28-8-2023 (BANGKOK) Under the leadership of the newly appointed Prime Minister, Srettha Thavisin, from the Pheu Thai Party, Thailand has set a record for the longest time taken to form a cabinet following an election. This surpasses the previous record set by the Prayut Chan-o-cha administration in 2019, lasting 108 days, as the new government awaits official endorsement.
The initial coalition formed after the poll consisted of eight parties, with the two most influential being Move Forward and Pheu Thai, holding the majority of seats.
The new 11-party governing coalition, however, excludes Move Forward, with at least six parties poised to take some of the 35 ministerial positions in Prime Minister Srettha’s cabinet.
The formation of a functioning government may alleviate concerns about the sluggish economy. Pheu Thai has pledged to address its 10,000-baht digital wallet pledge at the first cabinet meeting.
Nevertheless, concerns over stability linger due to the diverse policies of each coalition party, including intentions to amend or even rewrite the constitution, potentially leading to disagreements.
The possibility of political protests remains, particularly if the government fails to deliver on campaign promises once its honeymoon period ends.
While the business sector is relieved that a new administration is in place, the true challenge of governance lies ahead, extending far beyond assembling a coalition over the past few months.
Creating An Economic Roadmap
Academics are urging the new administration to focus on issuing stimulus measures for the remaining five months of the year to sustain economic growth at a minimum of 3%.
Aat Pisanwanich, director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce (UTCC), stressed the importance of discussions with coalition parties. He emphasized the need for stimulus this year, using the state budget while limiting its use for other purposes in various ministries.
To achieve a 3% economic growth rate this year, the government must inject as much money as possible into the economy, according to Mr. Aat. He pointed out that a timely injection of the fiscal 2024 budget into the economy is the only viable option for stimulating growth, considering uncontrollable factors like the global economic slowdown, China’s reduced growth, and the El Niño weather phenomenon affecting Thai exports and agriculture.
Before implementing a package to stimulate private consumption and domestic investment, the government must develop a roadmap for economic growth and investor confidence, advised Mr. Aat. Thai exports, highly dependent on a few key markets like the US, China, and Japan, remain vulnerable. Mr. Aat recommended diversifying risk by exploring other export markets, such as India, Africa, and the Middle East.
The UTCC forecasted a 2% contraction in Thai exports for this year, attributing it to over-dependence on a few markets and suggested offering monetary incentives to officials abroad to promote Thai products, similar to private sector practices.
A Blend Of Expertise
While acknowledging potential political instability during Prime Minister Srettha’s term, the Federation of Thai Industries (FTI) believes it can significantly contribute to Thai economic development.
Despite the controversy of Pheu Thai forming an alliance with parties from a previously rival camp, the FTI sees an opportunity for collaboration with the United Thai Nation (UTN) Party and the Palang Pracharath Party (PPRP). This collaboration could facilitate the implementation of key economic policies initiated during the Prayut Chan-o-cha administration, noted Kriengkrai Thiennukul, FTI’s chairman. Pheu Thai, known for its expertise in implementing economic stimulus policies, could work alongside these parties.
Mr. Kriengkrai expressed the FTI’s readiness to work with any new government, regardless of its leadership, and hopes that Pheu Thai’s government will help Thailand navigate economic uncertainties, including the global economic slowdown.
Stability For The Tourism Sector
Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association, emphasized that foreign tourists generally do not consider a country’s politics when planning trips overseas. However, they do prefer to travel in a safe environment. The stability of the government might not directly impact tourist confidence, but problems unresolved by relevant ministries that affect tourists can eventually impact the industry negatively.
For instance, issues like seasonal smog in Chiang Mai require integrated solutions involving various ministries. Another concern is the inequality of opportunity for small and mid-sized operators, who have experienced slower recovery compared to major investors and conglomerates. The persistence of these problems is attributed to a lack of commitment and cooperation between political parties in the past.
Chamnan Srisawat, president of the Tourism Council of Thailand, hopes that the government maintains stability and does not dissolve the parliament too soon. However, achieving seamless collaboration between ministries remains challenging.
Constitutional Dilemma
The political coalition between Pheu Thai, UTN, and PPRP raises doubts about the new administration’s stability. The Move Forward Party, which won the most seats in the general election but was excluded from the coalition, views this alliance as unacceptable, as do many observers.
Moreover, Pheu Thai has announced its intention to push for an amendment to the 2017 constitution to make it more compatible with political affairs. This could potentially disrupt the Srettha administration’s ability to complete a four-year term, as amendments are likely to cause disagreements among political parties, leading to a potential House dissolution.
Nattachart Mekmasin, research manager at Trinity Securities, believes that the Srettha administration is relatively stable with the ruling coalition’s 314 MPs. He anticipates a possible cabinet reshuffle during the first 3-6 months, a normal practice in the early stages of an administration. Monitoring opposition parties and political demonstrations is also on the government’s agenda.
Political Lifespan
Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities, agrees that the new government’s stability level is high, given the substantial number of MPs in the ruling coalition. He believes that the government should remain in office for at least 2-3 years to amend the constitution.
However, the popularity of the Move Forward Party, excluded from the coalition despite winning the most seats, could put Pheu Thai and its partners at a disadvantage if parliament dissolves too soon. The ruling coalition’s aim should be to stay in office for an extended period and amend the constitution, according to Mr. Therdsak.
He also noted that political situations outside parliament are unlikely to become serious or violent, assuming there’s no dissolution of the Move Forward Party. Rapid changes in political trends, influenced by social media and quick access to political information, may occur within the next few years.
Prasarn Trairatvorakul, chairman of the Stock Exchange of Thailand (SET), highlighted the importance of governance in the business sector, particularly good governance for public confidence. Economic policies should prioritize maintaining market confidence in financial and economic stability, especially given the uncertain domestic and global economic environment.
Private Sector Support
Somchai Sittichaisrichart, managing director of IT product distributor SIS Distribution (Thailand), noted that the country is accustomed to uncertainty and political upheaval, with the corporate sector driving the economy. He believes that having a new government is preferable to a caretaker administration.
Mr. Somchai stressed the urgency of disbursing the budget by year-end or in the first quarter of the following year to stimulate the economy. Sanan Angubolkul, chairman of the Thai Chamber of Commerce, emphasized that the business sector isn’t overly concerned about the coalition government’s stability.
The new government should expedite urgent measures within the first 100 days in office, including reducing the cost of living for citizens and cutting costs for the private sector, such as fuel prices and power bills. The government should also facilitate access to capital for entrepreneurs, streamline capital access for them, and enhance the tourism sector to boost the Thai economy for the upcoming high season.
