BANGKOK, Aug 21 (Reuters) - Prime Minister Yingluck
Shinawatra took over in August 2011 after an election that many
Thais hoped would heal the divisions that triggered street
violence in 2010, but Thailand is still politically polarised in
broadly red vs. yellow, colour-coded ideological camps, and any
number of issues could be the flashpoint that rocks the fragile
peace.
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Following is a summary of key political risks to watch.
FRAGILE PEACE IN SHADOW OF THAKSIN
Thailand's worst floods in half a century, which hit the
country late last year, ruined large parts of the central
Thailand's Chao Phraya river basin, killed more than 600 people,
devastated industry, and are slowing economic growth.
The flood started soon after the general election which
passed peacefully, though there is no indication the new
government can bridge the country's deep divisions after six
years of turmoil.
In mid-July, the ruling Puea Thai party said it would push
ahead with plans to change the constitution after a court ruled
that proposed amendments -- which Yingluck says are part of an
effort at national reconciliation -- did not threaten the
monarchy, which meant the party escaped dissolution.
Critics say the rewrite is aimed nullifying a series of
legal measures initiated by the generals who in 2006 overthrew
self-exiled former premier Thaksin Shinawatra, Yingluck's
brother, to allow him to come home without serving jail time for
abuse of power.
Though the July court decision essentially just delays the
problem's resolution, it has eased some of the political tension
that had been building and it appears likely the ruling party
will not try to press the issue any time soon, for fear of
reigniting tensions, scaring investors and complicating
Thaksin's behind-the-scenes moves to consolidate his vast
political and business power.
Despite technically being a fugitive, Thaksin travels freely
around the world on a Thai passport reissued by his sister's
government, basing himself at a mansion in Dubai, where he
routinely meets political allies. Thaksin says the a corruption
conviction he received in absentia in 2008 was politically
motivated to keep him away. His close allies say he is unwilling
to serve jail time or push for a pardon, because he insists he
is innocent.
Despite the three-fifths parliamentary majority of the
coalition, stability cannot be guaranteed as long as rivalry
between pro- and anti-Thaksin camps remains entrenched. Tensions
surround the prospect of him returning home and resume his
political career with his graft conviction whitewashed.
What to watch:
- Puea Thai's response to the court ruling. The party is now
in a tight spot. The Constitutional Court in July recommended
the government seek popular approval in the form of a referendum
before it is allowed to rewrite the constitution, but with a
plebiscite comes the risk of the amendment being shot down and
Thaksin's graft conviction being upheld. If it presses ahead
with a total rewrite, in defiance of the court, it would
certainly face a backlash. Another option is to amend clauses of
the charter separately, but that could be a very lengthy
process, one for which would test Thaksin's patience.
- Public and investor satisfaction with the measures taken
to rebuild after the floods. This is crucial to the government's
plan to boost foreign investment and raise living standards. If
there is major flooding later this year and the country is not
prepared, it could seriously hurt the ruling party.
- The judiciary. Thailand's courts have delivered rulings
that have dissolved political parties, banned hundreds of
politicians and brought down governments, and the impartiality
of judges is often questioned. Any rulings deemed politically
motivated could trigger a new crisis. Another case implicating
Thaksin in alleged malfeasance in the issuance of loans by
state-run Krung Thai Bank will be heard on Oct. 11.
- The PAD. The ultra-nationalist group has warned it will
come out in force if it becomes clear Thaksin will return to
Thailand without serving prison time. Though it may no longer be
able to draw big crowds, it does have hardcore followers who can
cause damage.
- Reconciliation plan. Four versions of a unity bill have
been on parliament's agenda but have been put on hold. Puea Thai
is highly unlikely to drop the issue completely. It is likely to
focus on a general amnesty for all political offenders since
2005 and the annulment of all investigations by the now-defunct
Assets Scrutiny Committee (ASC) set up to investigate alleged
corruption by Thaksin and his cabinet. Both would put Thaksin
and in the clear and allow the return of $1.5 billion of his
seized assets. The opposition, which has close links to the
royalist establishment and military, is furious.
- The military. Thailand's generals have a long record of
staging coups to remove or preserve governments, normally with
tacit backing of the conservative elite, which is still a potent
force behind the scenes. A coup would be extremely risky for the
army given what could be a monumental backlash by the red
shirts. However, any sign of a purge of the royalist top brass
and promotion of pro-Thaksin military commanders would make that
scenario more likely. Yingluck is likely to maintain the uneasy
status quo and try to appease the generals, with whom she has
enjoyed cordial and cooperative ties.
- Calls for reform of lese-majeste laws. In late May, a
court handed an eight-month suspended jail sentence to a website
editor for failing to quickly remove posts deemed offensive to
the monarchy. The case that had added to a debate over
Thailand's draconian royal censorship laws remains heated and
contentious. The government, aware of being accused of
republican leanings if it goes near the law, has said it won't
change it and has distanced itself from those calling for
change.
ECONOMIC MANAGEMENT
Yingluck's economic team was welcomed by foreign investors
at first, but her government has had to tear up its calculations
after the floods, which had a devastating impact on industry,
with tens of thousands of jobs lost, mainly in the car and
electronics sectors.
Thailand's economy grew a record 11.0 percent in the first
quarter from the previous three months, rebounding from the
floods, and strong full-year growth is expected due to a jump in
consumption and investment after the disaster.
In July, the central bank cut its 2012 growth forecast to
5.7 percent from 6.0 percent and cut its projection for exports
for the second time in just over a month to 7 percent from 8
percent.
The economy grew just 0.1 percent in 2011.
At its most recent policy meeting in July, the central bank
left its main interest rate unchanged at 3 percent, as expected.
It now seems likely to leave rates unchanged until the end of
the year to help the recovery in light of the weakening global
economic outlook.
What to watch:
- Central bank policy moves, and whether the GDP forecast
proves accurate.
- Whether firms actually leave Thailand to escape
government-mandated wage increases, as some have threatened.
THE KING'S HEALTH
The 84-year-old King Bhumibol Adulyadej's influence as a
moral arbiter and unifying figure in times of crisis is accepted
by most Thais, but his heir, 60-year-old Crown Prince Maha
Vajiralongkorn, has yet to command the same popular support.
King Bhumibol has been in hospital since September 2009. He
has made periodic public appearances in recent months, appearing
in better health, although he has suffered from some problems,
which have required surgery. In July, he experienced health
problems overnight including bleeding in the brain but his
heartbeat and blood pressure have since returned to normal.
His condition has focused attention on what will happen when
his reign ends. If the crown passes to Vajiralongkorn while
political divisions remain, opposing factions may intensify
their struggle.
What to watch:
- Public appearances by the monarch and statements from the
palace on the king's health. Application of the lese-majeste
laws, under which criticism of the monarchy is met with severe
punishments.
INSURGENCY IN THE SOUTH
A low-level insurgency in Thailand's deep south rumbles on,
and violence has spiked in the past month, leading to rushed
promises by the government to try to streamline its approach.
Currently, 17 ministries and 66 agencies oversee policy and
security in the region, but the army holds significant power
there. The defence minister said this month that the government
had met with some insurgents and discussed a possible truce, but
it is unclear whether there has been any real progress. This is
complicated by the confusion about which of the multi-celled
groups is really behind the unrest, and the identity and
whereabouts of the leaders. A top Thai conflict expert describes
the rebellion as a "network without a core". Although bombings
and ambushes are largely directed at the military, insurgents
are capable of large-scale strikes on civilians.
In all, more than 5,200 people, mostly civilians, have been
killed in Yala, Pattani and Narathiwat since the long-running
insurgency blamed on Muslim separatists flared up in 2004.
In addition, Thai authorities in January beefed up security
in parts of the capital after the United States and Israel
warned of a possible attack on areas popular with tourists.
What to watch:
- Any moves towards decentralisation of political power or
negotiations with the rebels. The army, and many nationalists,
are reluctant to start talks, but the government seems more open
to the idea, which could put the military and establishment on a
collision course with the executive. Instability in the region
has a limited impact on the economy, but its proximity to
tourist spots like Phuket and Krabi has caused concern.
(Editing by Daniel Magnowski)