A lot of things have happened this month. For a start, I am one year older and, hopefully, happier. I also finally got started on doing many things I had long wanted to do but kept putting off. On a broader level, the Thai economy is doing even worse than expected — it contracted by 0.6% in the first quarter from a year earlier. More surprising was last week’s swift coup, transformed so quickly from a state of nationwide martial law.
After nearly six months of political unrest and deadlock that resulted in 28 deaths and hundreds of injuries, the army chief Gen Prayuth Chan-ocha took control of the country in a military coup on May 22 — the 12th successful coup since the constitutional monarchy began in 1932.
This latest round of the political crisis has been associated with several dramatic events, starting from the anti-government protest led by Suthep Thaugsuban in November 2013, Yingluck Shinawatra’s dissolution of parliament in December, the Feb 7 general election later annulled by the Constitutional Court, the removal of Ms Yingluck and nine cabinet members from caretaker duties owing to the improper transfer of National Security Council chief Thawil Pliensri, to the mass rallies by pro-government groups including the red shirts.
Responses to the coup have been mixed. While most anti-government protesters welcomed the military takeover, some small groups continue to express their anger. The coup also faces strong opposition from Thai academics and the international community, with concerns over the consequences for democracy and human rights.
As a Thai, I have witnessed several bouts of political unrest. In my lifetime (and I am not that old), I have seen at least five coups already. In Thailand, political innovation seems high, but technological and business innovation remains low.
The latter is reflected in the country’s competitiveness ranking. This year, according to IMD, Thailand dropped two places to 29th amid falling rankings in economic performance, government efficiency and business efficiency — mainly as a result of the political stalemate that caused so much uncertainty and policy discontinuity.
Our neighbours, Singapore (ranked third), Malaysia (12) and Indonesia (37), have all improved this year. According to the survey, Thailand’s challenges are reforming politics and governance to promote balance and equality, strengthening the network of civic corruption watchdogs, and strengthening people power in all areas.
The National Economic and Social Development Board (NESDB) recently projected that the Thai economy in 2014 would grow between 1.5% and 2.5%, lower than the range of 3-4% previously estimated. It also lowered the export growth estimate to 3.7% from 5-7% earlier.
Investment is also expected to fall 1.3% this year from an earlier projection of a 3.1% increase. The main reason is political unrest, which dragged on longer than anticipated. The consensus now is that Thailand probably will have the slowest growth among major Southeast Asian peers this year.
Empirically, political instability is harmful to economic growth, especially through its adverse effects on productivity and by discouraging physical and human capital accumulation. Political instability shortens policymakers’ horizons, resulting in short-sighted and frequent changes of policies, which is damaging to economic performance.
Promoting political stability, however, does not mean saying goodbye to democracy. The notion that democratic political institutions help foster economic growth has gained a lot of attention in recent years. In fact, the relationship seems quite intuitive. Democracy, checks and balances, and strong individual rights should create an enabling environment for investments in human and physical capital — growth should then follow naturally.
Recent research has shown that democracy does have a robust and sizable pro-growth effect through a number of channels such as civil liberties, economic reforms, size and capacity of government, and reduced social conflict. A country that switches from a non-democracy to democracy tends to have around 20% higher GDP per capita over the following three decades.
However, for Thailand, with its deeply rooted political problems, it is understandable why a lot of people think democracy is not a good option right now, and hence a widespread call for reform before elections.
The coup-established National Council for Peace and Order (NCPO) now has a very challenging task of conducting economic, social and political reform. The reforms itself, while no doubt essential, really need to be done quickly and be specific. A full and complete set of reforms will take too long to accomplish, and will likely be easier said than done.
To return the country to civilian and democratic rule as soon as possible, the NCPO should focus only on critical elements such as a better and more transparent election system and more effective anti-corruption measures. The elected government should then be allowed to make medium- to long-term national reform decisions.
In a world where coups are becoming much rarer, the longer the current situation drags on, the higher the cost for the country and the further away we are from our international partners.
Let us hope that the recent political intervention by the army marks a beginning on the road to democracy and not the end of it.
Dr Tientip Subhanij holds a PhD in economics from the University of Cambridge, and currently has a career in banking as well as academia. She can be reached at tien201@yahoo.com