Just three years ago, as Bangkok played host to the annual Asia-Pacific Economic Cooperation (APEC) summit, Thailand's booming economy was the talk of the town. Leader Thaksin Shinawatra rode a wave of popular support as his economic policies reaped growth rates higher than 6 percent, and pundits anointed him the successor to regional leaders like Malaysia's Mahathir Mohamad and Singapore's Lee Kuan Yew.

Now the military has ousted Thaksin, and the excitement has shifted a few hundred miles east to Hanoi, which hosted the annual APEC summit last month. Vietnam enjoys Asia's second-fastest growing economy behind China and is finally set to join the World Trade Organization (WTO) after eight years of negotiations.

Vietnam's rise has not gone unnoticed in Thailand, where investors look longingly eastward and wish they could be as optimistic. But while the seemingly endless political gridlock in Bangkok may scare away new investment in the short term, some say this pit stop in Thailand's economic development may simply be a normal growing pain that will clearly define the rules for foreign investors and make the country's economy stronger down the road.

"When a country grows fast, eventually it will face a setback," said Kongkiat Opaswongkarn, CEO of Asia Plus Securities, Thailand's third-largest broker. "Vietnam will face the same thing one day. When you get a flood of foreign money, you need to take a close look to see what kind of investment you really want. In the long term, that's a positive."

Thailand's economy, built around superior infrastructure that has helped facilitate a thriving export industry, is more than twice the size of Vietnam's – for now. But the political events of the past year that led to Thaksin's ouster were fueled in part by opposition to his economic liberalization policies of privatization and free-trade deals that crystallized after his family sold its stake in Shin Corp last January to Singapore's government-run Temasek Holdings in a tax-free share sale.

Now, the new military-installed government, which has recruited many liberal economic thinkers, must figure out how to make the country attractive to investors while also justifying the Sept. 19 coup. For Thailand's new leaders, throwing the book at Thaksin and his personal business deals may be the best way to ensure public confidence while maintaining the economic status quo.

At the heart of the debate is a long-ignored provision to the foreign ownership law that says foreign firms cannot own more than 49 percent of a business in certain sectors. Although exceptions exist for investors who go through the country's Board of Investment (BoI),thousands of other foreign firms, including Temasek, skirted this law by taking stakes through nominee companies – firms established for the sole purpose of holding investments on behalf of other companies.

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