Bangkok rallies raise heat on Thaksin

Thailand's leader faced a second weekend of protests over a business deal, but his rural support is strong.

Tens of thousands of Thai protesters turned a downtown plaza into a sea of royalist yellow on Saturday in a bid to force Prime Minister Thaksin Shinawatra to resign. It marked the second successive weekend of large antigovernment protests in the capital.

Mr. Thaksin, who last year won a landslide electoral victory, is struggling to tamp down an opposition movement that has spread to universities, dominated water-cooler conversations, and jangled the nerves of foreign investors.

At the heart of the protests is a familiar complaint: Thaksin the premier is too close to Thaksin the businessman, and Thailand is the loser.

Before taking office, Thaksin handed over control of his business empire to his children, wife, and other confidants - a move widely seen as relinquishing only nominal control. His family-owned telecoms group, Shin Corp, which also owns a television channel and a satellite concession, has been dogged by allegations of government favoritism under Thaksin since he took office in 2001.

But the simmering concerns over corruption boiled over when a controlling stake in Shin Corp was sold last month in a $1.87 billion deal - engineered so that Thaksin and his family paid no capital gains tax. Thaksin said his family wanted him to concentrate on politics and end the sniping over Shin Corp. Regulators, however, began investigating the family's offshore shareholdings, putting a legal question mark on top of the mounting nationalist and ethical criticisms of the deal.

Thaksin has rejected the criticism and refused to resign, citing his popular mandate. He has a three-quarters parliamentary majority that expires in early-2009. But analysts warn that mounting protests are undermining his grip on power.

"This could affect the stability of the government. Cracks are appearing, and I expect more in the future," says Somchai Pakapatwiwat, a professor at Thammasat University in Bangkok.

CEO-style politics across Southeast Asia

The row has highlighted the close embrace in Southeast Asia between business and politics. Thaksin's emphasis on CEO-style leadership is echoed in Singapore, where savings are channeled into offshore investments that usually dovetail with foreign-policy objectives in countries like China and India. The Shin Corp stake was sold to Temasek Holdings, a Singaporean government-owned fund with a $53 billion portfolio in telecoms, property, healthcare, and other industries.

The foreign takeover of Shin Corp has raised nationalist hackles in Thailand, which is currently negotiating a free-trade agreement with the US. Thai officials say the US is keen to reach a deal before Congressional midterm elections and the expiration of fast-track approval in 2007.

Many protesters in Bangkok said they opposed the trade deal, just as they objected to selling Shin Corp to Singapore. "Thaksin is selling our air. How can we breathe?" asked one. "If Thaksin really loves his country, he wouldn't do this."

Others railed over the use of offshore companies to allow the Shinawatra family to avoid paying taxes, a tactic that is legal but riles ordinary Thais. One sign read "Thaksin=Tax-Free Prime Minister."

Ironically, Thaksin rode to power in 2001 as a nationalist who berated the previous government for letting the International Monetary Fund dictate economic policy. Two years later, after helping the rural economy with government handouts, he won plaudits for repaying an IMF loan ahead of schedule and declaring that Thailand was free again.

While some of the opposition is coming from the political left, royalists have also tried to pressure Thaksin by appealing to King Bhumipol Adulyadej to intervene. They argue that this is necessary because the administration has undermined the constitutional checks on its power. But analysts say this appeal is likely to go unheard, as the monarchy rarely intervenes in politics unless there's a national crisis.

Thaksin offering a referendum

Thaksin has tried to defuse the situation by proposing an April referendum on constitutional reform that could in theory be used to strengthen checks on the prime minister. He also pledged his loyalty to the throne. "Only one person can tell me to resign: his Majesty the King," he told listeners to his weekly radio address on Feb. 4. "If the king just merely whispers to me, 'Thaksin, you resign,' then I will resign right away."

Protesters will face a stiff challenge in bringing their campaign to the countryside, where Thaksin commands huge support. Much of the anger over the Shin Corp deal is confined to Bangkok and other cities where middle-class voters are better informed. Some observers say the differing reactions point to a widening urban/rural divide in Thailand that Thaksin is shrewdly exploiting.

"He's taken on the populist persona very substantially. He's the first national leader that people out in the sticks see as theirs. He belongs to them," says Chris Baker, coauthor of "Thaksin: The Business of Politics in Thailand."

Even in Bangkok, where newspapers have pounced on opposition calls for impeachment, not everyone is convinced it's time for a change. Worowate Sokuntat, a graphic designer, says that office talk often turns to the anti-Thaksin campaign. Many are adamant that the Shin Corp deal is unethical. But Mr. Worowate worries about the impact on jobs: "The economy is rising, and if we change political leaders everything could slow down."

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