Thailand’s recent history is filled with domestic discord and natural disasters that somehow failed to derail its economic expansion, earning the country the sobriquet “Teflon Thailand.” But as the latest political standoff worsens—with new violent incidents erupting daily, the government declaring a state of emergency, and no resolution in sight—it’s forcing the Thai economy into a quandary that’s starting to look very sticky indeed.
This is the conflict in a nutshell: In the latest chapter of an eight-year political conflict, protesters drawn largely from Bangkok and southern Thailand are seeking to oust prime minister Yingluck Shinawatra. They want to suspend democracy until constitutional reforms can rid the country of the influence of the Shinawatra clan—especially her brother, the deposed former PM Thaksin Shinawatra. The Yingluck government, meanwhile, has declared an election on Feb. 2, which it is set to win handily thanks to support from rural voters in the northeast.
The result is a stalemate, albeit one with an increasing body count. In the past week there has been a rise in violent incidents, including two grenade explosions at anti-government protests in Bangkok that wounded dozens and killed one, and the drive-by shooting on Jan. 22 of a pro-government political leader, who was wounded in the arm and leg. Meanwhile, the government’s state of emergency enables it to impose curfews, detain people without charge, censor media, and ban political gatherings.
The uncertainty about where this will all lead is starting to have a seriously detrimental effect on Thailand’s business climate—and not just for the brewery that makes Singha beer, which is facing boycotts after the anti-government granddaughter of the founder claimed that “many Thais lack a true understanding of democracy… especially in the rural areas.“
- The Bank of Thailand held off on a widely expected interest-rate cut on Jan. 22, with analysts surmising that the central bank will wait to see the result of the forthcoming election before it takes steps to stimulate the economy.
- Toyota, the largest player in Thailand’s sizable automotive sector, said on Jan. 20 that it may reconsider a planned $609 million investment in the country and could even cut back on production if the crisis is not resolved.
- The crucial tourism sector has been stung by the unrest, with travelers from China (paywall) and India canceling trips, and neighboring countries like Malaysia and Myanmar reporting knock-on effects. The United States and other foreign governments have issued warnings for their citizens to avoid protest sites in Bangkok, many of which adjoin major malls and tourist destinations.
As the Economist noted, the Thai political system is at a standstill “because the compact on which democracy is based—that losers will accept the result until the next election—no longer applies.” The irony is that the refusal to accept the voters’ decisions is threatening the prosperity that has transformed Thailand into an upper-middle income country over the past generation, as well as the country’s aspirations to serve as southeast Asia’s economic hub. For its recent achievements to endure, and for its future goals to be achieved, Thailand’s famous Teflon coating will need to last a little bit longer.