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Government's commitment on climate policy Weakest 1 2 3 4 5 Strongest
In Thailand, the impact of global warming on the monsoon season has produced more severe flooding, alternating with drought, which not only affects agriculture but also imperils Thailand’s relations with its major foreign investors. In 2011, severe flooding in the central plains caused several Japanese and U.S. manufacturing plants to shut down for several days, tarnishing Thailand’s image as a destination for foreign investment. A second danger is rising sea levels, which threaten to disrupt trade through the Gulf of Thailand but also the most lucrative areas of the Thai tourism sector, the resort islands that attract Western tourists. Additionally, air pollution, particularly in Bangkok, exacerbates the impact of global warming.
Expropriation Risk: 46 47 47 53 ▲ Political Violence Risk: 59 59 60 60 ► Terrorism Risk: 55 55 55 55 ► Exchange Transfer and Trade Sanction Risk: 55 55 55 55 ► Sovereign Default Risk: 37 37 47 37 ▼
Apart from climate change issues, problems with neighbouring countries affect Thailand’s energy sources and supplies. In 2021, the government agreed to purchase hydropower from three Lao dams on the Mekong River, over objections from several quarters, including Western countries and environmental groups that object to Chinese dam-building on the Mekong. This year, the decision of French energy giant Total and its junior partner Chevron to cut all ties with the Yadana natural gas pipeline it had built and managed in Myanmar, which provides gas to Western Thailand, puts a further strain on Thailand’s energy supply.
Climate change issues are managed through the National Committee on Climate Change Policy. To both monitor and implement greenhouse gas (GHG) emission policy the government has developed the domestic Measurement, Reporting and Verification system at national and sectoral levels. Most activity is centred in the Working Group on GHG Mitigation Measures under the Committee. Environmentalists have commented that this policy structure is too ad hoc and should be more deeply embedded in the permanent bureaucracy.
Thai environmental non-governmental groups (NGOs) have been active for four decades and serve as surrogate advocates for environmental causes in countries such as Cambodia and Laos, where government curbs on freedom of expression are more severe. These NGOs received strong public support; even in times or martial law, the government is reluctant to censure or otherwise constrain environmental advocates.
In accordance with the Paris Agreement, Thailand filed its commitment to reduce emissions in October 2021. Its carefully worded statement holds that Thailand “aims to peak” its greenhouse gases by 2030 and intends to phase out GHGs at some point in the second half of the century. The country will work towards carbon neutrality by 2065. The government will focus on the energy and transportation sectors in pursuit of these goals.
For several reasons, Thailand has long favoured a larger quotient of energy from renewable sources but, like most South-east Asian countries, maintains it cannot do so without robust external assistance. Despite opposition from environmental groups over the decision to purchase electricity from the three dams in Laos, the government will lean heavily on imported hydropower, which it believes will bring renewable energy up to 30% of all energy use over the next 20 years, the goal specified in the Alternative Energy Development Plan of 2018.
The inclusion of nuclear energy in the Thai renewable energy portfolio has long been a contentious issue. The government was on the cusp of proposing the country’s first nuclear power plant, but the Fukushima disaster in Japan quelled this move. Along with Vietnam and Indonesia, Thailand’s government resumed a cautious public dialogue on this issue. However, public attention to the dangers of the Russian attacks on Ukrainian nuclear facilities will likely defer this discussion again.
Thai laws provide guarantees regarding protection from expropriation without compensation, and the constitution mandates that expropriation requires specific and tailored laws. However, these are essentially guidelines for appropriation, the risk of which remains moderate to high. Most expropriation is of land for public use and is applied to Thai-owned properties, but foreign investors are not shielded from the possibility. Bangkok’s plans for infrastructure development when Thailand has recovered from the COVID-19 pandemic, combined with China’s renewed push on South-east Asian countries to participate in its Belt and Road Initiative infrastructure projects, will keep expropriation a live possibility for several years.
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As Thailand began to re-open following the COVID surge in late 2021, the anti-regime opposition showed signs of renewal. The administration of Prime Minister Prayuth Chan-ocha moved quickly to stamp down protests and undermine the political foundation of the opposition. In November 2021, the Constitutional Court ruled that advocating reform of the monarchy was an attempt to overthrow the king, a treasonous act under the constitution.
The most forward-leaning opposition party in parliament, the Move Forward Party, faces the prospect of dissolution in the courts. More broadly, the administration has approved a draft law to impose sweeping controls on NGOs which, if approved by parliament, would be a major blow to Thai civil society. The government is also considering amendments to the election law to favour larger political parties over smaller ones, the latter being largely in the opposition. Prayuth must hold elections in or before 2023; if he opts for early elections, it will likely be to consolidate his power with these new repressive measures.
In the short-term, this set of controls reduces the risk of political violence, but they could be the building blocks for a political time bomb over the longer term. The outlook will depend in part on the broader population’s views of the efficiency of government in meeting the challenge of restarting the Thai economy. The continued impact of the pandemic, particularly on tourism, supply chain issues, and rising energy costs present formidable obstacles, over which the government has limited control.
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Although attacks by Hezbollah and Islamic State (IS)-affiliated groups have been occasionally launched or attempted in Bangkok in recent years, the most persistent terrorist threat in Thailand remains the separatist struggle in the country’s four southern-most provinces, which have Muslim majorities. The current conflict has spanned two decades, but casualties have abated in recent years, with sporadic peace talks between the umbrella group Barisan Revolusi Nasional and the government.
The separatist insurgency remains a localised conflict and does not figure in the regional or global constellation of jihadist organisations. Consequently, central government attention to resolving the conflict is episodic. Several attempts have been made at negotiations between separatists and Bangkok, without significant progress. Another round of talks will commence in March 2022.
Apart from the insurgency, the Thai security sector also contributes to the country’s vulnerability to terrorism. The military’s political role keeps military leaders’ attention on Bangkok rather than conflict areas. Moreover, the military models its counterterrorism strategy after Cold War counterinsurgency tactics, which focus more on suppression of enemy combatants than on social reconciliation.
The baht was the worst major Asian currency performer in 2021, losing more than 11% against the dollar. This was largely because the COVID-19 Omicron variant emerged just as Thailand began to re-open international tourism. This volatility could continue, or worsen, in 2022 if global energy prices rise to crisis levels, although the baht hit a five-month high in February as foreign funds flowed into the Thai stock market. Thailand remains on the U.S. Treasury Department’s ‘watch list’ for currency manipulation, but Washington shows no signs at present of moving Bangkok to an official designation, which would raise the possibility of sanctions.
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In 2021, the Thai national debt rose to USD105 billion, a ratio of 58.04% in relation to gross domestic product (GDP). This was a jump from 49.63% in 2020, which itself was a significant increase on 41.04% in 2019. However, although the debt-to-GDP ratio is expected to continue rising, it will be in more modest increments: 59.5% in 2022; 60.04 in 2023, and 61.17% in 2024.
In September 2021, the government increased the debt ceiling from 60% to 70%, to aid recovery and implement economic reforms. On March 7, 2022, officials in the Public Debt Management Office said they did not anticipate borrowing up to the 70% level, even over the course of several years, and that they expected economic growth to keep the debt ratio at a steady level.
