different spheres of action, but pushing for broad reform. However, the struggle will be so much harder because Thaksin’s hold on parliament remains firm — and there is as yet no crisis imperative to reform the system as there was in 1997, when the economy collapsed. What will be crucial for progressive social forces is to define an independent position outside of elite liberalism, and this essentially means pushing for concrete interest-style politics beyond the institutions and procedures of constitutional democracy (see Ji 2003). As the Thaksin years show, no amount of democratic decoration can protect the interests of ordinary people. In some respects, the great energy expended in the last decade on democracy promotion, civic education and anti-vote buying campaigns has done little to abate the influence of money and power in the political system. Indeed, it might be argued that promoting “good citizenship” in Thailand has led to a moralistic type of politics that permanently displaces questions about power and structure in determining political outcomes (see Callahan 2002; Connors 2003). Self-organization is what can transform these democratic institutions into instruments that serve the interests of workers and peasants. Civic politics needs to be complemented with classbased activism in trade unions and farmers’ federations. Only this can ensure that national politics is not subject to the whims of aggrandizing elites. Action from above may pre-empt the emergence of such a movement; and Thaksin may fall in front of a jury of his peers. Indeed, there is considerable concern about the current political situation among elements of the Thai establishment. The king himself has expressed some cogent concerns that indicate fear of mass disaffection with the political system. In the birthday address discussed earlier, the king raises interesting questions about the future implications of Thaksin’s rule. Offering sympathetic comments on the “war on drugs”, the king nonetheless suggests that more be done to satisfy critics who claim the government is responsible for over 2,500 deaths. The king notes that accountability is continually shifted from the “superman” prime minister through to ministers, civil servants and through to the “CEO” people, who then may shift the blame on to the king, but: …this is against the constitution as it says that the King is not responsible for anything, so we agree that none of us are responsible for the nation…The

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person who is greatly troubled by this is the King, because no one can reproach him. We did not tell those who wrote the constitution that no one can reproach or violate the King, why this was written, I do not know. (Bhumiphol 2003b)

A system of no accountability is a volatile system, and it is clear that the king’s comments relate not just to the war on drugs but extend to the style of CEO governance that Thaksin has embraced. One may conclude also that if the king can cope with criticism, although it is not allowed, then Thaksin should also manage. In conclusion, this chapter has sought to highlight relevant developments in Thai politics over the last year. It began with a basic discussion of the “Thaksin project” and then moved to demonstrate inherent weaknesses in the Thaksin camp that limit the possibilities of a complete transformation of Thai politics. Inasmuch as there is now a tendency to speak of “Thaksin’s Thailand”, it is useful to bear in mind that Thaksin is subject to the dynamics of change and conflict that emerge in the contest between multiple interests. In highlighting these limiting factors, we can also speak of “Thailand’s Thaksin”, which suggests a man who is as much determined as he is determining. NOTES *

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

I would like to express my thanks to the organizers of the Update for the opportunity to speak, and to the respondents who provided me with reason to make some revisions. Thanks also to Chris Baker for his useful suggestions and corrections. Some of the research contained in this paper was undertaken while I was on a research trip to Thailand in relation to the Ministry of Culture, funded by the Australian Academy of the Humanities. My thanks to the academy for providing its support. I would also like to thank the Faculty of Political Science, Chulalongkorn University, for hosting me during January and February. Thai Post, 10 December 2003. Krungthep Thurakit, 28 April 2003. The Nation, 29 October 2001. The Nation, 30 August 2004. Nation Sapda, 7–13 July 2003. The Nation, 5 April 2004. The Nation, 13 March 2004 Thai Post, 1 August 2003. The Nation, 20 November 2003. Thai Post, 20 September 2003. The Nation, 17 March 2004.

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12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

The Nation, 24 November 2003. The Nation, 27 October 2003. The Nation, 13 November 2003 The Nation, 8 March 2004. Matichon, 22 August 2003. Seriraiwan, 28 July 2003. The Nation, 24 October 2003, 10 December 2003. The Nation, 24 February 2004. The Nation, 10 May 2003. The Nation, 8 May 2003. The Nation, 20 February 2004. The Nation, 26 November 2003. Please note that the quotation comes mostly from The Nation, however, the end part of the quotation, in italics, is my translation from Bhumiphol 2003b. Thanks to Chris Baker with the Thai language version of this speech. The Nation, 18 November 2003. The Nation, 5 March 2004. Naew Naa, 21 April 2003; Matichon, 21 April 2003. Krunthep Thurakit, 25 August 2003. The Nation, 26 April 2004. Prachachart Thurakit, 3 July 2003, 7 July 2003. Phujatkan, 26 January 2003. Matichon, 26 August 2003. Thai Post, 4 August 2003. Thai Post, 4 August 2003. The Nation, 5 February 2004. The Nation, 7 March 2004. The Nation, 26 March 2004. The Nation, 22 March 2004 Pujatkan, 11 December 2003. Prachachart Thurakit, 13 March 2003.

REFERENCES Anek Laothamatas. “A Tale of Two Democracies: Conflicting Perceptions of Elections and Democracy in Thailand”. In The Politics of Elections in Southeast Asia, edited by R.H. Taylor. New York: Cambridge University Press, 1996. Bhumiphol Adulyadej, King of Thailand (2003a). “His Majesty’s Speech: Monarch Urges Unity, Responsibility”. The Nation, 6 December 2004. ———. (2003b). “King’s Edict Graciously Conferred on an Audience of Various Persons Offering Blessings on the Occasion of the King’s Birthday 4 December, 2003”. (Unofficial Thai version) available at .

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Callahan, W.A. and D.J. McCargo. “Vote-Buying in Thailand’s Northeast: The July 1995 General Election”. Asian Survey 36, no. 4 (1995). Callahan, W.A. “The Ideology of Vote-Buying and the Democratic Deferral of Political Reform”. Paper presented at Trading Political Rights: The Comparative Politics of Vote Buying International Conference, 26–28 August 2002, Massachusetts Institute of Technology, Cambridge MA. Available at . Connors, Michael. Ideological Aspects of Democratisation: The Mainstreaming of Localism. Working Paper no. 12, Southeast Asian Research Centre, City University, Hong Kong, October, 2001. . ———. Democracy and National Identity in Thailand. London: RoutledgeCurzon, 2003. Democrat Party. “Naiyobai”. , accessed 19 April 2004a. ———. “RDI Centre”. , accessed 19 April 2004b. Glassman, Jim. “Economic ‘Nationalism’ in a Post-Nationalist Era”. Critical Asian Studies 36, no. 1 (2004). Hewison, Kevin. Pathways to Economic Recover: Bankers, Business and Nationalism in Thailand. Working Paper no. 1, April, Southeast Asian Research Centre, City University Hong Kong, 2001. Available at . ———. “Responding to Economic Crisis: Thailand’s Localism”. In Reforming Thai Politics, edited by Duncan McCargo. Copenhagen, Denmark: Nordic Institute of Asian Studies (NIAS), 2002. Ji Giles Ungphakorn. Radicalising Thailand: New Political Perspectives. Bangkok: Institute of Asian Studies, 2003. Kasian Tejapira. “Post-Crisis Economic Impasse and Political Recovery in Thailand”. Critical Asian Studies 34, no. 3 (2002). McCargo, Duncan. “Populism and Reformism in Contemporary Thailand”. South East Asia Research 9, no. 1 (2001). ———, (ed.) Reforming Thai Politics. Copenhagen, Denmark: Nordic Institute of Asian Studies (NIAS), 2002. National Economic and Social Development Board. “Phonkandamnern Nayobai Kradun Sethakit radab rakya” [Results of the Grass Root Economic Policy], 2003. , accessed 14 April 2004. National Human Rights Commission. “Kho Saneu to rathaban karani phusiachiwit kiawkhong ya septit” [Proposals to the Government on the Loss of Life in Relation to Drug Addiction], 2003. Available at , accessed 18 April 2004. Nelson, Michael H. “Thailand’s House Elections of 6 Jan. 2001: Thaksin’s Landslide Victory and Subsequent Narrow Escape”. In Thailand’s New Politics: KPI Yearbook

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2001, edited by Michael H. Nelson. Nonthaburi and Bangkok: King Prajadhipok’s Institute and White Lotus Press, 2002. Nophakhun Limsamarnphun. “Bringing the Holding Company Structure to Thai Politics”. The Nation 18 April 2004. Ockey, James. “Change and Continuity in the Thai Political Party System”. Asian Survey 43, no. 4 (2003). Pasuk Phongpaichit and Chris Baker. Thaksin: The Business of Politics in Thailand. Chiang Mai: Silkworm, 2004. ———. Thailand’s Crisis. Chiang Mai: Silkworm, 2000. Rangsan Thanaphornphan. “Thai rak Thai Kap amnat phukat thangkanmuang”. Phujatkan 19 February 2003. Sungsidh Phiriyarangsan and Pasuk Phongpaichit. Jitsamnuk lae udomkarn khong khabuankan prachathipatai ruam samai [Consciousness and Ideology of the Contemporary Democracy Movement]. Bangkok: Political Economy Centre, Chulalongkorn, 1996. Suriyasai Katasila. “3 pi wuthisupha bonsenthang patirup kanmuang”. Krungthep Thurakit, 7 August 2003. “The Inner Circle”. Corporate Thailand 8, no. 84 (August 2003). (in Thai) Thirayut Bunmi. “Wikro Sangkom Thai yuj ‘Thaksinuwat’ ”. Matichon Raiwan 6 January 2003.

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3

Intercultural Realities: Working in Thailand Tamerlaine Beasley

In this chapter I would like to offer some practical examples from real life of what foreign business people encounter when they work in Thailand. Much is said about the challenges of doing business in Thailand. There are a lot of books on how to, and how not to do business across cultures, so what is the reality? Most of what I have to say is based on the experience of my company, Beasley Intercultural, which assists clients to better navigate the complexities of working globally. It is really tough working globally for a lot of our clients. We don’t only focus on Thailand; we work across the Asia-Pacific region and we are doing increasing amounts of consulting in China and India. What we help our clients with is: “How do you navigate these complexities?” We use the term “navigate” because as I am going to explain today, it is not necessarily appropriate for Australians to learn to behave like Thai people or Thais to learn how to behave like Australians. How do you navigate the differences and get the job done? That is what we focus on. So we provide consultancy and training services and we are doing increasing amounts of consultancy work in intercultural management, pre-departure, orientation and re-entry. Intercultural communications issues in virtual teams are increasingly important. For example, how do you work with people using teleconferencing when

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there may be six to eight different countries represented? We work with government and have a contract to do all pre-departure and re-entry teams with the Youth Ambassadors. That is, about 240 young people each year going to live and work in the Asia-Pacific region. We work with the Australian Embassy in Bangkok, and with corporate clients. We work with a variety of different organizations dealing with these types of issues. I would like to start off with the mythology of doing business in Thailand. There is a huge mythology about doing business in Thailand and a lot of it can be found in the bookstores of many airports in the region. One of the first myths is that Thai culture is so unbelievably complex, that you need to understand everything about it before you can be effective. And a lot of that involves remembering very complex rules about politeness. The second myth I believe is that the biggest danger in working in Asia is in causing offence through doing something impolite. There are far bigger risks when working in business in the Asia-Pacific region than doing something impolite! The third myth is that the business rules are all different. One of the key competencies in working in the Asia-Pacific region, I believe, is maintaining your sense of commonsense in doing business. The rules of business in many ways do still say the same. Let us consider some of the realities. Everyone has as much culture as everyone else; we all possess this thing called “culture”. One of the biggest challenges I find with working with Western expatriates in the Asia-Pacific region is they think that, in the Thai context, culture is something that Thais have. And that Thai culture is problematic sometimes gets in the way of doing business. Whenever two people come together in any encounter, whether it be business, government or academia, there are two cultures coming together. No one is culturally neutral. When I interact in Thailand, I bring my “Australianness” to any interaction. This is something we often forget when we’re working with people from other cultures. Australians, very dangerously I believe, think that the way we do things is normal and that culture is some bizarre rituals about how to be polite. Then there is the whole concept of the inscrutable oriental and of Asians having these strange cultural things that make things difficult. Often we will find that clients come to us and say “we’re working in China and we don’t want to offend anyone”. And our China consultant says that this risk of offending someone is quite different from the very significant risk of failing in a business sense. Causing offence is the least of your worries. One of the things that tend to heighten this paranoia when you’re working is that Thailand and the culture of Thailand have been so actively

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promoted. The Tourism Authority of Thailand, the National Identity Board and you have quite an incredible amount of nationalism. Thai people will very commonly talk to you about “this is the right way, this is Thai way” of doing things. Sometimes those “Thai” ways of doing things are not even being done by the Thai person who is telling you all about this. This makes it even more complex because there are business people who try to do things the “Thai way” and then find it does not work or maybe some other people say that this is not the way it is done. A very simple but accurate definition of culture, which I like, is that “culture is the way we do things around here”. Culture is learned behaviour and it is something that you grow up with. In a business context, how do you meet someone from a different culture? How do you reach agreement or resolve conflicts? How do you agree on timelines or manage projects? How do you negotiate contracts? Are contracts even important? Is it worth even bothering? These are the sorts of things that are important cultural stumbling blocks rather than how to wai or what happens when you point your foot at someone. I am not suggesting that there are no dos and don’ts of courtesy but these can be fairly readily learnt. The things I am talking about are far more complex and very important. Our culture is a learned behaviour and we learn our culture at a very young age. Most of our core cultural norms and beliefs are locked in by the time we are about ten years old. So what we are talking about when we have people from different cultures coming to work together is core values and beliefs about how things should be done that are often different. Simple things are learnt. Think about the Australian educational system and the Thai educational system. In the Thai educational system, what is taught as an appropriate way to relate to a teacher or someone who is senior to you? What is considered appropriate in that context? Is it raising your hand and saying “excuse me ajarn [teacher], I disagree with you because I think your argument is not consistent”? It is not. It’s a very different system of education. Working with Thai students in the Australian education system, I find that it is very challenging for them because no one tends to define the rules of behaviour or the culture of the Australian education system which is one where independent thinking is expected. They often do not realize this until their second or third year when they fail a course or come up before a board for plagiarism. They are given things by famous academics and told to critique them. In the Thai system you do not criticize something that was written by someone that was higher up than you, especially if it was written by the person who is actually teaching you! So people are punished

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for behaving in Australia the way they had been taught to behave in Thailand. Obviously, this kind of deferential behaviour does not occur only in the academic system. How do we actually agree upon things in a business sense? How is consensus reached on how to go forward with a business project? Think about how different people like to resolve issues within a business or workplace. Is it to walk into a room, sit down and lay it on the table and find out in a direct way what different people think? Do Australians stop behaving in this very Australian way when they go and work in Thailand where the system is different? Far too often they do not. In Thailand, decisions may not be debated publicly, particularly between people of different status. It is more common for the junior person to defer to the senior. Discussion will be much less direct. Also, the consensus building is more likely to have been reached outside of the meeting. Clearly these differences are very significant. Another important thing to remember is that culture is not fixed. Often when thinking about culture, we are thinking about some historical or idealized notion of what culture was or what certain political figures would like it to be. The cultures of the Asia-Pacific region are dynamic and changing and do not all work in the same way. For example, the cultures of the bureaucracy in Thailand and of Chinese (Sino-Thai) owned businesses in Thailand are significantly different and require different approaches. Generational change is also happening there just as it is in Australia. Culture is basically about values and beliefs and this is where people often get confused. It is like an iceberg — there is the stuff we can see and then there are the values and beliefs which are in our heads and in our hearts that are far more difficult to understand. In a Thai sense, it is often the visible indicators of the culture that are focused on. How do you wai? What should you do with your feet? These visible indicators of culture are focused on good manners rather than values and beliefs. Australians also have their own cultural iceberg. Common responses from Thais about what they notice about Australians are that they are very casually dressed; they are very informal and very direct. If we only look at the visible tip of the iceberg, we may make an enormous number of assumptions. Common assumptions made by people who cross cultures and only look at the tip of the iceberg relate to trustworthiness and make negative comparisons with the home culture. Think about what Thais would say about Australians: “You can’t trust Australians, all they want to do is sign a contract, and they’re not interested in developing a relationship. How can you trust someone who doesn’t want

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to know you and your family?” And Australians will say: “You can’t trust Thais, they’re not interested in signing a contract and all they want to do is know about your family.” You can see how these assumptions can readily be made by both parties. One of the key values below the tip of the iceberg that we find is particularly challenging when you have Thais and Australians working together is that Australians are task rather than relationship oriented in the workplace. Australians want to get the job done first and then if they like you maybe they will develop a relationship. You do not need to have a relationship to do business with someone in an Australian setting; it is more of a contract based on mutual advantage. In Thailand it is the other way round; you need the relationship first to be able to do the task. If you try and skip straight to the task without having a relationship, you will find it extremely difficult to complete the task successfully. One of the biggest challenges for Australians working in Thailand is the concept of hierarchy. In Australian culture, we are often taught that not only is hierarchy inappropriate but it is offensive, rude and offends all of our sensibilities. In Thailand you cannot even speak without using hierarchy. Whenever a Thai person speaks to another Thai person, Thai grammar requires them to rank themselves in relation to the other person in order to be able to communicate. So hierarchy is not just a choice, it is embedded in Thai thinking that you cannot extract it from Thai society. This is a real challenge for Australians because their way of making people feel comfortable, of developing a rapport in the early stages of a business relationship, is to relate on the same level. Australians will, for example, make people of senior status feel comfortable by making fun of them and having a few jokes even though they may be many levels higher. This does not work in a Thai context, just as Thai deference in an Australian context is often misunderstood and may be perceived as “grovelling” or even embarrassing. There is another other key value which causes misunderstandings. Thais believe harmony is extremely important and Australians believe in direct communication. This leads to an enormous amount of communication breakdown and confusion; this is where offence is often given. Never mind all the paranoia about body language in Thailand, it is value differences like this that lead to the most significant problems, in terms of businesses breaking down and people not winning significant contracts. This is because Thais and Australians do not understand the world view of the other. The Thai concept of “krengjai”, relating to harmony is one that is very different from Australian concepts. It is very difficult even to explain; there is no word for it in English but it is about showing proper respect for other people so as to maintain

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harmony. Australians think that it is healthy to communicate directly and to make jokes about others; for them this is a way of showing friendship and being relaxed. Thais also like to make jokes and to work in a fun atmosphere (they call it sanuk) but they do it differently. Ideally Australians should understand all aspects of Thai culture and Thais should understand all elements of Australian culture, but we live in the real world and this is often an unrealistic demand especially for people who are working in a number of countries. I suggest, however, that there are three elements of competency when you are working in different cultures. They are knowledge, skills, and attitude. Interestingly people who are confident and highly effective in working in different cultural contexts are not necessarily the people who have a lot of cultural knowledge. It is the skills and attitudes, which are often most important. You do not have to know everything! In terms of effectiveness, research shows (and this is often what we find when working with our clients) that the key skills are often inter-personal skills. Self-awareness is such a basic skill, but one that is often neglected. Are you aware of the impact you have in an environment? Are you aware of what is being given back to you in terms of communication? Are you aware enough to be able to modify your behaviour? Tolerance for ambiguity is a hugely important skill when you work across the Asia-Pacific region. (Tolerance for ambiguity is kind of like when someone says “Is it black or white?” and someone answers “Well maybe its grey.”) As many businesspeople negotiating with specific Thai bureaucracies discover quite frequently, tolerance for ambiguity is a key skill. You need to be able to continue without knowing everything. Even if there is a law that says one thing, reality might be quite different, depending on who is involved. Flexibility is another key personal skill. You need to be able to change direction rapidly. The environment is changing. The 1997 Asian crisis, SARS, September 11, Avian flu, are only the beginning. We need to be able to maintain our flexibility and tolerance for ambiguity. If you wait to fully research a market before you get involved, that market might be gone. Turnaround cycles in business are now so much quicker. At the same time though we do need to be careful in terms of time limits in Thailand. Communication skills are enormously important. It would be ideal for all Australian business people to learn Thai but that is not always possible. The most important communication skill for international business or diplomacy, especially in the Asia-Pacific region, is one which can be learned relatively quickly, and that is “global English”. I was conducting a workshop in China recently where we had participants from across the Asia-Pacific region. We had one Australian, Singaporeans, Thai, Chinese and Koreans and

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what was interesting was that the Asians in the room asked why they all understand each other when they were all communicating in English as a second language, yet could not understand Australians. Australians need to modify their accent and minimize their use of irony, slang, sarcasm and colloquialisms. If they are working in Thailand, I suggest learning Thai English. For example, get a basic understanding of Thai phonology that you understand why is it that people say “Sen-tan” and not “Central”. Try to speak cab driver Thai — it is quite a challenge. Finally in terms of personal skills, respect for self and others is important and it is a two-way thing. In this sense, our personal skills are part of our business skills. If you do not know the Thai context well, make sure your team includes people who do. Something I believe about businesses in Sydney in particular is that we are not leveraging the amazing diversity that exists in this city. One in every two people in Sydney were born overseas or their parents were. Yet look at the upper echelons of any company in this city. As soon as you hit CEO/managing director level, where is that diversity? If we are operating in diverse markets we need to understand them. Be aware of, and actively manage risk. In Thailand political risk is significant. You need an understanding of political risk and to have people who advise you. Understanding the needs of the market sounds so simple but it is commonsense that is rarely applied. The same products will not necessarily work. Dove soap in Thailand, for example, was a disaster because Thai bathrooms are wet spaces and the soap changed to slime in three hours! This is what will happen if you do not understand the context for your product. Another thing that is very important is the managing of both local values and HR issues in human resources. This is something a lot of companies are grappling with at the moment, particularly global companies. Trying to standardize processes for managing people, salaries, and those sorts of issues. There is a very delicate balance between having global standardization and local customization. It is very important to get the local values right. I believe that the “what” stays the same but the “how” can be quite different. The “what” is performance management but “how” you get people to perform more effectively in Australia and in Thailand is hugely different. How you interpret core values and core principles in your business may vary. Taking a long-term approach is very important in a Thai context and to do the right thing by Thailand as well. Thais have a very long memory. As many companies learnt after the 1997 crisis. If you desert your country when times are tough, you cannot just come back when you feel like it.

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Ms Beasley made the following points in response to questions from the audience: •

•

Dealing with the Thai bureaucracy is very tough as Prime Minister Thaksin discovered when he started trying to reform the bureaucracy. In the early stages of his attempts, the backlash was quite phenomenal. When our clients work with the Thai bureaucracy, our advice is to know what you are getting. You cannot read the letter of the law and assume that it applies. You need to know the personalities involved, you need to know the relationships involved and you need to know also that those relationships are often shifting. You need to have people working inside to tell you what is really happening. To try and work with the bureaucracy from the outside, without any knowledge of the internal machinations is extremely difficult. In terms of relationships and task orientations, this is very challenging for Westerners who often assume that there is a standard policy and this is written down and therefore that is what will happen. There are many companies in Thailand at the moment trying to extract value added tax (VAT) out of Thailand and finding it impossible, so working out what is going on in the inside can really be of assistance. But that said, even some of the most successful companies are still grappling with these issues. Handling networking relationships, too, is very challenging for Australians who tend to say “tell me who I need to go to and I will go and talk to them”; the Thai methodology is take an “aab oom noi”, a less direct approach. Also from a risk management perspective, I would suggest that it is important that you do not just have one very important relationship and one very important person, particularly if you are talking about the Thai bureaucracy at the moment. Under the Thaksin government, you have people coming and going very quickly, so you need to be very careful that your network is significant enough to sustain political shifts and changes.

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Doing Business in Thailand Suchart Liengsaengthong and Glen Robinson

SUCHART LIENGSAENGTHONG I will begin with an overview of Thailand focusing on the economy and then discuss exports and imports. Thailand is a country of approximately sixty-three million people and so provides a large market which offers very good opportunities for business. Thailand is also in the centre of Southeast Asia and we consider ourselves to be the gateway to the Mekong region which is comprised of Myanmar, Laos, Northern Thailand, Cambodia and Vietnam. This region has a total population of about 250 million people. The size of the market is therefore even bigger because Thailand shares borders with all of these countries. Thailand is also a rising economic star in Asia since we are ranked number two, only after China. Thailand is now the twentieth largest exporter in the world and Thai exports are expected to reach US$100 million in the year 2006. International agencies now view Thailand in a very positive light compared with Thailand during the Asian economic crisis. UNCTAD, for example, has just released a study of Thailand and, in terms of investor confidence and of direct investment from overseas, Thailand is ranked fourth after China, India and the United States. Turning to the political environment in Thailand, I have seen some onesided comments from people who have studied Thailand from overseas but who do not really know about Thailand, so I would like to refer briefly to a few issues. Earlier speakers discussed the Thai Government’s campaign against

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drugs and we referred to the killing of many people in Thailand. In fact there are many perspectives on that issue. This government takes drug issues very seriously when compared to the past. They are trying to bring Thailand forward, trying to suppress and trying to uproot the drug syndicates that have been operating behind the scenes for such a long time. There are many critics and many criticisms of what the government has been trying to do, but in fact some of the deaths resulted from the syndicates trying to cut short the investigation. This is a key issue. Many have mentioned the speech made by the king on his birthday where he mentioned the actions of the government on these issues. After that speech, Prime Minister Thaksin commissioned a study to investigate how many people had been killed over the drugs issue and that data will be received very soon. The results will be given by the prime minister to the king. Mention has also been made of the unrest in Southern Thailand. When we talk about problems in the southern part of Thailand, we tend to talk about the present but we do not talk about the past. What is the history? What are the complications there? So it is very easy to just follow the newspapers and follow the news and talk about Thailand without a complete view of what is going on there. The problem is much more complicated. To take one example, people raise the case of a soldier who was killed recently in the South and criticize the prime minister for remarking that the solider deserved to die. They take this statement out of context and ignore the stress that this government puts on the “CEO style” of administering the country. The key words of this government are efficiency and professionalism. What happened in this case was that a military barrack was robbed, firearms were stolen and the guards were killed, so clearly the officer in charge showed no professionalism in failing to defend that military installation. The prime minister’s remark was intended to reflect how upset he felt with the commanding officer’s lack of professionalism and must be understood in that context. It is also important to note that Prime Minister Thaksin has a majority in the parliament whereas in the past all governments were coalitions which led to problems, infighting and factionalism. These made it difficult for the government to run the country efficiently and so the Thai people suffered. Let me now turn to the issue of security and terrorism, which is very popular right now. It is very easy to talk superficially about this topic but we need to ask what the purpose of the terrorist is. What is their aim, their goal? Do they want us to have feelings of fear, panic and in the end

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surrender to their demands? If this is the case, panic means we have to give in to them. My point here is that business has to be carried on as usual. Individuals must go about their business as usual and not panic. Governments have to cooperate more closely together to fight terrorism. Thailand has very close relations with Australia and others in handling this particular issue. We signed the agreement on international terrorism about three years ago and at senior levels of government we are cooperating very well with the exchanging of information and the holding of meetings on a regular basis. So the key issue here is that we have to defend ourselves through things like more screening; more exchanges of information; through citizens acting more as the eyes and ears of government; and by carrying on business as usual. Investment in Thailand is welcome but we should note that every country has the same problems arising from the fact that every culture has different practices and different ways of doing business. Before working in Sydney, I was working in Bangkok where I was involved in advising people how to do business in Thailand. In my view, culture is the main issue. If you want to invest in Thailand, my best advice is to try to find a local partner. Try to form a joint venture, which is more practical, and your local partner will tell you everything. This is the key issue and this is the main thing you have to do before venturing into another country. Now we come to the business section. One of the main sectors where Thailand and Australia can work very well together is the automobile industry, especially in automotive parts, but there are many other areas. •

•

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Energy needs in Thailand are increasing because of the growing demand and the recovery of the economy after the financial crisis. So there is a big demand for investment by Australian energy companies. Insurance is another area where a lot of Australian companies operate and there are opportunities for Australian companies who want to do business in this sector as a result of the government’s decision to increase the tax deductibility of life insurance premiums. Previously this was about 8,000 baht, but it has been increased to 50,000 baht, so this influences Thais in deciding whether to put their money into insurance or into banks that offer only very low interest rates. The property sector has expanded and has experienced a steady recovery since the crisis. Some of the factors including low interest rates, strong domestic consumption, limited supply of new properties and new

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•

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government tax measures that will be introduced, have all contributed to a booming property sector in Thailand. Media and entertainment is a sector that many experts believe will be very popular in the Thai stock market because of the high revenue from this sector. Telecommunications: Government policies have been changed to privatize state telecom agencies. The first one being privatized is the Telephone Organization of Thailand and the second one is the Communications Authority of Thailand.

The Thai market is experiencing a significant generation shift in consumption patterns, which is leading to an increase in demand for international products. Those products are cosmetics, high quality building material (which a lot of Australian companies are working in), fashion design garments, minerals and energy and advanced technology. Education is a booming industry and very popular in Thailand; many Thai students are coming to Australia every year and enrolling in universities and many other kinds of training. The cost of studying in Australia is very competitive, so that is why it is very popular. Australian wine, fruit and vegetables, Sydney rock oysters, Australian beer, fashion design garments, these are all popular. These are examples of Australian brands that are popular in Thailand. Although these products are very expensive in Thailand, there is still demand for them and hence the market opportunities. The other opportunity is in information communications technology, which I think is very popular nowadays, as well as environmental services and products. What I would like to mention here is the Australian Industry Group or AIG, which surveys 800 Australian manufacturers, and their conclusion is basically that the appreciation of the Australian dollar against the U.S. dollar means that one in five Australian manufacturers are considering moving their operations overseas. So Thailand is coming to attention because operating a company or factory in Thailand is comparatively cheaper and we offer many competitive factors as well as the incentives provided by the Board of Investment or the BOI. The top Thai products in Australia are cars (especially pickup trucks), seafood, jewellery, television sets and telephone sets. Thailand is ranked the most popular tourist destination by a number of surveys and is followed by Italy, Australia, India and New Zealand. When we talk about accommodation, the two best hotels in the world, the Oriental hotel and the Peninsula hotel are in Thailand. Australian tourism to Thailand is important.

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GLEN ROBINSON I am the executive director of a company called ASEAN Focus Group which is a cross border corporate advisory company. One of my clients is the Thai Government so I am going to side with, and defend the bureaucracy in Thailand, but what I first want to try to give is a perspective of what Thai business is about. This is incredibly difficult as it is a dynamic situation What I first saw twenty years ago is totally different from what Thai business is today. So I will identify the five major factors that have changed the most over the last twenty years and it is interesting that those five factors are also the factors that have changed the most over the last five years. •

•

Thailand moved quickly from labour intensive to capital intensive industries and is now heading into technology based industries. Anything that could be made by hand was made but then moved reasonably quickly into some very high capital intensive industries and right now you see the proliferation of, for example, automobile factories — fifteen of the major car companies have assembly factories in Thailand which in turn has attracted first and second tier suppliers. The development is continuing into the higher technology which is being applied to both the existing capital based industries to make them more efficient and at the same time it is spawning a whole new category of company not previously envisaged. So we are starting to see the emergence of Thai technology companies which have low capital involvement. Now this is causing some problems for the Thai authorities because the push has been to encourage foreign investment in the form of big dollars. But what is now happening is the high technology companies are coming in and joining with the local Thai companies: Very low capital, but very big in technology. Some example of the “new” industries is the development of the technological sciences in the health area. Many foreigners are now going to Bangkok have post-traumatic treatment, and there is a developing reputation for cosmetic surgery. The quality is A-1, the prices are quite low and it is extremely pleasant to go through the rehabilitation afterwards. That development process from labour intensive, though capital intensive to applied and developed technology is the change I call the capital change. Another change is in the distribution. Previously the Thai company would sell just locally, around the local area, through the local markets. That is gradually growing to the national area, to the regional area, specifically through the ASEAN and AFTA arrangements. Many companies are targeting the global market. We have some very big and

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•

•

•

very professional, quality companies that can only be regarded as being global companies. A third dimension is the skills of the workforce. We have moved from all hard, back breaking work where you did not have to use your brains; you just started at seven o’clock in the morning and finished at eight o’clock at night without ever having to think about what was happening in between. With the advent of technology, starting probably with the auto industry once again, clever people started to work in Thailand, and importantly, people started to work smarter, and today there is really good, scientific and innovative thinking being applied to the commercial sector by Thais. The attitude of people is another dimension of change. We are moving from a feudal, introverted, autocratic and very hierarchical society. To a considerable extent it still is all these things, but it is changing to become far more inclusive. It is not unusual for all participants in a meeting in Thailand to make a contribution, which is something you would not have seen a few years ago. So I see that as being a massive change in attitude. People at all levels are beginning to be represented and to take the opportunity to make a contribution in a way that was not previously the case. The last dimension is transparency. We have all heard some dreadful stories about the past practices, and of course some still exist, but it is clear there are more and more of what must be regarded as good quality corporate citizens; the sort of people that everybody would be very happy to deal with.

There are over 800,000 registered corporations in Thailand and not every one of them is on the extreme positive or negative end. There still exists the range through each of those five factors but it should be noted that many of the companies there are as good as, if not better than, many companies here in Australia. And that can be a shock to Australians raised on the old myths about Australian superiority. I would like to reinforce one or two considerations for those considering a market entry. Firstly, understand your colleagues. We sometimes think that because we spend time in a country or a market, that we understand it. It is very easy to live as an expat in an expat condo, work with expats, socialize with expats, attend the Austcham, Capricornia Club, the Sundowners, read the Bangkok Post and believe it, but never meet a Thai at a “mate” level. It is far too easy for this to occur.

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Secondly, you really should try to understand your market. I am not going to go through all the steps for this but I will give you a couple of examples of some of the difficulties you can have. You have really got to understand what your customers want and what you have to do to provide it to them. A few years ago, on behalf of the BOI, I took a group of Australian businesspeople on their first visit to Thailand. On the first morning during my briefing, I said, “Just remember, these Thai guys do not need you. They do not need your product. You’re going to have to convince yourself and convince your customer that he should buy it.” One of the Australians was horrified and said, “What the hell am I doing here? They don’t need my product, I shouldn’t be here.” He was probably right, he should not have been there because he was not prepared to listen to what his potential customer wanted and then to try to supply it to them. So to really understand your market to is a prime requirement. Thirdly, never assume that because you and your lawyer have read the rules that you understand them — because it is probable that the application of those rules is not understood. It is difficult for the practice of doing business in Thailand to be interpreted by somebody else; you really have got to get your feet dirty. I will give you a very good example, and I shall use Work Permits as that example. They are the bane of everybody’s life; nobody wants to get a Work Permit but the law says you have to have one and in practice you do have to get one. You should only get one on the advice of somebody who knows what the practice is. If you are not very careful you can be issued with a Work Permit that says that you have to work at a specific address. So, for example, my Sydney address is Level 37, George St, Sydney — that is what my workplace is. I am here in Canberra this afternoon working. I have broken my Work Permit requirements because this is not George Street so the authorities have every right to take action against me. So I make sure that my Work Permit says that Glen Robinson can work anywhere in Thailand. Fourthly, many of you will have heard the stories about how dreadful the bureaucracy is in Thailand and “aren’t we lucky we don’t have this problem in Australia”. Well you might find that the truth is the reverse. A few years ago I had a shareholding in a small shrimp farm in Brisbane, and we counted the number of permits, authorities and approvals that we needed to grow prawns. We stopped counting at thirty-two, and our business was very simple, dig a couple of holes in the ground, take some water out of Moreton Bay, grow a couple of hundred tonnes of prawns and put the water back! That is the super-efficient Australian bureaucracy. By way of contrast, if you want to invest in Thailand and you get your bits of paper right, you can go to the

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Board of Investment, a one-stop shop, put all your papers down and all of those approvals will happen. (I have never actually seen it happen that way, but that is the way the storybook tells us.) There are a lot of rules and regulations about investing in Thailand, but there are a lot of people who can provide assistance: there are lawyers and accountants, Austrade, the Board of Investment and specialist advisors. What is important is that you apply commonsense, you follow the rules and you can very easily become a good corporate citizen.

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Thailand–Australia Free Trade Agreement Bill Paterson and Sawanit Kongsiri

THE AUSTRALIAN PERSPECTIVE Bill Paterson It falls to me to present perhaps the driest presentation of this conference, but also perhaps the most significant development in recent history of Thai– Australia relations. Let me offer some context and a personal view. I think there is some risk of the Association of Southeast Asian Nations (ASEAN) going off in different directions in terms of growth strategies and, possibly, related outlooks and interests. Southeast Asia could become, at least, a two-track region. With the addition of Vietnam, Cambodia, Laos and Burma, ASEAN became an organization which includes fast-developing, newly-industrializing countries (Singapore, Malaysia and Thailand) and four developing countries. The fast developers are aggressively open to international trade, embracing globalization, liberalizing and progressively operating to international standards including those of governance. As a general proposition, that is overall not true of the developing four. In between these two broad groups, some others are potentially making the wrong choices, becoming increasingly economically nationalist, anti-globalization, protectionist, and, in some cases, anti-American.

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Their systems of governance await determined processes of reform despite the shock delivered by the Asian financial crisis of 1997–98. And in an unforgiving globalized world they reap the consequences: Foreign direct investment (FDI) avoids them, and their approach affects perceptions of the whole region. In turn, this retards growth: Domestic consumption-led growth in a number of ASEAN countries is simply insufficient to match population and labour force growth. So even at, say, four per cent Gross Domestic Product (GDP) growth, these countries are sliding backwards and are vulnerable. Thailand is not one of these. It has opted for pro-growth, pro-business policies. It has embraced the discipline of the market and decided to seek development through accepting globalization rather than opposing it. It is sometimes an imperfect process, but it is delivering results — results which are delivering impressive levels of growth and improved standards of living beyond the Bangkok commercial elite. This approach has laid the basis for much closer cooperation with Thailand’s developed partners. While both Thailand and Australia are robust supporters of multilateral trade negotiations through the World Trade Organization (WTO), both are also pillars of the Cairns Group, frustrated by the snail’s pace in carrying forward the Doha Round and denied access to a level-playing field for agriculture. Pro-growth governments cannot await the outcome of lengthy rounds and inconclusive negotiations. To do so will be to lose popular support, slow improvements in living standards and fall behind those embracing globalization. Hence Thai and Australian shared interest in exploring a bilateral free trade agreement (FTA). Introduction: TAFTA — An Important Milestone in the Bilateral Relationship Formal negotiations on a free trade agreement with Thailand began in May 2002 and were recently completed. The Thailand-Australia Free Trade Agreement (TAFTA) will be Australia’s third free trade agreement, following the Singapore-Australia Free Trade Agreement and the Australia-New Zealand Closer Economic Relations Trade Agreement, and the first comprehensive free trade agreement concluded by Thailand, its first with an OECD country. It is also a prelude to Thai negotiations with the United States. This is a major step towards greater economic integration with the second largest and perhaps the fastest growing economy in Southeast Asia. Consensus economics estimates put Thailand’s growth at 6.3 per cent in 2003, its strongest performance since the financial crisis. High growth is expected to continue for the foreseeable future.

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Bilateral trade is growing. Thailand was our twelfth largest source of exports and thirteenth largest source of imports last year. Two-way trade in 2003 was worth US$5.9 billion, four per cent more than the previous year. The balance of trade remains in Thailand’s favour by US$1.36 billion. We expect the FTA will substantially improve the environment for investment. Two-way investment flows are currently low. Australian investment in Thailand was worth only US$272 million in June 2002 (roughly half the value of Thai investment in Australia). Benefits for Thailand and for Australia Trade liberalization undertaken as a result of TAFTA will deliver economic benefits to both Australia and Thailand. The gains to Thailand are larger than for Australia as Thailand has higher barriers to trade. According to analysis prepared by the Centre for International Economics, the gain to Thailand will be worth US$6.8 billion of additional GDP, around three times the gain to Australia, at US$2.4 billion. Following entry into force of the agreement in 2005, Thailand’s GDP will be 0.16 per cent higher than it would have been without TAFTA and 0.45 per cent higher from 2020 onwards. For Australia, GDP will be 0.01 per cent higher than it might otherwise be without TAFTA. With TAFTA’s entry into force, Thailand will gain improved access to the Australian market of nineteen million consumers with a disposable income equivalent to the highest strata of Thai consumers. Thai consumers will benefit from cheaper products while Thai industry will gain from cheaper inputs (leading in turn to an improvement in their competitiveness and increased exports). The automotive sector illustrates the mutual gains possible to both countries from TAFTA. The complementary nature of the vehicle industries in both countries (with Thailand focusing on small cars and light commercial vehicles and Australia on larger cars) will encourage economies of scale through closer integration of the Australian and Thai markets. Thailand may be expected to increase its share of the Australian market in existing automotive product lines, such as tyres, radios and lights, while Australian suppliers of engines, transmissions and brakes, will have greater potential in the Thai market. What is TAFTA? The agreement contains nineteen chapters and runs to more than 1,200 pages. It is comprehensive — covering goods, services and investment and

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also includes rules to promote cooperation and best practice in a wide range of areas such as competition policy, e-commerce, industrial standards and quarantine procedures. It also includes provisions to avoid and settle disputes. (Ed. The text is now published on the DFAT website .) Implementation Timetable The timetable for implementation of the agreement is tight. Australia and Thailand are aiming for signature during the planned visit to Australia by Prime Minister Thaksin, which is expected in the coming months. Following signature, TAFTA will be reviewed by parliament’s Joint Standing Committee on Treaties (JSCOT). As part of the review, JSCOT will hear public submissions in relation to TAFTA. Before the agreement enters into force, enabling legislation will need to be passed or, in the case of the Customs Act, amended. A number of measures will need to be implemented, including the refinement of channels of communication with Thai customs to allow tariff problems experienced by Australian exporters to be dealt with. (Ed. Signatures were exchanged on 5 July 2004, and TAFTA began as scheduled on 1 January 2005.) New Opportunities for Trade in Goods and Services The agreement will deliver substantial improvements in access for goods and services to the Thai market and in the conditions for trade and investment across the board. As soon as the agreement enters into force Thailand will eliminate tariffs on more than fifty per cent of products, accounting for nearly eighty per cent of Australia’s current exports to Thailand. Tariffs on a further forty per cent of goods will be phased down and eliminated by 2010. All remaining tariffs and tariff quotas will be subject to upfront cuts and then eliminated according to agreed phasing timetables, most by 2010. Elimination or reduction of these tariffs for Australia will give Australian exporters a considerable advantage in the Thai market relative to many of their competitors. Over US$700 million of Australia’s current exports to Thailand will benefit immediately from the tariff cuts under the agreement and many Australian companies currently locked out of the Thai market because of prohibitively high tariffs on some products will now enjoy new opportunities for export. TAFTA holds out the promise of major benefits for Australian agricultural and manufactured goods exporters. For example, tariffs will be eliminated on

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lactose, infant formula, casein and milk albumin. Tariffs on dairy products such as butter, cheese and milk powders will be cut and phased to zero in 2020. In the case of meat, the tariff on beef will be cut to 40 per cent and then reduced by 2.6 per cent each year until eliminated in 2020. Special safeguards apply to agricultural products which both countries consider sensitive. Thailand claims safeguard treatment for forty-one dairy, meat and horticultural items — if a volume level is triggered, consequent safeguard action allows additional duties to be imposed to a level not more than the most favoured nation (MFN) tariff rate for the rest of the year. TAFTA also provides benefits for Australian automotive products manufacturers. Automotive parts exporters, for example, will benefit from an immediate tariff cut to 20 per cent (from 42 per cent) phased to zero in 2010. The lowering and elimination of tariff barriers is an important objective of global trade liberalization and needs to occur in conjunction with the removal of non-tariff measures that frustrate trade. TAFTA commits both Australia and Thailand to harmonize technical regulations where feasible; recognize each other’s standards as equivalent where they meet the objectives of their own standards; and make conformity assessment procedures mutually compatible. Services TAFTA will help both Australia and Thailand penetrate third markets by giving each country access to qualified technical expertise. The gains from liberalizing the services sector are likely to be significant. TAFTA’s key provisions on services are modelled on the WTO’s General Agreement on Trade in Services (GATS). Domestic regulation of services, the operations of monopoly service providers, financial, air and telecommunications services are all covered in the agreement. Once the agreement is in force, Thailand will permit majority Australian ownership of mining, construction, management, consulting and hospitality ventures. Thailand will grant extended visas and work permits for all Australian citizens being transferred to work in Thailand from one year to five; increase the work permit to three years for contractors in Thailand and allow Australians who hold work permits to participate in business meetings anywhere in Thailand. I would like to emphasize that Australian exporters should move quickly to secure the market benefits TAFTA brings. If, as it has foreshadowed, Thailand embarks this year on an ambitious Free Trade Agreement with the United States, the tariff preferences Australia will enjoy through TAFTA may

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not be sustainable and the market share of Australian goods and services in the Thai market is likely to erode. Australia and Thailand will hold further negotiations in the future to achieve additional liberalization of two-way services trade. Given that Thailand’s financial and telecommunications sectors have not yet been fully opened, negotiation of the proposed Thailand-United States FTA may improve the prospects for further liberalization in services. To achieve a substantial FTA with the United States, Thai regulators will need to intensify reform of their services sector and domestic utilities. Investment Australia and Thailand will commit to treating investments in non-services sectors (that is, mining and manufacturing) made by each other’s investors at least as well as they treat such investments made by their own investors. This commitment is in line with national treatment principles recognized internationally. TAFTA allows Australian investors to transfer their funds out of Thailand at any time, except where a party is facing financial difficulties and provides investors the right to seek impartial resolution of any disputes with the Thai Government. Among other innovative features included in TAFTA are provisions for electronic commerce, the protection of intellectual property and dispute settlement. Under TAFTA, trade conducted electronically will remain free of charge. Both countries will make publicly available electronic versions of all trade documents; cooperate to widen the acceptance of paperless trading; and maintain e-commerce consumer protection and electronic authentication procedures. To provide for adequate protection of intellectual property, both countries will respect the provisions of the WTO agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS); take measures to prevent exports of goods that infringe copyright or trade marks; and cooperate to increase awareness of intellectual property rights and the commercialization of intellectual property. Under TAFTA both countries will seek to resolve any disputes through consultation. Where consultation cannot resolve a dispute, a country may establish an arbitral tribunal to make a determination on award. If one country is not satisfied that the other has adequately implemented a tribunal award, it may suspend benefits it owes to the other country under TAFTA.

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TAFTA provides for periodic review of the agreement though establishment of an FTA Joint Commission. The purpose of the joint commission is to ensure proper implementation of the agreement and consider changes in the bilateral economic relationship that may impact on TAFTA. The joint commission will meet at ministerial level within one year of TAFTA’s entry into force. Conclusion: Next Steps In announcing TAFTA in October 2003, Prime Minister Howard stated, “[the agreement] positions Australian exporters to take advantage of a rapidly growing Thai economy and will also strengthen linkages between Australia and the ASEAN Free Trade Area (AFTA).” Now that the text of the agreement has been finalized, Australian Government agencies are putting in place administrative and legislative arrangements to ensure TAFTA’s smooth entry into force. Liaison with industry representatives has already commenced with a view to setting up the appropriate regulatory framework to administer the agreement. The Australian Government is committed to working with Australian business to ensure that Australia makes the most of the new opportunities arising out of TAFTA. The role for both the Australian and Thai Governments is to provide an enabling environment for policy and commercial linkages to evolve and ensure that information about commercial opportunities is disseminated quickly to business in both countries. But it is up to Australian companies to become familiar with TAFTA and position themselves to take advantage of its benefits once the agreement enters into force. It is important that Australian businesses are aware of those areas where they will gain preferential access to the Thai market, especially for products protected by tariff barriers too high to permit Thailand to be considered a serious market for Australian goods and services. Ultimately it is up to individual companies to take advantage of the new opportunities the agreement provides. The Department of Foreign Affairs and Trade (DFAT), through Australia’s Embassy in Bangkok, maintains excellent contacts with the Government of Thailand and Thai business groups. DFAT has a proven track record of success in securing trade wins for Australian companies throughout Asia and is a ready resource for Australian companies pursuing business opportunities in Thailand under TAFTA. We encourage companies to seek advice from the Department’s Thailand, Vietnam and Laos Section and explore the DFAT website for information on Thailand and TAFTA. We are keen to receive

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feedback from business about the agreement and how it can be fine-tuned in the future. THE THAI PERSPECTIVE Kongsiri Sawanit I am the Thai Chamber of Commerce coordinator for Thai–Australian Free Trade Agreement and I would like to offer some essentially personal thoughts on TAFTA from a Thai point of view. As a former diplomat, I feel the need to place the actors in context and this context is that the agreement has come at the right time because relations between Australia and Thailand are progressing smoothly. Since the establishment of diplomatic relations and the consequent exchange of embassies in the 1950s, security tended to dominate and Thais fought side by side with Australian troops in three conflicts: The Korean War, the Vietnam War and also in East Timor — although there was not too much fighting in East Timor. So the early days were marked by what we might call cooperation which took place in adversarial circumstances. More recently, relations in other directions have developed very well, especially in tourism and education. Tourism figures vary, but the important thing about tourism is that a lot of young people from Australia have gone to Thailand. This has helped to increase understanding on both sides and the working visa arrangements between Australia and Thailand that will be hopefully arranged soon will increase understanding further. There are also many Thais studying here, who have then gone back home to hold important positions. There are a lot of things on the social side which one does not hear much about. Thailand should work closely with the government of Australia as the closest non-Asian developed democracy in order to inculcate the values and disciplines that Thailand must acquire to consolidate its democracy. We can see a gradual evolution in Thailand towards improved standards in all aspects of politics, economics and national and social areas. If there is no improvement in practices, we are likely to have problems. Some argue that there has been a slump in economic relations over recent years but if you take a long-term perspective, trade has grown since the 1997 crisis by four to five per cent a year. Although I would question some of the statistics on bilateral trade, the point is that trade is growing. I would like to congratulate the negotiators for reaching a successful conclusion to the negotiations. It took one-and-a-half years and eight meeting sessions plus sessions with foreign ministers and prime ministers. The agreement will come into effect in January 2005. On our side, we do not have to submit

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the agreement to parliament because, according to the constitution, only international agreements that require enabling legislation have to be scrutinized by the parliament. Now let me comment briefly on the content of the agreement. The first is on the transmission of information. Both governments agree to consult on products like textiles — consulting each other on what the other’s view is. There has been some criticism in Thailand because of complaints that there have been no hearings or public surveys. Many people feel that Thailand is unprepared, that things have been rushed and that there has not been enough public input. This view comes from many sectors such as the NGOs, the opposition party and from the senate. The Thai Senate is non-partisan so the senators do not belong to any political party. This constitutional provision aims to provide checks and balances to the lower house, especially when there is a government which has an absolute majority. Some critics argue that the government, which has an absolute majority, runs roughshod over ideas that differ from their own. Critics are complaining that the farmers and the agricultural sector will lose, although we do not hear these criticisms directly from the farmers. Academics and NGOs are speaking for them. Why? I think one reason perhaps is that the farmers are not so organized and some people would say that the reason is commodity prices. There has not been so much criticism of TAFTA per se, as on globalization. That has been the focus of the criticism of most people. The prime minister has responded to criticism of this kind by making a number of points. He has said that in order to have effective policies to combat negative events, people have to be proactive. People have to look at the past and look to the long-term future. So he envisages greater links with the two big economies: The United States and Japan. (Meetings with the United States have been scheduled for next month.) He also wants links with the two most populous countries, India and China. He wants the Thai economy to grow at six to eight per cent and he sees a free trade area as one of the mechanisms that will help achieve sustainable, deepening growth for the next few years. The goal is to encourage extra investment and this fits well with his other theme to try to eradicate poverty, especially by supporting the village funds scheme. Open theme markets accomplish what he wants. To the criticism that the Thai market will be flooded, he responds that people will only buy as much as they want and can. So how does Australia fit into all this? While it has not been specifically mentioned, I think an important factor is that Australia is a leading economy in the OECD. The Australian economy is doing very well. Secondly, as I mentioned above, Australia is a developed economy and developed democracy

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that we might take as an example. Thailand wants to be perceived to be contacting the Australian economy so that our economy can be challenged and we can develop our product quality and economic efficiency. We can do this by being challenged by an economy that is developed and better than us, but is not as big as the Japanese or the U.S. economies. So in a way, the negotiations with Australia can be seen as a preliminary process before we take on the heavyweights of Japan and the United States. Actually, there is a soft spot in Prime Minister Thaksin’s heart for Australia. When he was with the Palang Dharma Party as a deputy prime minister, he was invited to visit Australia by the Australian Government under the Special Visitor Programme. He had already in mind to set up his own party and he was looking for models of political parties and electoral processes. He met with people in Australia and you can draw your own conclusions! As I said above, the private sector reaction has been cautious to some extent. We have had experience with other free trade areas and that is the basis for this caution. The main destinations for our exports have always been the United States, Japan and the European Union, but now our trade within ASEAN and with the East Asian-9 or ASEAN+3 is now a third theatre for our exports. There have been negative feelings about this because of experience with what we call, the early markets in China, where fruits and vegetables could be quickly imported tax-free or tariff free. Recently in Yunan province just to the north of Thailand, where most of our products go, they collected fees; this was not the national government but provincial authorities which have the power to collect such taxes. So the Chinese fruits and vegetables are coming in to Thailand tax-free but the Thai fruits and vegetables going into Yunan are taxed. This has been an obstacle in negotiations with that government. Another example is customs inspection in Guangdong province. There are sixty-seven million people in Guangdong province so it is larger than Thailand and because it is in the southern part of China, it is a logical market for Thai fruits and vegetables. However, the customs inspections take so long that the fruits and vegetables are rotten before the process is finished. Obviously, experiences such as these have strengthened the cautiousness of the Thai private sector and I would imagine the Thai private sector will be asking for help from Australia. This would be very much like what the Australian Government did with your textiles. Some manufacturers will have to move from their home country and this again fits into the vision that Thaksin has of trying to rationalize the Thai economy. For instance, in some sectors China has flooded the economy and adversely affected some Thai producers. Maybe behind all of this, Thaksin is trying to rationalize the

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economy and the Thai agricultural sector so that, in areas where we cannot compete, industries are transferred to Laos or to Cambodia. This is consistent with Thai efforts to help poorer neighbouring economies to become richer not only so that they can become markets for Thai goods, but also to lessen all the attendant problems of poverty and illegal workers coming in from Laos and Cambodia. Who will benefit? I think it will actually be the small and medium enterprises (SMEs). SMEs in Thailand are not yet a major sector of the economy and we want to increase them. Multinationals are most of the big exporters from Thailand so we have to try and raise the profile of the SMEs and they will have to make the most of the free trade agreement. Because the SMEs are small by their very nature, we will probably see a lot of promotions and roadshows to get them to look at the Australian market. The initial plan was for the Prime Minister to come and stay here for two days with roadshows accompanying him to look at the opportunities for Thailand. But I understand that now there might be simply a signing of the agreement, the delegates have lunch and then they head straight back. Why? The Australian market is not well known to Thais and the Thai market is not that well known, especially in rural areas, to Australians. Let me join with other speakers in making a plea for greater understanding of each other’s ways. We would like to express a hope that Australia might approach potential conflicts in a more Asian way. Try to have consultations and start talking about problems before they start to simmer and come to the boil. The question of culture that we have been talking about is very relevant here. There needs to be a gradual build-up of understanding between the two styles of business. Finally, there is the question of time perspectives. There is a big difference between hunters and farmers. There are the hunters who leave once they see there is no more game to be killed. Then there are the farmers who stay fixed. Some seasons there will be drought, some seasons there will be great produce. When there are ups they celebrate together and when there are downs they try to consult with others to see how problems can be resolved, or how to get out of the problems with as little damage as possible to the whole. Since the 1997 Asian downturn, Thailand and many of its neighbours have been going through an economic drought but the good times are coming again. That is when we will remember who stood by us during the bad times. So I leave you with a question. Is Australia a hunter or a farmer?

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6

Environmental Issues in Thailand: A Rural Perspective Andrew Walker

This chapter focuses on environmental issues in Thailand, particularly looking at how these environmental issues are experienced, talked about and thought about at a local level. My first objective is, then, to provide a local perspective on some national environmental issues. Second, I explore the ways in which discussions of environmental issues are often intertwined with discussions about “appropriate” life styles. Very often environmental discourse in Thailand incorporates suggestions about people changing to more environmentally appropriate life styles. Third, I want to suggest that we may benefit from somewhat less preoccupation with the idea of environmental crisis and move towards a greater focus on environmental risk and the way people adaptively manage risk. The theme of risk runs through my entire presentation in a subtle sense, and I will return to it more explicitly at the end. The data in this presentation is based on anthropological research in a rural village in northern Thailand. It also draws on my longstanding interest in the politics of environmental knowledge in the region. ENVIRONMENTAL, AGRICULTURAL AND SOCIAL CHANGE I want to start with farmers, and particularly the farmers I have been working with in the village of Khua Kaw, which is located about two hour’s drive from

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Chiang Mai. This is a northern Thai (khon muang) village, located in a narrow lowland valley with substantial areas of paddy fields but also quite a lot of upland cultivation and orchards on the fringes of the paddy fields. Like most northern Thai villages, this is a rice-growing village and in the wet season rice is the predominant crop. During this season, almost one hundred per cent of the paddy fields and quite a lot of the upland is cropped with rice and you get lovely picture postcard scenes of verdant paddy fields that are often used by people in Thailand who want to provide images of sustainability, cultural tradition and ecological balance. However, my primary research focus has been on the dry season, which runs from about November–December until about April–May. In this village there has been a tradition, going back about fifty years, of growing garlic during the dry season. But the level of garlic cultivation has increased significantly in the past 10 years or so. Whereas in the past they might have only cropped 20 per cent of the irrigated paddy fields with garlic, in 2003 over 80 per cent of those fields were cropped with garlic in the dry season. I should emphasize that this garlic is grown on the paddy fields because irrigation is essential — there is almost no rainfall during the dry season, so dry season cultivation is completely dependant upon the locally managed irrigation systems. Garlic production starts with the painstaking planting of the garlic cloves, and the entire area is then mulched with rice straw. Over the next hundred days or so there are a wide range of tasks to be performed — water management, fertilizer application and, most time consuming of all, weeding. When the garlic is finally harvested it is bundled up and hung in drying sheds because the farmers get a much better return if they sell the garlic dry. Eventually, when prices are favourable, the garlic is sold to middlemen and traders who visit the village to acquire the crop. So that is a brief thumbnail sketch of the two main agricultural systems in this village: the wet-season cultivation of rice and the dry-season cultivation of cash crops, with a particular emphasis in this village on garlic. But there are significant changes afoot. Here I can return to the environmental focus of this chapter. Agricultural activity in these villages is undertaken in what the farmers see as an environment of instability. They say things like “one year it’s cold, then it’s raining, then it’s hot” conveying a sense that the environment no longer functions according to the seasons as it used to. There is a common perception that there is a lot more variation and instability in the environment and also that environmental events are much more intense: “when it’s hot it’s really hot and when it’s cold it’s really cold and when it rains it really rains”. People also make statements that compare the current environment with that of the past: “in the olden

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days it was really cool in our village but now it’s hot just like Chiang Mai”. There is a real sense in which modernity is associated with increasing temperatures and more persistent dryness. This environmental instability was powerfully underlined for me early on in my research. When I first went to the village at the beginning of 2003 — with the intention of studying the challenges of water allocation during the dry season — there was actually very heavy and unseasonable rain. In fact it was widely reported to be one of the wettest dry seasons in about a hundred years. Garlic farmers in Khua Kaw experienced flooding in the dry season, which was a truly exceptional event and a lot of the garlic crop was damaged either by direct inundation or by excess moisture that encouraged mould and fungal diseases. By contrast the dry season that started in late 2003 has been characterized by dramatic water shortage. I was just in the village a couple of weeks ago and they are literally irrigating the main stream dry: the entire flow of the river is being diverted into the fields and even that is not sufficient to cover the entire cultivated area. So in the space of just two years we’ve gone from exceptional flooding to severe drought. The other key environmental issue that farmers are concerned about is declining soil fertility. I am often told that “too many chemicals have made the soil acid”. There is a great deal of local concern about the impacts of longterm chemical use associated with garlic cultivation: “the soil used to be rich and fertile but now it’s spoilt” and “we used to have cattle [that used to graze on the paddy fields in the dry season] and lots of manure but now we have to use chemicals”. What is the effect of these environmental changes on the farmers of Khua Kaw? How are they experiencing environmental trends that are of concern throughout Thailand? Most directly, they are experiencing environmental change in the form of very dramatic reductions in garlic yields. Garlic heads are smaller than in the past, with yields so low that some farmers cannot even be bothered harvesting the crop. Farmers talk quite colourfully about this change. One farmer told me that “garlic heads used to be as big as a fence post, then they got smaller and were as big as the handle on this spade and then they were about as big as a finger and now they are only as big as the head of a pin”. So, for these farmers the small size of the garlic is a potent symbol of environmental decline. What is the effect of this declining garlic yield? The main issue that farmers talk about most is indebtedness. The farmers in Khua Kaw typically borrow money to buy the garlic seed, fertilizer and other agrochemicals. As a result of low yields over the past few years many farmers have found themselves unable to pay these debts. Many farmers have heavy debts with the local

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agricultural bank, the cooperative and with private moneylenders within the village itself. It is not uncommon to meet farmers who report debts of 100,000 baht or even more. So, here we have a local linking of three key issues that are often linked in national discourse about the environment: there is a strong sense of environmental instability that is linked to agricultural crisis and socioeconomic decline. ENVIRONMENTAL AND LIVELIHOOD DISCOURSE I now want to move on to some of these national discourses and explore how they are received and interpreted by the farmers in Khua Kaw. I will start with some relevant aspects of official state discourse about the environment. This is a hugely complex and contentious topic that I can only examine very briefly here. I will start by looking at a couple of examples of slogans from signs — erected by various government agencies — that can be found along the road between Chiang Mai and Khua Kaw: “if the soil doesn’t have forest, the sky won’t have rain and people won’t have life”; “if the forest is gone the soil will be dry, the rain will dry up and the rice will die”. These slogans are part of a broader state discourse of environmental crisis. This is a discourse that explicitly links deforestation with a whole range of environmental problems. The issue highlighted in these particular examples is the locally relevant issue of drought and water shortage. Official state discourse claims, and this is picked up by villagers to a certain extent, that the cause of hydrological imbalance in Thailand — both droughts and floods — is the loss of forest cover (Walker 2002, 2003). This prompts a whole range of government regulatory efforts to protect forest, especially in mountainous upper-watershed areas. There are a large number of watershed protection units — including a number in the vicinity of Khua Kaw — and forest planting programmes and occasionally quite heavy-handed state efforts to protect these northern watersheds in Thailand as a secure water source for the whole country. There are some alternative discourses to the official state discourse but they often share many of the basic assumptions about environmental processes and the threat of environmental crisis. One of these is what we might call the “NGO perspective” on environmental problems. A key element of NGO discourse about the environment — and its relationship with social processes — is a very considerable emphasis on the local knowledge or local wisdom (phum panyaa) of farmers living in these northern watershed areas. There is

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an enormous amount of research and activist material on the indigenous ecological knowledge of the region’s farmers. The underlying claim is that this knowledge provides a sound basis for sustainable environmental management. So, while state discourse often frames farmers as a threat to the forested ecosystem, NGOs respond that there are longstanding traditions of water, soil and forest management that can provide a basis for sustainable livelihoods in upper watershed areas. The emphasis on phum panyaa has spread to such an extent that you can now hear radio advertisements for restaurants declaring that the food is cooked with phum panyaa! A second, and related, element of the NGO discourse on the environment is a very strong emphasis on the very intimate relationship between people and the forest. Elsewhere I have referred to this as a process of “arborealisation” whereby farmers in northern Thailand are commonly portrayed as “forest dwellers” (Walker 2004b). This aspect of NGO discourse places considerable emphasis on the importance of forest products in upland livelihoods and also often points to the spiritual nature of the relationship people have with forests. These approaches are evident in campaigns of “tree ordination” and in the revival (or perhaps invention) of a wide range of forest oriented rituals. In NGO literature it is common to see images of people praying in front of trees or worshipping various elements in the natural environment. The third key element of the NGO discourse is its emphasis on communal arrangements in relation to resource management. The most famous communal institution in relation to resource management in northern Thailand is the muang faay irrigation system. These are regularly portrayed as a cooperative and communal model whereby water resources are shared equitably within and between communities. Once again, common property arrangements and communal approaches to resource management are seen as providing a sustainable alternative to much more individualistic market-based approaches to resource management. These various alternative approaches to environmental management are often associated with grass-roots organizations. But there are similar views emanating from other levels of Thai society. For example, over the past few years there has been considerable interest expressed in an approach sometimes referred to as “sufficiency economy” that is seen as providing an alternative to the “bubble economy” that caused the financial crisis of the late 1990s and widespread environmental degradation. The “sufficiency economy” approach is often linked both in policy and practice to a wide range of environmental programs relating to forest protection, watershed management and wildlife conservation. I find it hard to imagine what the “sufficiency economy” may

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look like in Bangkok but in rural areas it is sometimes proposed that farmers divide their land, roughly equally, between rice production, mixed gardening and fishponds. A small amount of land should be allocated for the farmer’s house plot. There are two aspects of this approach — which is reflected in various ways in a wide range of publications — that I would like to highlight. One is the emphasis on diversity. It is commonly argued that if farmers’ agricultural systems can start to mimic some of the biodiversity of the forest then this can provide a strong basis for sustainability. Farmers’ land divided into various uses provides a nice contrast to the specter of monocropping. The second key element is an emphasis on self-sufficiency. Of course, few would propose that farmers should completely disengage from external markets but there is a view that all the basic elements of a farmer’s livelihood can be produced on the farmers own land: subsistence rice production; vegetables and fruit (some of which can be sold to generate cash for essential purposes); and protein from fish ponds. So, both diversity and sufficiency are brought together in this particular model of sustainable resource management. Buddhist environmentalism is of some interest to the farmers where I am working. At one of the nearby temples some environmentally oriented monks have established a project (with some government support for “sufficiency economy” initiatives) to promote alternative forms of organic agriculture. Next to the temple compound they have established a large demonstration garden in which various herbs, flowers and vegetable are grown in a chemical free environment. Interested farmers visit the demonstration garden and training sessions are also held in a number of villages. The core of this organic approach is a substance called “EM” (Effective Microorganism), which is a Japanese product and is linked to ideas about alternative agriculture and Buddhism coming out of Japan. You buy EM in a bottle, you mix it up with water and various other things and you apply it as a fertilizer, as a pesticide, as a soil conditioner and for various sanitary uses. The theory behind the use of EM in agriculture is that the micro-organisms living in the soil play a crucial role in maintaining the overall environmental system. The ideal is a natural system in which micro-organisms support people and other forms of life, which, in turn, support nature in a holistic cycle. What has happened in Thailand, according to this theory, is that the use of chemical fertilizers has compromised these micro-organisms, effectively killing the soil. As we go down this chemically driven path the entire natural system gradually dies. Here were have another version of Thailand’s environmental “crisis narrative.”

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FARMERS’ RESPONSE TO ENVIRONMENTAL DISCOURSE How do farmers in Khua Kaw respond to these various official and alternative accounts of environmental crisis? How do they respond to the various prescriptions for more environmentally responsible lifestyles? To put the matter very simply and bluntly, by and large farmers see these various discourses as having limited relevance to their lives. Part of this, I think, arises out of the notion of “community” that the farmers have. Fundamentally “community” for them is based on their external connections — for them the power and strength of their community is based on the external connections that the village has. They see their local natural resources as providing one important basis for these connections. On the whole, they do not perceive a strong contradiction between the external market and the local community, a contradiction that underlies a lot of the discussion of environmental crisis and alternative livelihoods in Thailand. They see community and market as fitting together, in a sense, very naturally. I just want to give one specific illustration of this. A couple of months ago there was an election for a new headman in the village and in the local assessments of the various candidates two key criteria emerged. The first criterion was someone who “sacrifices for the common good” while the second was someone who had an “established and solid financial position.” The man who was ultimately successful — he was elected with an overwhelming majority — had secured his financial position primarily by working as an agricultural broker and trader in the village. In other words, the ideal representative of “community” was one whose external market connections placed him in a sufficiently secure financial position so he could make sacrifices for the common good. This may seem something of a diversion from the issue of environment but it illustrates, I think, an important aspect of local resource management whereby local resources and external linkages are seen as existing in a complementary relationship. The second, and related, point is that many farmers see the various forms of “sufficiency economy” promoted by a wide variety of agencies as a second or third best option for them. One lighthearted example can illustrate this. Last year on one of my visits to a village near Khua Kaw I was sitting having dinner and watching television with a relatively poor farming family. The reception on the television was terrible. The farmer apologized for the bad picture explaining that this was “sufficiency television”. These sorts of jokes are not uncommon. On another occasion a farmer told me that his corn crop had failed-the heads of corn were so small that he could not sell them. Instead

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he would have to eat them himself. He told me that this was his version of “sufficiency economy.” Of course this is not to say that farmers dismiss these ideas altogether and in very general terms theories about alternative approaches to livelihood are regarded as wise and appropriate, particularly given national economic and environmental challenges. Some farmers are keen to experiment with alternatives such as organic fertilizer and fishponds, though by and large these experiments take place on the margins of their economic activity. But overall there is the view that alternative economic approaches do not sufficiently address the aspirations of the farmers for enhanced and secure livelihoods through market engagement. A third key point is that the discouse of local knowledge (phum panyaa) does not have much salience for these farmers. If they are asked explicitly they will say: “yes we do have phum panya” but they will usually acknowledge that the contexts for agricultural production and resource management have changed dramatically and that the challenges they are facing now are not the sorts of things that traditional ecological knowledge can be readily applied to. My view is that farmers place much greater emphasis on what might be called “experimental knowledge”. They try new things out; they take and adapt ideas and practices from diverse sources; they rely on external connections for new technologies, new crops, and new approaches to production. By and large, in the agricultural sector, they are not turning “inward” to traditional forms of knowledge. What all this amounts to in practice is that, in response to the crisis in garlic production, farmers in Khua Kaw are now trying to grow alternative crops during the dry season. The most important way they are doing this is by entering into contract arrangements with various agribusinesses that are active in northern Thailand. For example they are growing peas and eggplants under contract for a major producer of canned vegetables, they are growing tobacco that will ultimately end up in German cigarettes and they are growing corn and maize both for livestock feed and for human consumption. The transformation in the agricultural landscape has been dramatic. Whereas last year about 80 per cent of the paddy fields were cropped with garlic during the dry season, this year about the same percentage is cropped with a diverse range of crops primarily under contract arrangements with agribusinesses. Contrary to the common imagery of “proletarianization” the farmers in Khua Kaw find these contract arrangements very attractive primarily because the companies provide all the input costs and farmers do not have to borrow money on their own account. The company provides the inputs, the company provides the seedlings and if the crop fails, the company bears the loss. Farmers find this an attractive proposition in an environment of uncertainty

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and volatility. They have dealt with risk in large part by transferring it to organizations outside the village who are very keen to secure sources of agricultural production. Of course, it is very early days for this new farming system in Khua Kaw and no assessment can be made of the longer-term sustainability of this system. But, the rapid transformation that has taken place illustrates the importance of experimentation and adaptation in the face of uncertainty and risk. ENVIRONMENTAL VARIATION AND THE MANAGEMENT OF RISK I want to conclude this discussion in a somewhat unusual manner. I want to examine some long-term rainfall records from northern Thailand (Figure 6.1; and for more examples, see Walker 2002). What these figures demonstrate is that over the last hundred years there has been enormous variability and volatility in one key aspect of northern Thailand’s environment. Two key features are evident. First, there is very considerable year-to-year variation. Second, there is no evidence of any significant long-term decline in rainfall.

Figure 6.1 Annual precipitation (millimeters) in Chiang Mai. Source (W alker 2002) 2000

1000

0 1914

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Note: Some years with missing or clearly erroneous data have been excluded.

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A lot of the crisis-based discussions about deforestation causing reduced rainfall simply doesn’t stand up to statistical analysis as we look at the rainfall data. The environment has always been variable: there have been very wet years, and there have been very dry years. There has been very significant fluctuation from wet to dry for a very long time. What is the point of all this? My view is that an historical perspective on the environment can help to soften some of the language about environmental crisis, language that motivates a whole range of regulatory measures that are typically aimed at farmers and relatively poorer people. That is why, as an anthropologist, I am interested in environmental discourse. Most observers of northern Thailand are aware that there has been a lot of critical discussion about the negative social impacts of inappropriate state regulation of forests and other natural resources. I agree with much of this criticism and I would argue that some key aspects of state action in relation to resource management are based on inaccurate and sometimes highly prejudiced perceptions of environmental change. But I am also critical of what I would call more “normative” and “value-based” regulation that is present in a lot of the alternative environmental and livelihood discourses that I have mentioned in this presentation. For example, the persistent statements on the desirability of subsistence-oriented production (which often emanate from thinkers in urban centers) and statements about the desirability or moral superiority of a spiritual relationship with natural resources are, in my view, regulatory statements which embody a series of value judgments about the nature of economic activity in rural areas. And they are often motivated by a sense of crisis and widely shared nostalgia for a more environmentally and socially benign prior era. In focusing attention on the significant amount of environmental variation in the past, attention is also drawn to the issue of risk and its management. Farmers in the region have a long history of managing risk, of dealing with an environment that is characterized by considerable fluctuation. To the extent that there is phum panyaa it is based on a “tradition” of managing variability and managing risk. My view is that a focus on “experimental” or “adaptive” knowledge may be much more useful in talking about environmental management in northern Thailand than a reliance on stereotypical accounts of “traditional” knowledge. This alternative perspective suggests that a key issue for environmental sustainability in Thailand is supporting and encouraging processes of adaptation. Rather than suggesting that what we need is fundamental changes in people’s life-styles — turning away from the market and adopting other-worldly approaches to natural resources — it may be much more productive to actively encourage ongoing processes of

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adaptation, innovation and diversification. Some elements of “sufficiency economy” may have an important part to play in this ongoing process of transformation but they need to be effectively incorporated into rural livelihoods where external linkages are now fundamentally important.

This is an edited transcript of an illustrated presentation made to the 2004 Thai Update. It is not intended as a formal academic discussion, rather an overview of local responses to environmental challenges and environmental discourse. For more detailed consideration of some of these issues see Walker (2001, 2002, 2003, 2004a, 2004b). REFERENCES Walker, Andrew. 2001. “The ‘Karen consensus’, ethnic politics and resource-use legitimacy in northern Thailand”. Asian Ethnicity 2 (2): 145–62. —. 2002. “Forests and water in northern Thailand”. Chiang Mai University Journal 1 (3): 215–44. —. 2003. “Agricultural transformation and the politics of hydrology in northern Thailand”. Development and Change 34 (5): 941–64. —. 2004a. Karen cultural capital: consensus and contestation. Asian Ethnicity 5 (2): 259–65. —. 2004b. Seeing farmers for the trees: community forestry and the arborealisation of agriculture in northern Thailand. Asia Pacific Viewpoint 45 (3): 311–24.

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Ethnicity and the Politics of Location in Thailand Yos Santasombat

The thesis that I will propose is a simple one. I will argue you that you cannot understand or explain development in Thailand by simply looking at economic indicators and political activity but, rather, we need to look deeper into the changing nature of Thai society and how cultural politics are situationally constructed through the process of globalization and localization. I will illustrate my case by discussing the issue of ethnicity and how ethnicity has transformed the nature of conflict and struggle in Thai society. Let me begin with events that took place on the afternoon of 10 January 1999 when a family of Lua (a small highlander group in northern Thailand) were confronted by local Forestry Department officials. Two men were picked up and taken to a nearby police station. They were subsequently charged with trespassing, occupying and illegally practising agricultural cultivation within a national park. They were detained at the police station for eight days and were then released on bail after a large group of Lua threatened to stage a massive rally in front of the district office. This incident is by no means isolated, as powerful demands for resources, lands and mobility control have guided state expansion to the furthest corners of the land. The autonomy and mobility of marginal cultural groups from once inaccessible places in tropical forests and rugged

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mountains have increasingly been threatened. During the past decade, many ethnic minority groups in northern Thailand have been victimized by a militant conservation policy to protect forests. In August 1999, twenty Karens from two villages in Koh Sute National Park were arrested for practising agriculture in an area where they had lived for centuries. In 1991 the Hmong of Hun Tang village in Doi Inthanon National Park were forced to abandon their agricultural practices and were threatened with relocation. Since 1992, the Royal Forestry Department (RFD) has strengthened its forest conservation policy by establishing more national parks and reforestation programmes and has stepped up its threats of relocation. From this time on, forest conservation policy became highly politicized and contested because the RFD strictly enforced the new policy on certain marginal groups, especially ethnic highlanders and poor lowlanders. It did so while favouring the rich and their investments in eucalyptus plantations, resorts and structures on forest land, etc. In addition to relocation schemes, the rapid expansion of conservation policies through establishing more national parks and reforestation programmes have threatened the security of tenure of local villagers who usually have only husbandry access to land. Several Karen villages in Mae Wang district where Paul Cohen did his research had their rotational swidden fields taken away from them. So without legal recognition of community rights and community property in general, the RFD began the establishment of new national parks and the expansion old ones in highland and lowland areas. These often encroached upon enclosures in community forests which many villages had been preserving as their graveyards, watershed areas and multi-purpose communal woodland. Changes in forest conservation policy and tightened implementation also provoked so many disputes and conflicts that local villages in Northern Thailand have begun to form a network to protect themselves against this encroachment by the state. The RFD relocation and reforestation programmes are part of what I call “spatial technologies of domination”. The RFD produces space by cutting out and differentiating between parcels of space; the use and abuse of maps, markers, borders; and the control of movements within and across different types of boundaries. So its not just distance; the borders are much more than that. They have assigned forest types, zones and so on and so forth. These boundaries, forest types and zones are authorized spaces of domination. They are what I call “spatial practices of oppression”. In addition to these technologies of domination, the RFD also uses brutal tactics to suppress the expression of cultural identities or opposition by indigenous groups. These tactics include the machinery of fear, surveillance, border guarding, controlling movement,

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dividing and ruling, pitching the lowlanders against the ethnic highlanders and so on. State power is also mobilized through the imposition of a system of values. They talk about forest conservation for the entire nation, forestry protection for the common good and these values are something local groups must recognize — even though they might despise them. So, the forestry officials and the Lua look at each other but neither sees the other at all. Every contact between officials and the local people is a falsehood. The forestry officials have to figure out who it is they are. In one sense, their power is the power to have control over space, to occupy it and to guarantee that hegemonic ideas about space coincide with those of the nation and national identity. In order to impose and maintain control over the people, they have to work out what exactly has to be suppressed and what does not. While not really understanding what is going on the RFD official seeks to construct a nominal image to describe what the local people are like and then to denigrate them on the basis of those constructs. The forms of knowledge through which the officials came to know the local people have become the power builder’s facts. They built up stories, anecdotes, misconceptions, lies and so on: fantasies about untamed hill people, the use of violence, opium production. These fantasies serve to legitimize their power over these people. The Lua people, on the other hand, are in a different position. They have to recognize that the officials are more powerful and this puts them in a position of having to “misrecognize” themselves and their culture as well because it is the RFD’s values that have authority, and give meaning — however fantastic. In a way the local people are battered into place by phantasms: Savagery, untameability, illiteracy, animism and so on. With the powerful discourses of the government, their images are formed in the imagination of the Thai state and the civilized majority. Yet these powerful government discourses do not have an unquestioned hegemony. The local people respond within the threat and challenge, even as they accept and are shaped by discourses. It may at first appear that the power is with the state and that the Lua are weak but as the arrests showed the Lua began to fight back. The spatial practices of resistance are what I call the “politics of location”. The politics of location involves not only a sense of belonging, of where one is in the world, but also the political definition of the grounds on which structures are to be formed. In this sense, location has more to do with the active constitution of the grounds on which political structures are informed and the identities through which people come to adopt political stances and with the latitude and longitude of the experiences of constriction, marginalization and exclusion. Location conveys a sense of having to take up

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positions and stances in order to change the structure of power. These locations cannot however, be presumed in advance of actual construction. If politics is about making history, then it is also about changing space. Political locations are constituted through the struggles that are constantly taking place. Location is both the grounds which define struggle and a highly contested terrain which provides ethnic grounds for struggle. Thus in the case of the Lua, ethnicity is produced as well as uncovered. The notions of unity and difference form the basis of this production. Location is simultaneously about the community, about ethnicity, about definitions of boundaries or who occupies the space and who does not. In this sense, the politics of location involves boundaries, movements and cereberalization. Boundaries are drawn and redrawn, history is constructed and reconstructed and resistance can be analysed as the reaction to the injurious effects of power relations. The change in the situation of the Lua makes it necessary for us to rethink the question of roots in relation to ethnic identity and to the form of cereberalization. For instance, in Northern Thailand, the Lua are regarded as the first inhabitants and the founders of most towns and settlements in the North. The ancient Northern Thai chronicles gives Doi Ngen or Doi Suthep as the site of the former capital of the Lua, which was founded prior to the creation of the modern kingdom. So in Naan province also, the Lua of Doi Sukha still remember themselves as the first inhabitants of the lowland areas, of Pua district, or “Woranakorn” as they called it. But of course, throughout the years, the Lua have been displaced by more powerful lowland tribes and territorial displacement is not new to Northern Thailand. Peoples have always moved through violence and through personal design. Cultural groups have spread away as prisoners of war, when their kings were defeated, the same way marginal groups are now evicted from their homes to pave the way for dam construction or forest conservation and other large-scale government projects. In recent years however, place is becoming more important with the authenticity of the world of these people being undermined by political and economic processes of spatial transformation and forest conservation. In other words, it is under conditions of challenge and threat that identities are most vehemently and at times violently spatialized. So in the case of the Lua of Naan province that I just briefly described, the hills are a result of a state making forests. Although in many hill areas in Northern Thailand’s geographical location prevents extensive settlement, the areas have, since the mid eighteenth century, formed part of an internal conflict area among various ethnic groups including the Lua, the Tai Leu and the Thai who are lowlanders. The new values mean that the Lua not only live in marginal territory but they also occupy marginal land. In many ways the forests and

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fallow fields are central to the practice of traditional agriculture. They are the prime source of food and medicinal herbs. The Lua are blessed by the abundance of forest products and these are non-timber products that they can use. Their dependence on forest resources has been institutionalized through a variety of social and cultural activities. However, in recent years their subsistence security and control over means of production and local forest resources has been increasingly undermined. Another system of forest management, propelled by powerful, demanding, political forces and based on a set of radically different priorities is threatening the stability of the system of the mountain people. I call this the “science of domination” or “forestry science”. A landmark in the history of Thai forestry is undoubtedly the reform programme of King Rama V during the time of foreign conquest in Southeast Asia. An attempt to maximize knowledge of exploitation of the forest in Northern Thailand and to minimize the power and control of the Hulong over the forest led to the creation of the Forest Department with the help of British experts in 1892. The first task before the new department was to oversee all the tree-logging concessions in the North and for this, the assertion of state monopoly rights was considered essential. Initial attempts at an assertion of a state monopoly through the Teak Reservation Acts of 1898 and Forest Reservation Acts of 1932 having been found wanting; a comprehensive Forest Act was promulgated in 1941. In my view, these strategies and legislation manipulated agrarian practices by carefully regulating the inclusion and exclusion of the local people so as to define them, in the terminology of forestry science, as one of the enemies of the forest. Consequently, forest policy has been and remains based upon the assumption that local communities are not part of the forest and that local people are the main cause of deforestation. This particular misconception has been undermining the traditional role and customary rights of local communities as custodians and managers of the forest. Even for those local people who are classified in the terminology of forestry science as one of the enemies of the forest, intrusions into the reserve forests was seldom strictly imposed at the local level. However in 1989, after many decades of extensive commercial logging and exploitation, including the massive expansion of agricultural land, the forest destruction and resulting environmental problems led to a public outcry and a demand for a total logging ban. Practices leading to the rapid destruction of the forests have included many things: Unbalanced growth between urban and rural sectors; skewed land distribution; insecure land tenure and sustained exploitation of forests for industrial production and exports. None of these problems had been tackled.

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So conservation became the top priority and led to a radical shift in the management practice of the Forestry Department in Thailand. At the instrumental level there were new national parks and conservation parks. The radical shift in forest policy also led to redefinition of customary practices of forest use. For instance, rotational swidden agriculture and the use of fire were outlawed. It is important to reiterate the importance of the position of the national parks and conservation forests on this location of agricultural practice. The working of a forest for conservation necessitates its closure to the local community, which had traditionally protected and utilized the surrounding forest areas. Closure to local people is regarded as an integral part of successful reforestation but the loss of the control of the forest and swidden fields has been acutely felt by the peasants. As one Lua peasant commented: “The RFD has taken away our forests and our rice fields. They are robbing us of our own property. We have been living here for hundreds of years.” So the belief persisted in a minor or local way that the RFD is taking away their property. The notion seems to have grown up from the complete lack of restriction and control over their use by the local people over the forests during the past decades. But the RFD officials on the other hand say that the Lua were stuck in an anachronism. A local RFD official contended that “we have repeatedly warned them that burning the forest areas in the national park is no longer acceptable. It is against the law and we have to arrest them in order to teach them a lesson.” So the root causes of the conflict between the RFD and the highlanders over forest rights lies in the different conceptions of property rights. According to the swidden cultivators, all forest land and swidden fields are communally owned and managed; rights of the individual householders are established by previous claims and utilization. In more ways than one, the recurring conflicts are a consequence of a struggle that exists between the peasants and the state officials: The former to live, the latter to control. In its most elementary form, localism is a result of the restriction of customary practices used in forests. The takeover of the forests and their consequent management is at once, a denial of the state’s traditional obligation and a threat to their subsistence ethic and security of the human presence. So initially the Lua were defiant of the state and of the hegemony of the forests under state control. In 1997 they staged a massive rally against the declaration of Doi Phukha National Park. They managed to deny official movement and even threatened to burn down the local national park. These rebellious actions are very similar to cases in India and of France in the nineteenth century. Lately, however, the relationship between forest dwellers and the state has come to be mediated through NGOs and local groups.

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Through these organizations the Lua articulate different analogies to their means to subsist by being a peasant in the forest and demand access to the forest and swidden fields. In addition to non-compliance, the hegemony of forest officials is eroded by other forms of resistance. In day-to-day functioning, the Lua accept the domination of the forest officers who are clearly respected. At the same time the Lua may refuse to have anything to do with local forestry officials. Many Lua villages for instance, have been reluctant participants in wage-day labour in the national park. In fact, wage employment of a few Lua teenagers in a local reforestation programme alienated the elders, many of whom forbid their children to work for the RFD. In the minds of these people, forest areas, especially those they have not been able to use (for example, those set aside for regeneration or reforestation), bring out a deep sense of hostility. Communal struggles are organized to deal with injustices. In recent years, forests and swidden fields have become a space of resistance in the sense that they have to be struggled for and fought for. The unity of communities of resistance is formed through the collapse of locations, the production of rituals, the redefinition of boundaries, etc. The politics of place is also undeniably the politics of identity in which group boundaries are constantly replaced, repositioned, opened up and closed down. Resistance has informed boundary formation and in the case of Doi Phukha it is also constituted of religious rituals. The rituals are very elaborate and the ceremonies serve to re-establish their sense of place as the first inhabitants and the rightful owners of the forests and swidden fields in the national park. In their search for alternative means, Doi Phukha or the national parks are conceptualized as the site of struggle and of fiercely contested terrain of symbolic and natural practice. It is not just a mountain but a place. It involves a sense of belonging, of where Lua people are in the world. It is the grounds upon which struggles against the oppressors are performed. Doi Phukha is simultaneously about place, community, ethnicity and identity. It involves boundaries and territorialization. The Lua’s search for exclusive rights territorially are expressed through multiple forms of resistance including agricultural production. They still practice slash-burn agriculture. Their sense of place and identity however, are not fixed and immobile. On the contrary, their space identity formations are tactical and strategic. They are continually producing ways of opposition using the Lua and multiple partners, especially the RFD and the lowlanders. Doi Phukhan has a politics which is produced through material and symbolic structures. It is a grounds of struggle in a state of war that has history at its core. Resistance to scientific forestry and technologies of domination hinge critically on the social memories of past displacement and their eviction from lowland areas.

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Their refusal to comply with the new practices are shaped by their attachment to specific structures and hence their struggle for place and identity. In conclusion, I would like to stress that ethnic identity formed on the margins stands for a safe place where there is no need to explain one’s self to outsiders. It stands for home. More problematically it can be nostalgia for the good old days that never were. Ideas about home, community and identity animate words by people on the land. Identity then, is a product of words and of struggle. It has to be continually re-evaluated in relation to critical social priorities and it is a product of interpretation, interpretation based upon constant attention to history. So in a sense ethnic identity is more than a by-product of language, culture and genetic transmission. Identity is relationally and situationally constructed and reconstructed and formed by a network of social relations over time. The essential point about understanding ethnic identity as relationally constructed is that there is no personal ethnic identity apart from a relationship with other identities. A post-modern concept of ethnic identity embraces consciousness of other worlds. It also calls for social action in which requires a constant reflective monitoring of motivations and reasons that programme groups. The process of ethnic identity formation moves substantially beyond the notion of the autonomous “oneself ” and embraces the notion of ethnicity as a contested cultural terrain. A ground for cultural struggle whose borders are constantly drawn and redrawn. This assumes a considerable degree of conflict over values. The increasing recognition of ethnicity on a global scale through identity politics challenges the conventional notions of a political structure. It also provides the social space within which the marginal local groups can effectively challenge and destabilize it.

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8

Terrorism in Thailand: How Serious is It? John Funston

The events of 11 September 2001, and the Bali bombing of 12 October 2002, have had a profound impact on the Southeast Asian region. In some areas governments have benefited. Eager to gain support for the war on terror, the United States has been more accommodating on such awkward issues as human rights. Incumbent governments have also found citizens more willing to give them the benefit of the doubt on a wide range of issues — such as Thailand’s introduction of tough anti-terror regulations by emergency decree in August 2003. But what has focused international attention on Southeast Asia has been the issue of terrorism. Thailand has not been exempt from this scrutiny. Indeed the international media has depicted it as part of the terrorist problem — particularly in the Muslim South — because jihadi organizations with global links are firmly entrenched there. Is this concern justified? What are the long-term prospects? GROWTH OF INTERNATIONAL CONCERN Thailand has gained major international attention on at least three recent occasions. The first period, from November–December 2002, began with an

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article in the Asian Wall Street Journal alleging that the Al-Qaeda linked Jemaah Islamiah (JI) had used Southern Thailand in January 2002 as a “pivotal planning area” for the Bali bombing, part of a shift from “hard targets” such as U.S. military installations and embassies, to “soft targets” such as nightclubs.1 Several other sensational reports of alleged JI activities appeared around this time, though by early December reports of the JI planning meeting shifted the venue and timing to Bangkok in February 2002. Some of these reports also linked JI to a sudden outbreak of killings directed at the police and security forces after December 2001. The second period of media attention was between May and August, 2003. In late May two Thais with alleged JI links were arrested in Cambodia; on 10 June three alleged JI were arrested in the South (reportedly following a tip-off from a Singaporean JI, whose arrest on 16 May was announced at this time), and one more the following month. They were variously alleged to be planning attacks on the APEC summit later that year, and Bali-style car bomb attacks on five embassies. In what many saw as a related development, on 13 June a Thai (not a Muslim this time) was arrested for trying to sell radioactive material for a “dirty” bomb. Finally, on 11 August, Hambali (Riduan Isamuddin), the operational head of JI, was arrested in Ayuthia. Some media reports claimed he was planning to attack the APEC summit, though others discounted this. Thailand gained prominence a third time when on 4 January 2004 a group of 100 or so insurgents raided an arms depot of the Fourth Army Engineers in Narathiwat. They killed four Buddhist Thais (reportedly after separating them from Muslims)2 and seized a cache of around 400 small arms and 2,000 rounds of ammunition. As diversionary moves they also torched twenty public schools, and burnt rubber tyres and planted fake explosives, in neighbouring Yala. Martial law was then declared for the three southern provinces of Narathiwat, Yala and Pattani,3 but still the killings continued. In a further escalation three Buddhist monks were killed, and two others injured, on 22 and 24 January, the first time ever that monks were targetted. Continuing violence and insurgent activities were reported over subsequent weeks. (See Appendix) On 27 March a motor cycle bomb exploded in front of a night club at the border village of Sungei Golok — widely seen as the first time militants had targetted civilians and an imitation of Bali albeit on a smaller scale. On 30 March a huge amount of explosives were stolen from a quarry in Yala — 1.4 tonnes of ammonium nitrate, 56 sticks of dynamite and 176 detonators.

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ISLAM IN THAILAND The overwhelming number of Thailand’s Muslims are in the “deep South” — Narathiwat, Pattani and Yala, to which Satun and Songkla are sometimes added. Ethnically they are Malays, like neighbours across the border, but by an accident of history have been included in Thailand rather than Malaysia. There are smaller numbers of Muslims in other Southern provinces, some in Bangkok and isolated pockets throughout Central Thailand, and even some Chinese Muslims in the North. But these groups are more ethnically diverse and (together with those in Satun) better integrated into Thai society. Muslims in total number around three to four million, or five per cent of the population, not ten per cent as some recent media reports have claimed. The deep South has a long history of conflict with governments in Bangkok, since formal incorporation in the state in 1902. After World War II several organizations led a fight for independence or autonomy, particularly the Barisan Nasional Pembebasan Patani (BNPP, established 1959), Barisan Revolusi Nasional (BRN, established 1960) and the Patani United Liberation Organization (PULO, in Malay Pertubuhan Pembebasan Patani Bersatu, established 1968).4 For many years they received considerable assistance from Malaysia — part of a tit-for-tat in which Thailand sometimes extended similar support to the Malayan Communist Party — before the MCP surrendered in 1989. Many Malays in this area hold dual nationality, so can move easily between the two countries. Southern problems have for years been exacerbated by relative economic deprivation, criminality (including gun and drug running) cultural insensitivity by ethnic Thai public servants, and an ineffective, sometimes corrupt, police force. Nonetheless, security problems eased very considerably in recent decades. Governments in Bangkok have shown greater sensitivity to Muslim cultural needs, in part because Muslims have assumed a greater political role under more democratic governments. A current deputy prime minister, Wan Muhamad Nor Matha (until recently interior minister in charge of security in Southern Thailand), is a Muslim from Southern Thailand — a man who has had a long, generally well-regarded political career. The previous foreign minister, Surin Pitsuwan, is also a Muslim from the South (although not the deep South), and held in high regard; Prime Minister Thaksin sponsored his recent (unsuccessful) nomination as United Nations Human Rights Commissioner. Several Muslims have been elected to parliament as both senators and members of the house of representatives. In addition, military-dominated administrative structures known as Civilian-Police-Military Task Force 43 and the Southern Border Provinces

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Administration Centre, established at the beginning of the 1980s, effectively coordinated activities by the security agencies, and provided a focus for listening to Muslim concerns and representing their interests. The Nation has observed: “The centre has been praised for its fine job of promoting national reconciliation between the Muslim South and the rest of the Buddhistdominated country. Besides serving as a forum where community leaders can voice their grievances, the centre has been instrumental in promoting Islamic banking, permission for female Muslims in public institutions and schools to wear headscarves, and preparations for the annual Hajj pilgrimage.”5 By the late 1980s the secessionist movements had largely subsided — a fact recently acknowledged on the PULO website, for instance. Nonetheless violence still flared occasionally. In August 1993, for example, thirty-four schools were torched. And according to statistics provided by former Prime Minister Chuan, there were 70 violent incidents in 1997, 37 in 1998, 14 in 1999, 8 in 2000 and 28 in 2001.6 However the level of violence escalated dramatically in December 2001 when five police and a village defence volunteer were killed. Since then there have been regular killings of police and government officials. Violence took a new apparently ethnic form on 29 October 2002 when arsonists attacked five public schools, a Buddhist temple, and a Buddhist shrine. Violence against police and security forces continued throughout 2003, leaving at least fifty dead by year’s end. It then escalated sharply after the 4 January 2004 attack. EXTENT OF EXTERNAL DIMENSION? In an age of global terrorism, Thailand is a likely target of organizations such as JI and Al-Qaeda. The United States and its allies have important interests there. Thai Muslims have a long history of links with Muslims throughout Southeast Asia and the Middle East. The country’s location, porous borders, and large Muslim minority make it attractive for hiding out or transit. The arrest of Hambali, and a Singapore JI member before this, shows that Thailand has been used for such purposes. Opportunistic contacts between organizations such as JI and Thai Muslims are likely, but so far there has been no evidence of significant links. Reported JI meetings in January and/or February 2002 may have occurred. It is indeed possible that such a meeting decided on a JI change of direction towards “soft” targets — though the manner in which reports shifted from a January meeting in the south to a February meeting in Bangkok raises questions about the reliability of sources. However this was clearly incidental to the decision to bomb a night club in Bali. Evidence

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emerging out of recent trials have made it clear that the decision to target Bali, and all detailed planning, took place in Indonesia between July and August 2002. It should be noted also that no reports on this meeting suggest that any Thais participated. Shortly after these international media reports, Kavi Chongkittavorn in The Nation wrote that there were indeed thousands of JI in Thailand — more than 10,000 according to the secretary to the Chula Rajmontri, the spiritual leader of Thailand’s Muslims.7 Yet at the same time Kavi reports Southern Islamic scholars as believing that no local conditions exist to allow militant penetration from abroad. Clearly Kavi is not referring to the same JI designated a terrorist organization by the United Nations in October 2002. Perhaps there is an organization that shares that name or, more likely, jemaah islamiah is used in its general sense which means “Islamic community”. Assessing reports of arrests of alleged Thai JI members in May–July 2003 is complicated by the non-transparent way in which these were conducted. Prior to this, Prime Minister Thaksin had denied any JI activity in Thailand, beyond transit. But just before a visit to Washington, he declared that U.S. intelligence on JI activities was correct. The June arrests occurred just hours before he met President Bush, for a meeting that was expected to focus on shortcomings in Thailand’s assistance to the war on terror. This may all be a simple coincidence, but a long delay in bringing the accused to court, and indications that proceedings will be drawn out over years, have not helped convince Thai Muslims that they are guilty as charged. The lawyer for those arrested denied early reports they had admitted an association with JI, and had maps and other incriminating material in their possession.8 The arrest of the dirty bomb suspect around the same time adds confusion. The suspect was detained in a sting operation that involved U.S. officials. An ABC 7.30 Report disclosed that the radioactive content of the materials was negligible (the type used in hospitals), while an alleged vial of uranium contained only sand.9 There are no ambiguities about Hambali’s arrest, though what he was doing at the time of his capture remains a matter of conjecture. He has been undergoing intensive interrogation at an undisclosed location (reportedly Diego Garcia), but media reports on the outcome have been inconsistent. However no reports so far have claimed any close contacts between Hambali and Thai Muslims. After the 4 January 2004 attack government leaders initially blamed bandits involved in the illegal arms trade, but Prime Minister Thaksin soon declared them “separatists” belonging to the hitherto little known Gerakan Mujahideen Islam Pattani (GMIP).10 This view was endorsed by other

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unidentified Thai intelligence sources. In some accounts GMIP was seen as acting alone, in others jointly with older organization such as the BRN or New PULO. Newly appointed security advisor, General Kitti Rattanachaya, a former head of the Southern Fourth Army, said the attackers had links with Malaysia’s Kumpulan Mujahideen Malaysia (KMM) and indirectly through them to JI and Al-Qaeda.11 Information on GMIP remains sparse, including its ties to foreign organizations. It seems reasonable to assume, however, that any linkage with JI is unlikely to come through KMM. There is indeed no clear evidence that KMM exists, but if it does, Malaysian police seem confident that arrests prior to December 2001 crippled the organization. And when Prime Minister Abdullah Badawi visited Bangkok in mid January, he also ruled out the possibility of JI involvement.12 A great deal has been learnt about JI since the Bali bombing. Training in Afghanistan and later Southern Philippines has been a key element in shaping the organization. In this respect, some Thai Muslims received training in both venues, but there is no evidence of this on a large scale, or that it led to close personal ties with JI leaders as happened with some Filipino Muslims. Thailand (unlike Australia) does not appear in the formal JI structure, as set out in Singapore and Australian White Papers, and the latter judges that “there is as yet no evidence that supporters of Jemaah Islamiyah have formed a formal, structured network in Thailand.”13 Accounts differ on whether Southern Thailand is part of the Southeast Asian super state that JI allegedly aspires to; but in any case this is a pipe dream reflecting JI’s lack of touch with reality, not a real prospect of regional change. DOMESTIC FACTORS If conflict has not been initiated by international jihadis, where does responsibility lie? Within Thailand there is no agreed answer. The Thai police have generally argued that criminal elements have been behind the recent escalation. This was their justification for taking over control of security from the afore-mentioned Southern Border Provinces Administrative Centre (SBPAC) and Civilian-Police-Military (CPM) Task Force 43, in May 2002.14 According to their account conflicts in the region are unrelated to Muslim-Buddhists conflicts, though there may have been an attempt to make it appear so in order that criminals, sometimes in alliance with certain political groups, could protect vested interests. Given the entrenched nature of criminality in the South, this is likely to be part of the answer. However there are large question marks over a dramatic press conference

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police arranged on 22 March 2004 in which they alleged two members of the ruling Thai Rak Thai in the house of representatives, and a Southern senator, were key organizers of the 4 January attacks. It is difficult to see why Muslims who have made it to influential political positions might embark on such a risky venture. Some analysts have highlighted conflict between police and the military as a key factor. A level of ill-will was on public display when both sides debated dissolving the SBPAC. According to the media, a military report to senior defence officials in March 2002 blamed the police for escalating the conflict, because some were allegedly tied in with influential figures and involved in illegal businesses such as drugs, contraband and prostitution.15 Another report to the government later in the year, headed by the military, ruled out both bandits and separatists, and pointed instead to a conflict between police and paramilitary rangers, perhaps linked in to broader conflicts of interest.16 Around the time armed conflict began in December 2001 killings were highly professional, involving the use of army-issue guns often fired from long range. This would suggest that army irregulars (“rangers”) may have been involved, and police officers at times claimed this was the case.17 Killings occurred even before the police replaced the military as the main security force on 1 May 2002, but the subsequent reduced security role for the rangers, and withdrawal of a daily 100 baht allowance, provided additional reasons for conflict with the police. Perhaps, however, there was also an element of “separatist” violence in this period. The first killings in December 2001 were only a month after security forces killed a PULO leader.18 From October 2002 the evidence for a separatist or at least ethnic dimension to the conflict is stronger. The initial attacks on schools, temple and shrine were preceded by the sentencing to death (subsequently commuted to life imprisonment) of three separatists (two reportedly PULO, one New PULO) only two weeks earlier.19 This specific targetting of Buddhist targets has precedents in earlier separatist violence, and was again a feature of the violence in January. These events suggest that violence since January 2004 represents a revival of ethnic conflict, a cause that had almost faded away by the 1990s after being influential in the 1960s and 1970s. Three factors probably contributed to the resurgence of ethnic conflict. International changes after 11 September 2001 made Thai Muslims more conscious of their Muslim identity, and like Muslims everywhere they also felt more vulnerable. Domestically a number of changes around this time reduced democratic opportunities for residents in the South, at the same

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time as government policies impacted adversely on Muslim economic and cultural interests. And when violence began the government response was often heavy-handed, with tough measures by the police, in particular, exacerbating tensions. The 11 September 2001 incident heightened tensions between Muslims and non-Muslims throughout the world. While there was initial Muslim sympathy for the United States, this quickly evaporated when the United States responded in a manner widely interpreted as not a war against terror, but a war against Islam. Indeed Prime Minister Thaksin showed he was aware of this prospect when, immediately after September 11, he spoke of adopting a “neutral” stance in the event of armed conflict between the United States and Muslim countries. The subsequent U.S. invasion of Afghanistan saw demonstrations involving up to 50,000 in the South, efforts to boycott Coca Cola and other products produced by the United States and Britain, and the sale of Osama T-shirts to raise funds for humanitarian assistance to Afghanistan. Such opposition continued after the March 2003 U.S.-led invasion of Iraq,20 and Muslims also protested the dispatch of Thai troops to the two countries. At a time when Muslims felt more conscious of their identity and more vulnerable, the opportunities to air their concerns contracted. A critical development in this respect was the dissolution of the SBPAC and CPM Task Force 43 from 1 May 2002. The former, in particular, had played a crucial role in listening to Muslim concerns and acting on their behalf. Under plans announced at the time, the SBPAC was to be replaced by new “CEO” provincial governors, appointed by the government and having direct responsibility to the prime minister — a proposal that might help rationalize administration, but did not enhance democracy. In the area of economic policy, government emphasis on big developmental projects caused concern to Southern Muslims concentrated in small, primary industries such as fishing and agriculture. This found most dramatic expression over the Thailand-Malaysia gas pipeline, a project planned under earlier governments but seen as threatening fishing grounds and agricultural areas. In December 2002 protestors (nearly all Muslim) clashed violently with the police, in an incident that the National Human Rights Commission later blamed on the security forces. After the 4 January attacks the government announced plans for new developmental expenditure amounting to some twelve billion baht, but were strongly criticized by Southerners for announcing such plans without consultation and giving priority to big-ticket items rather than areas more directly relevant to local needs.21 In addition, frequent government announcements that it would crack down on dual citizenship

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caused anxiety in a society where Malaysian citizenship was often relied on to facilitate short-term employment or establish small businesses in neighbouring Northern Malaysian states. The Thaksin government has given a high priority to culture, even establishing a ministry for this purpose. But it inadvertently acted in ways that caused concern in the Muslim community. In late 2003 the army closed down the only Muslim radio broadcasting twenty-four hours daily from Yala to twenty-eight provinces, after payments fell behind schedule. It also closed the only Muslim station in Bangkok to gain more revenue from another client (though eventually this station was given a new temporary frequency and continued to operate).22 The government’s popular village fund, providing one million baht per village for loans, conflicted with Muslim prohibitions on interest. Similarly, the government’s legalization of the underground lottery in early 2003, provision of education scholarships from these, and mooted legalization of casinos and prostitution also conflicted sharply with Islamic teachings. Frequent government criticisms of traditional Islamic schools (pondok), occasional harsh security actions in and around these schools, and threats to crack down on their activities, caused anxieties in a society where this institution remains highly revered. Government attempts to address problems from a security first perspective also exacerbated problems. Extra-judicial killings of alleged drugs traffickers in early 2003, resulting in over 2,000 deaths, were not particularly targetted at the South, but many there seem to have felt they were. The introduction of martial law — in stages between March 2003 and February 2004 — was opposed by all Southern leaders. Their concern has been that under these arrangements anyone could be detained indefinitely for questioning, and that several local leaders “disappeared” in the process — estimates ranged from fifteen to over a hundred. After returning from a study of the South, Deputy Prime Minister Chaturon Chaisang concluded that police were the main cause of the problems there, often resorting to kidnappings and other heavyhanded tactics.23 The most notable disappearance on 12 March was that of prominent Bangkok Muslim lawyer, Somchai Neelaphaijit, who represented the alleged Thai JI and was a regular critic of government policies towards the South. Five police were subsequently charged with minor offences, but the circumstances of his abduction remain a mystery. ORGANIZATION BEHIND THE VIOLENCE? Since the 4 January raids several anti-government actions have demonstrated a high degree of coordination and military sophistication. If, as suggested, JI

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is unlikely to have been behind the attacks, which group was? No organization has claimed responsibility. Government spokespersons frequently professed uncertainty, as did knowledgeable commentators on the South. Under these circumstances no firm conclusions are possible, but interrogation reports found in the media do suggest that “separatists” of some form are involved. Whether these are a revival of the older separatist groups — PULO, BRN or BNPP — a newer group such as the GMIP — or a breakaway from one or more of these, can only be a matter of speculation. But such groups did launch sophisticated military attacks in the past, so some form of linkage with them would seem likely. OUTLOOK The situation in the South has moved through different stages since the resumption of armed violence in December 2001, and escalated sharply since 4 January 2004. Contrary to perceptions of most in the international media, and other terrorism experts, there is little evidence that events are being directed by international terror organizations, such as JI or Al-Qaeda. JI has made use of Thailand as a hiding and transit area, and perhaps also for planning, but has not established extensive links with Thai Muslims. Nonetheless continued violence provides opportunities for international groups, and is worrying whether instigated by external or local groups. Where is the conflict likely headed? If the analysis above is correct, the issues that need to be addressed are concerns over international events (particularly U.S.-led) perceived as anti-Muslim, reduced democratic openings, concerns over the implications of government actions and policies for Muslims, and less emphasis on harsh security measures. There is probably only a limited extent to which Thailand can respond to international events in ways that will reassure Muslims. Thailand has much to gain from good relations with the United States, and will have to weigh options very carefully before adopting policies contrary to U.S. interests. Nonetheless plans to bring back troops from Iraq in September may help. There are also some encouraging indications of willingness to compromise on the domestic front. Democratic space has not been completely closed. Various interests continue to speak on behalf of Muslim interests, including Southern members of parliament, the National Human Rights Commission and a range of NGOs. Some members of the government have done the same, most notably Deputy Prime Minister Chaturon whose report in April advocated a “u-turn” in government policy (see appendix) — a proposal that was accepted in principle but then largely set aside. Importantly, the royal family has made its concern about the need for understanding and compromise

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very clear. The Crown Princess visited the South in February, and called on a school run by an arrested JI suspect. The Crown Prince visited in March, opening a new private Islamic colleague headed by high profile Islamic scholar Ismail Lutfi. In late April privy councillor and former army head General Surayud Chulanont revealed that the privy council met every week to gather information for His Majesty. POSTSCRIPT: THE 28 APRIL TRAGEDY On 28 April hundreds of Muslims attacked police and military posts in Pattani, Yala and Songkhla. In one of the bloodiest days in modern Thai history 107 rebels and five security officials were killed, thirty-two of the former while holed up in the historic Krue Se mosque. Most were young, and attacked security posts armed only with knives and parang. Initially the government claimed that the attackers were drug addicts. That was soon dropped, and attempts made to link them with external groups, particularly JI — on the basis of one T-shirt that appeared to have the letters JI on the back, and unclaimed bodies which some speculated could be Indonesian. Both arguments were unconvincing. The letters JI may in fact have been Arabic lettering, and in any case it is not known JI practice to wear uniforms of any kind. Eventually all the bodies were accounted for, and found to be local. The most convincing evidence that JI was not involved, however, is simply the modus operandi employed in this operation. JI is associated with the use of sophisticated bombs and the like, not lightly armed suicide missions. What the attacks did appear to reflect were traditional forms of invincibility cults present for centuries in the Malay world, which come to the fore when pressures are seen to have reached intolerable levels. The date of 28 April may also have been significant. This was the date of a major Malay uprising in 1948. And in 2003, rebels attacked marine camps in Narathiwat and Yala on this date, killing five marines. If the date is significant, this also would link the attacks to traditional local forms of protest.

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Appendix: Southern Thailand — Some Key Events

Early 1980s

Establishment of Civilian-Police-Military (CPM) Task Force 43 and Southern Border Provinces Administration Centre (SBPAC), on 6 November 1980 and 5 April 1981 respectively.

Sep–Oct 2001

September 11 and the U.S. invasion of Afghanistan. Demonstrations of up to 50,000 against the Afghanistan invasion occurred in the South. (130 Thai troops — mainly engineers — sent there, February– September 2003.)

Dec 2001

Five police and a village defence volunteer killed. Regular killings of security forces (mainly police) after this — numbering over fifty in the next two years.

May 2002

Dissolution of Civilian-Police-Military Task Force 43 and the SBPAC.

Oct 2002

Arsonists target five public schools, together with a Buddhist temple and Buddhist shrine, two weeks after three “separatists” were sentenced to death (commuted).

Nov–Dec 2002

Media reports claim Southern Thailand was a “pivotal planning area” for Bali bombing, and other allegations of activities there by the Al-Qaeda-linked Jemaah Islamiah (JI).

Mar 2003

U.S. invasion of Iraq (447 Thai troops sent — mainly engineers — from September 2003–September 2004).

Early 2003

Extra-judicial killings of alleged drugs traffickers (Southern residents were not particularly targetted, but seem to have felt so).

May–Aug 2003

Arrests of Thai JI suspects in Cambodia (May) and the South (June–July), Hambali (an Indonesian,

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operational head of JI), and a Thai alleged to be selling radioactive material for a “dirty” bomb. Jan 2004

A hundred or so insurgents raided an arms depot of the Fourth Army Engineers in Narathiwat, killing four soldiers and seizing a cache of around 400 small arms and 2,000 rounds of ammunition. As diversionary moves they also torched twenty public schools, and burnt rubber tyres and planted fake explosives in neighbouring Yala (4th). Three monks killed and two injured in violent attacks on 22 and 24 January. Regular assassinations have continued since, with deaths up to mid-April numbering over sixty. Widely blamed on “separatist” groups such as the Gerakan Mujahideen Islam Pattani (GMIP), PULO (Patani United Liberation Organization), the Barisan Revolusi Nasional (BRN) and Bersatu.

Mar 2004

Cabinet reshuffle affecting key ministries dealing with the South — Defence and Interior (9th). Muslim lawyer Somchai Neelaphaijit “disappears” (12th). Coordinated torching of thirty-nine government buildings in Pattani, Songkhla and Yala provinces; police chief and head of 4th Army removed as result (18–19th). At a police-organized press conference a suspect alleges two Thai Rak Thai MPs and a senator were key organizers of 4 January attack (22nd). Motor cycle bomb explodes in Sungai Golok, injuring twentyseven including five Malaysians — alleged to be first separatist targetting of civilians (27th). Huge amount of explosives stolen from quarry in Yala — 1.4 tonnes of ammonium nitrate, 56 sticks of dynamite and 176 detonators (30th).

Apr 2004

Discovery of cave used as a “hiding place for militants and making bombs” (3rd) — later recognized as a meditation centre for Sufi Muslims. Deputy Prime Minister Chaturon Chaisang proposes “u-turn’” in government policy — including offering a general

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amnesty, ending martial law, withdrawing Bangkokbased police from the region, allowing continuation of dual nationality, and supporting Islamic private schools (4th). Accepted in principle, but not implemented. U.S., UK and Australia issue travel warnings against visiting the South (9th). Trains in the South stopped after third rail employee killed, and only resumed after army promised close protection (18th). Attacks by Muslims armed largely with knives and parang on eleven security posts in Pattani, Yala and Songkhla, resulting in the death of 107 of the attackers and five security officials (28th).

NOTES 1. Asian Wall Street Journal, 7 November 2002. 2. Bangkok Post, 7 January and 18 January 2004, and The Nation, 27 February 2004. 3. Martial law has in fact existed in parts of the three Southern provinces for several years, and was not immediately extended to the remaining districts. After conflicts in April 2003 martial law was imposed in fourteen districts (Bangkok Post, 1 May 2003). A Bangkok Post report on 6 January 2004 noted that: “For more than 10 years, martial law has been in effect in six districts of Narathiwat: Chanae, Cho Airong, Rangae, Waeng, Si Sakhon, and Sukhirin; and five districts of Yala: Than To, Bannang Sata, Yaha, Betong, and Kabang. However, the military did not enforce it seriously in the past. Martial law has now been expanded to four more districts of Narathiwat: Rueso, Bacho, Takbai and Sungai Kolok; and another district in Yala: Raman”. The Nation then reported on 4 February 2004 as follows: “Martial law is now being enforced throughout the southernmost provinces of Yala, Pattani and Narathiwat. The move was a response to the continued lawlessness in the area and the recent murders of innocent people, military sources said yesterday. Martial law previously covered nineteen districts in the three provinces, but was now being enforced in all 32 districts. Fourth Army commander Lt-Gen Pongsak Ekbannasing signed the order on Thursday [29 January], the sources said”. 4. For an excellent account of these organizations through to the mid-1980s see W.K. Che Man, Muslim Separatism: The Moros of Southern Philippines and the Malays of Southern Thailand, Singapore: Oxford University Press, 1990. Especially pp. 98–114. 5. The Nation, 6 May 2002.

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6. Bangkok Post, 11 November 2002. See also further details of violent incidents in Desmond Ball, The Boys in Black, Bangkok: White Lotus, 2004, pp. 105–11. 7. Kavi Chongkittavorn, “The Thai Jemaah Islamiyah is Unlike Others”, The Nation, 6 January 2003. 8. The Nation, 14 June 2003. 9. Peter Lloyd, “Thai Terrorism Crackdown Lacks Substance”, ABC 7.30 Report, 14 July 2003. 10. Media references to the GMIP, said to have been established in the mid-1990s, are scarce before January 2004. The Nation on 14 March 2002 reported police suspicions that the Mujahidin Islam Pattani (presumably the same group), “led by the notorious Che Kumae Uteh”, had been responsible for the outbreak of violence against police since December 2001. A Bangkok Post report on 24 March 2004 refers to it as having around forty members, and being led by Wae Ka Raeh, who had allegedly received training at an Al-Qaeda camp and fought in Afghanistan. A book by Colin Anwar and Supalak Karnjonkundi dates the organization to 1995. (Fai Tai: Krai Jut? [Fires in the South: Who is Responsible?], Bangkok, 2004, p. 97.) 11. Bangkok Post, 8 January 2004. 12. Bangkok Post, 16 January 2004. 13. Ministry of Home Affairs, White Paper: The Jemaah Islamiyah Arrests and The Threat of Terrorism. Republic of Singapore, January 2003, p.10; and Department of Foreign Affairs and Trade, Transnational Terrorism: The Threat to Australia, July 2004 (see ). 14. Pol Lt-Gen Thawatchai, commander in the South (Region 9), told the house of representatives police panel that criminal activity in the South could be brought under control if the police had complete jurisdiction over security affairs; a military presence was no longer necessary since the separatist movements were scattered and no longer posed a threat. Bangkok Post, 24 March 2002. 15. Bangkok Post, 23 March 2002. 16. Bangkok Post, 11 September 2002. 17. Desmond Ball, The Boys in Black, Bangkok: White Lotus, 2004, p.172. 18. Then Interior Minister Purachai Piemsoomboon claimed the incident was revenge for the killing of a top PULO leader, Madari Ni-ing Jae Ae, the previous month. Bangkok Post, 27 December 2001, and Straits Times, 27 December 2001. 19. Bangkok Post, 16 October 2002. 20. See Chaiwat Satha-Anand, “Praying in the Rain: The Politics of Engaged Muslims in Anti-War Protest in Thai Society”, Global Change, Peace & Security 16, no. 2 (June 2004): 158–67. 21. The Nation, 4 March 2004. 22. Bangkok Post, 3 January and 3 February 2004. 23. The Nation, 3 April 2004.

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Index

Index A Abdullah Badawi, 97 Abhisit Vejjajiva, 37 agricultural sector, xiii, 14, 22, 70, 72, 80 agriculture, xv, 11, 63, 78, 83, 85, 88, 89, 90, 99 Al-Qaeda, 93, 95, 97, 101, 103, 106 Anand Panyarachun, xviii Anek Laothamatas, 38, 43 Army, 27, 93, 97, 104, 105 Association of Southeast Asian Nations (ASEAN), vii, xiv, 7, 18, 19, 24, 58, 62, 63, 68, 71 Asian financial crisis, 1, 63 Asia-Pacific, 46, 47, 49, 51 Assembly of the Poor, 34 Australia, v, vii, xiv, 20, 49, 52, 56, 57, 59, 60, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 97, 105, 106 Australian companies, 56, 57, 65, 68 automobiles, 11 B Bali, 92, 93, 95, 96, 97, 103 Bangkok, xii, 34, 44, 45, 47, 56, 58, 59, 63, 68, 78, 93, 94, 95, 97, 100, 105, 106

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107

Banharn Silapacha, 31 Bank of Thailand, 3, 9, 12, 14, 17, 22, 23, 24 banks, 8, 10, 12, 23, 56 Banyat Banyathan, 36, 37, 38 Barisan Nasional Pembebasan Patani (BNPP), 94, 101 Barisan Revolusi Nasional (BRN), 94, 97, 101, 104 Beasley Intercultural, vii, 46 Bhumiphol Adulyadej (See also ‘King’), 35, 36, 42, 43 biodiversity, 78 Board of Investment (BOI), 57, 60, 61 borders, xvi, 54, 85, 91, 95 Buddhism/Buddhist, xv, 78, 93, 95, 98, 103 budget, 3, 5, 6, 7, 9, 22 deficit, 3, 6, 7, 9, 22 surplus, 5, 11 bureaucracy, xiv, 27, 49, 53, 58, 60 Burma (see also ‘Myanmar’), 62 business, v, vii, xi, xiii, xiv, 2, 15, 17, 20, 22, 24, 30, 33, 34, 38, 39, 44, 45, 46, 47, 48, 49, 50, 51, 52, 54, 56, 58, 60, 63, 66, 68, 69, 72

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Index

C Cabinet, xix, 27, 29, 31, 32, 33, 104 Cambodia, 54, 62, 72, 93, 103 capital goods, 2, 17 CEO, vii, 26, 27, 41, 42, 52, 55, 99 Chaisit Shinawatra, 27 Chart Pattana, 29, 30, 31, 32, 38, 40 Chart Thai, xix, 29 Chaturon Chaisang, 100, 101, 104 Chavalit Yongchaiyut, 29, 32 Chiang Mai, viii, xv, 45, 74, 75, 76, 81, 83 China, xv, 16, 18, 19, 20, 46, 47, 51, 54, 70, 71 Chuan Leekpai, 36, 37, 39, 95 Chula Rajmontri, 96 Civilian-Police-Military (CPM) Task Force, 43, 94, 97, 99, 103 coalition, 26, 29, 30, 31, 32, 36, 38, 40 commodities, xiii, 22 communication, 50, 51, 65 conservation, xvi, 77, 85, 86, 87, 89 conservationists, xvi Constitution, 33 Constitutional Court, 35 constitutional democracy, 41 constitutional state, 31 Consumer Price Index, 4 corruption, 33, 40 culture, xiv, xvi, 47, 48, 49, 50, 51, 56, 72, 86, 91, 100 currency, 1, 2, 4, 5, 7, 10, 21, 22, 29 current account, 2, 4, 5, 17, 21

Department of Foreign Affairs and Trade (DFAT), vii, 65, 68 drugs, 27, 31, 35, 40, 41, 42, 55, 98, 100, 103

D debt, 7, 10, 23, 24, 28, 37, 38 Democrat Party, 36, 37, 38, 39, 44 Democrats, xix, 26, 29, 30, 35, 36, 37, 38, 39, 40 deforestation, 76, 82, 88

F factionalism, xiv, 55 farmers, xv, 37, 41, 70, 72, 73, 74, 75, 76, 77, 78, 79, 80, 82, 83 Foreign Direct Investment (FDI), xiii, xiv, 15, 16, 22, 23, 63

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108

E East Timor, 69 economic crisis, 1, 2, 4, 13, 23, 54 economic development, 1, 2, 19, 23 economics, vii, xi, 24, 25, 63, 64, 69 economy, v, 1, 24, 45 education, 35, 41, 48, 69, 100 elections, xiii, xviii, 26, 27, 30, 32 Electoral Commission, 31 Electricity Generating Authority Thailand (EGAT), xv, 39 entrepreneurs, xiv, 28 environment, xii, xvi, xvii, 16, 40, 51, 54, 64, 68, 74, 76, 77, 78, 79, 80, 81, 82 change, 82 crisis, xv, 73, 76, 79, 82 instability, 75, 76 issues, v, xv, 73 management, xv, 77 policies, xvi environmentalists, xii, xv ethnic identity, xvi ethnicity, xvi, 83, 84, 87, 90, 91 European Union, 18, 71 exchange rates, xiii, 18, 21, 23 exports, 2, 4, 14, 15, 16, 17, 18, 19, 20, 29, 54, 64, 65, 67, 71, 88

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forest, xvi, 76, 77, 78, 85, 86, 87, 88, 89, 90 Free Trade Agreement(s) (FTA), xi, xiii, xv, 62, 63, 64, 66, 67, 68 G garlic, xv, 74, 75, 80 Gerakan Mujahideen Islam Pattani (GMIP), 96, 97, 101, 104, 106 Gross Domestic Product (GDP), 3, 4, 5, 6, 7, 11, 13, 16, 17, 18, 19, 63, 64 globalization, xii, 23, 37, 62, 63, 70, 84 H Hambali, 93, 95, 96, 103 highlanders, xvi, 85, 86, 89 Hmong, 85 Hong Kong, 20, 44 House of Representatives, 26, 31 human rights, 39, 92 I identity, xvi, 32, 86, 87, 90, 91, 98, 99 International Monetary Fund (IMF), 27, 28, 37 imports, xiii, 2, 6, 17, 20, 22, 54, 64 indebtedness, xv, 38, 75 India, xv, 46, 54, 57, 70, 89 industrial sector, 14, 15, 24 industry, 14, 15, 22, 56, 57, 59, 64, 68 inflation, xiii, 3, 4, 9, 10, 12, 22, 23 insurgency, xviii, 31 insurgents, 93, 104 intellectual property rights, 67 interest rates, xiii, xviii, 4, 7, 8, 9, 10, 12, 22, 28, 56

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109

investment, xiii, xiv, 2, 4, 5, 7, 8, 9, 11, 15, 16, 22, 29, 54, 56, 63, 64, 65, 70 Iraq, 99, 101, 103 irrigation, 74, 77 Islam, 96, 99, 104, 106 J Japan, xv, 18, 19, 20, 30, 70, 71, 78 Jemaah Islamiah (JI), xvii, 93, 95, 96, 97, 100, 101, 102, 103, 104 K Karens, 85 Khua Kaw, 73, 75, 76, 79, 80, 81 King (see also Bhumiphol Adulyadej), xii, xv, 35, 41, 42, 55 Korn Dabbaransi, 32 Kru Se, xviii, 102 Kumpulan Mujahideen Malaysia (KMM), 97 L labour, xiii, 11, 13, 22, 23, 24, 58, 63, 90 Laos, 54, 62, 68, 72 local knowledge, 76, 80 lowlanders, xvi, 85, 86, 87, 90 Lua, xvi, 84, 86, 87, 88, 89, 90 M Malaysia, xiv, 62, 94, 97, 99 Media, 57, 103, 106 military, 31, 55, 93, 94, 98, 100, 101, 102, 105, 106 monetary policy, 8, 9, 12 Muslim, xii, xiii, xvii, xviii, xix, 27, 92, 93, 94, 95, 97, 98, 99, 100, 101, 104, 105 Myanmar (see also ‘Burma’), 54

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110

Index

N Narathiwat, 93, 94, 102, 104, 105 National Counter Corruption Commission (NCCC), 34, 40 National Economic and Social Development Board, 28, 44 National Human Rights Commission, 40, 44, 99, 101 national parks, 85, 89 National Reconciliation Commission (NRC), xviii National Social and Economic Advisory Council, 39 nationalism, 28, 44 New Aspiration Party (NAP), 29, 31, 32 newspapers, 55 Non-Governmental Organisations (NGOs), xv, 34, 70, 77, 89, 101 Northeast Thailand, 31, 32, 33, 37, 44 Northern Thailand, xii, xv, xvi, 54, 85, 87, 88 O oil, xiii, 1, 2, 3, 4, 13, 23 P Pak Moon, 34 Palang Dharma Party, 71 Parliament, 35, 41, 55, 65, 70, 94, 101 Patani United Liberation Organization (PULO), 94, 95, 97, 98, 101, 104, 106 patronage, xiv, 29, 30, 33 Pattani, xviii, 93, 94, 96, 102, 104, 105, 106 peasants, xiii, xv, 41, 89 Pertubuhan Pembebasan Patani Bersatu, 94 phum panyaa, 76, 77, 80, 82

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politics of location, 84, 85, 86, 87, 91 poverty, xiv, 5, 22, 23, 70, 72 Poverty Registration scheme, 28 private sector, xv, 5, 71 privatization, 27, 34, 39, 40 property sector, 12, 14, 56, 57 Provincial Administration Organization, 30 public debt, 1, 2, 7 public enterprises, xiii, 22 Q quotas, 15, 65 R real estate sector, 11 recession, 1, 4, 6, 13, 16, 17, 20 regionalism, 19, 23 Royal Forestry Department (RFD), xvi, 85, 86, 89, 90 S Sanan Kachornprasart, 36, 37, 38 security, xii, xvii, xviii, xix, 31, 35, 55, 69, 85, 88, 89, 93, 94, 95, 97, 98, 99, 100, 101, 102, 103, 105, 106 Senate, 34, 70 separatists, 96, 98, 101, 103 Singapore, vii, xiv, 62, 63, 95, 97, 105, 106 Snoh Thiengthong, 32 Songkhla, 102, 104, 105 South [of Thailand], vii, xii, xvii, 19, 24, 27, 32, 38, 39, 44, 55, 92, 93, 94, 95, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106 Southeast Asia, vii, 43, 54, 62, 63, 88, 92, 95 Southern Border Provinces Administration Centre (SBPAC), 95, 97, 98, 99, 103

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111

Index

Southern Border Provinces Peace Building Command, xviii state agencies, xiii, 27 Stock Exchange of Thailand (SET), 8, 9 subsistence, 78, 82, 88, 89 sufficiency economy, 77, 79, 80, 83 Surin Pitsuwan, 94 Suwat Liptapanlop, 32 swidden, xii, 85, 89, 90 Sydney, viii, ix, 52, 56, 57, 60 T Thailand–Australia Free Trade Agreement (TAFTA), v, vii, xi, xiv, xv, 63, 64, 65, 66, 67, 68, 69, 70 Tak Bai, xvii tariffs, 6, 65, 66, 68, 71 tax, 6, 9, 18, 23, 29, 30, 53, 56, 57, 71 telecommunications, 29, 66, 67 terrorism, 55, 56, 92, 95, 101, 106 Thai economy, xiii, 1, 2, 4, 8, 13, 14, 18, 22, 23, 68, 70, 71 Thai Rak Thai (TRT), xvii, xix, 26, 27, 28, 29, 30, 31, 32, 33, 34, 36, 37, 38, 39, 98, 104 Thaksin Shinawatra, v, xii, xiii, xiv, xv, xvii, xviii, xix, 5, 6, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 44, 45, 53, 55, 65, 71, 94, 96, 99, 100

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Thammasat University, vii, ix The Nation, 34, 42, 43, 45, 95, 96, 105, 106 Tourism Authority of Thailand, 48 trade, xiii, xiv, 2, 3, 7, 18, 19, 22, 23, 40, 41, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 96 transparency, 59 tsunami, xvii, xviii, xix U United States (U.S.), xv, 18, 20, 21, 30, 54, 57, 66, 67, 70, 71, 92, 95, 93, 96, 99, 101, 103, 105 United Nations, 94, 96 university, 37 V Vietnam, 54, 62, 68, 69 village, xii, xv, xvi, xviii, 5, 70, 73, 74, 75, 76, 79, 81, 85, 93, 95, 100, 103 village funds, 5, 70 violence, xii, xvii, 86, 87, 93, 95, 98, 99, 101, 106 W Wan Muhamad Nor Matha, 94 war on drugs, 27, 31, 35, 40, 41, 42 World Trade Organization (WTO), 23, 63, 66, 67 Y Yala, 93, 94, 100, 102, 104, 105

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ABOUT THE EDITOR Cavan Hogue is a Senior Research Fellow at Macquarie University and was Director of the National Thai Studies Centre from 1998 to December 2004. He is also a former Australian Ambassador to Thailand. His research interests are focused on relations between Southeast Asia and Australia, especially cross-cultural issues. He has published widely on such topics, in both academic publications, including Thailand Today: A Changing Society (ed., 2003) and the media.

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