After turmoil, hopes for stability with new Thai prime minister

Ahbisit's coalition has presented a stimulus package to shore up Thailand's faltering economy.

By , Correspondent

If you think President-elect Barack Obama is taking on a tough job, spare a thought for Thai Prime Minister Abhisit Vejjajiva.

He came to power in a backroom deal aimed at ending months of political strife and street violence. An angry mob besieged parliament during his inaugural speech, forcing a change of venue. When opposition media displayed his cell phone number, hostile callers beseeched him day and night.

One month on, Mr. Abhisit leads a divided, bewildered nation with an increasingly shaky economy. On Wednesday, the Bank of Thailand cut interest rates to a four-year low of 2 percent and said growth in 2009 may fall to close to zero, down from an estimated four percent last year.

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But the awkward coalition headed by Abhisit, a British-educated economist and Thailand's fourth prime minister in a year, is holding firm. A slew of by-election victories on Jan. 11 has extended its parliamentary majority. Talk of imminent elections and more turmoil has given way to cautious optimism that his government can outlast its scandal-hit predecessors, providing a dose of much needed stability.

Abhisit vowed Wednesday to "return Thai politics to normalcy" after months of unrest that peaked in November with the occupation by a royalist protest group of two international airports in Bangkok. Speaking at the Foreign Correspondents Club of Thailand, he promised to bring to book the ringleaders of this and other acts of street violence in order to restore order and heal Thailand's political wounds.

"You will never have reconciliation unless there is justice," he said.

An equally pressing challenge is propping up a listing economy beset by global as well as domestic gloom. Like other countries in Asia, Thailand is suffering a sharp slowdown in demand for its exports. In response, Abhisit is asking parliament for a $3.3 billion six-month stimulus plan to support domestic consumption.

Business leaders aghast at the recent chaos and disruption have broadly welcomed the plan. While much attention has focused on the role of the military and protesters in aiding Abhisit's rise, influential business groups also played a crucial role. Arguing that partisanship had reached a dead end that threatened to sink the economy, big business swung decisively towards the Democrat Party led by Abhisit.

The reasoning was based less on ideology than survival, says Narongchai Akrasanee, a banker and a former minister of commerce. "It's not because we support the Democrats. It's because we need a government in a time of world economic crisis," he says.

Thailand's $17 billion tourist industry is still reeling from the airport closures, which stranded hundreds of thousands of foreigners and sparked mass cancellations over the peak winter season. Abhisit said Wednesday that international arrivals had since recovered to around 80 percent of normal capacity.

Even more acute is the slump in exports, by far the biggest economic driver. An 18 percent annual decline in November, when the political unrest peaked, was the first such drop since 2002, Bloomberg reported.

Behind the stimulus package is a political calculation, too. By targeting low-paid workers, farmers, and other groups of society, Abhisit hopes to make inroads into the rural north and northeast, both key election battlegrounds. In recent years, rural voters provided a bedrock of support to former Prime Minister Thaksin Shinawatra, whose allies lost power last month after the courts disbanded their party.

Mr. Thaksin, who is living in exile and is wanted at home on a corruption-related conviction, built his base with populist policies that the new government has begun to emulate. He also cultivated an image as a man of action at home in the hardscrabble countryside, in contrast to Abhisit's more urbane style.

However, Thaksin's remaining allies in parliament, grouped into a new political party, fared poorly in Sunday's by-elections, winning only five out of 29 seats. Twenty went to the governing coalition, giving it a margin of around 50 seats over the pro-Thaksin opposition.

While analysts have cautioned that these polls are skewed by local factors, Abhisit has seized on the results as an endorsement of his conciliatory approach. "Ordinary Thais are sick of divisions and want the country to move forward and want to give us a chance to move it forward," he told the FCCT.

As well as burnishing its pro-poor credentials, the Democrats also need to reward coalition partners that switched sides. Critics say the hastily assembled stimulus package will be a source of corruption for these parties, which received cabinet seats in proportion to their voting blocs. Aides to Abhisit insist, though, that all contracts awarded under the package will be properly scrutinized.

A wild card in any political calculation is Thaksin, a polarizing figure who has defied past attempts to bury his legacy. The by-elections shed some light on how rural voters are thinking, but it's too early to write off the former leader, says James Klein, country director for the Asia Foundation.

"Are people shifting away from the [pro-Thaksin] parties? Or does it have more to do with politics on a local level? We don't know yet," he says.

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