Geopolitical Weekly: The Business Impact

Analytical Insight provides a weekly overview of global geopolitical events and the potential impacts these events may have on business operations.

Thailand - The calm before the storm

Key Points

Thailand may be facing a period of relative calm as martial law has cracked down on any form of political protest, however, this is merely increasing political polarisation and paving the way for Thailand to plunge into deep political turmoil again in the longer term.

Near term - The calm before the storm The Military Junta is likely to remain in power for the next 8-12 months

Widespread political unrest is unlikely
Small acts of violence, such as the recent IED attack at a luxury shopping mall in Bangkok, will likely increase in frequency
Despite the drop in oil prices, economic conditions will likely deteriorate as the market remains sceptical that military rule can maintain order
The Military will attempt to secure power through removal of opposition leaders and key allies in all areas of government
It is likely the King will die and the less popular. Crown Prince will ascend to the throne

Medium term - The return of political unrestIn the medium to long term (12-18 months) a civil uprising against the unelected Junta will destabilise Thailand and plunge the country back into political uncertainty

Exiled former Prime Minister Thaksin Shinawatra will likely mobilise his red shirt supporters against the military rule prompting widespread political protests and rallies
Political unrest will intensify, as the military attempt to delay elections that will see the Junta lose any power it has amassed
It is likely the Pheu Thai Party, backed by Thaksin, will win elections should they be held during this period
Economic conditions will further deteriorate as political parties stagnate due to power struggles

Thailand’s complex Military – Government – Monarchy power triangle has produced cyclic periods of political unrest that have been widespread and violent in nature. The country’s democratic process is repeatedly challenged by the elite urban opposition and there have been 12 successful military coups since 1932. While political upheaval followed by military intervention is fast becoming ‘business as usual’ for Thailand, the next cycle of power struggles will likely be more intense and potentially more destabilising than those before. The death of the much-loved King, and the succession of the unpopular Crown Prince will destabilise the monarchy side of the power triangle. While the military will seek to influence the royals, it is unlikely that the Crown Prince will act as a stabilizing influence for national stability like his father has. Exiled former Prime Minister Thaksin Shinawatra’s options are narrowing following the banning from politics of his sister,former Prime Minister, Yingluck Shinawatra. Thaksin will be left with little option but to mobalise his red shirt supporters to challenge the military Junta. This challenge will be met with opposition from the military supporting yellow shirts and will likely lead to widespread civil unrest.

The Business Impact

Business operations in Thailand face long term uncertainty and business continuity issues. The economic conditions are also likely to deteriorate in the medium term as the ongoing power struggles prevent Thailand from reforming to manage its economic issues. The constant change of power will continue to hamper trade relations and put Thailand further behind its regional rivals in terms of trade agreements. The ongoing security issues will likely hamper Thailand’s prevalent and central tourism industry, especially as its neighbouring countries can expect periods of relative calm.

Businesses operating in Thailand should ensure their business continuity plans are robust, especially those with operations in Bangkok. Investors should expect further decreases in the markets as investor confidence drops.

For further information on the potential impact to your business, contact a member of our South East Asia Analysis Team

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