Index Trend Previous Quarterly Editions
Overal Risk Temperature TREND ▼
Special topic: Geopolitical alignment 4
Alignment five years ago 3
Degree of contestation 2
Thailand attributes its unique history in South-east Asia as the only state never to be colonised by a Western power to its skill in balancing major powers. Nevertheless, pragmatism led Bangkok to enter a close alliance with the U.S. during the Cold War, and to commit forces to U.S. actions in Laos and Vietnam. For its part, the U.S. brought infrastructure, economic assistance, and military training to the alliance.
Expropriation Risk: 52 ▼ Political Violence Risk: 60 59 ► Terrorism Risk: 5 53 ► Exchange Transfer and Trade Sanction Risk: 45 ▼ Sovereign Default Risk: 47 ►
Reconfiguring the alliance with the end of the Vietnam War has been a jagged process; indeed, in 1975 Bangkok opened a diplomatic window to China out of concern the U.S. would not defend Thailand if Vietnam invaded. Bangkok is currently attempting to balance its relations with the U.S. and China, but China’s military rise will encourage leaning towards the U.S. in the near term.
The U.S./Thailand alliance has endured, with Thailand having been upgraded to the status of a Non-NATO Treaty Ally, but the central purpose of the alliance has been in question for two decades. During the Cold War, the communist threat in South-east Asia was land-based, and Thailand was the ‘domino’ that did not fall. However, the current
security environment in the Indo-Pacific is one of maritime competition, and potential conflict.
Thailand is not a claimant in the South China Sea, and in recent decades Washington has been more focused on building security ties with Singapore, Vietnam, Indonesia, and Malaysia. Moreover, the alliance has suffered from a series of coups in Thailand (1991, 2006, 2014), which under U.S. law required Washington to withhold security assistance until elected government was restored.
On the Thai side, Bangkok has avoided providing support for U.S. actions that do not bear directly on Thailand. In 2003, then-Prime Minister Thaksin Shinawatra initially refused flyover rights for U.S. planes on their way to the Iraq War. It is doubtful Thailand would agree to join in a U.S. military action to defend Taiwan. Younger generations in the military and the broader public exhibit less support for the U.S./Thailand alliance than do their elders, which could make the alliance more controversial (or insignificant) in future.
Greater distance in the U.S./Thailand alliance has prompted Thailand to build strong relations with China, but this relationship is not without serious caveats. Until recently these have primarily been economic, with the assistance of Thailand’s extensive and well-integrated Sino-Thai population. China has been Thailand’s largest trading partner for nearly the past decade, but is also the source of a significant, widening trade deficit; Bangkok aims to increase exports to China through the Regional Comprehensive Economic Partnership but has made little progress.
Thailand has both benefitted from and helped finance hydro-power dams on the Mekong, but has suffered from China’s upriver management of its dams with droughts and floods. The prospect of a Chinese naval base at Ream , Cambodia, would give Beijing a strategic outpost on the Gulf of Siam and could disadvantage Thailand in discussions with Cambodia over competing claims of oil and gas resources in overlapping sections of the Gulf. Bangkok is also worried about the possibility Laos will become a Chinese vassal because of its rising debt, much of which is with China.
The U.S. is presently making efforts to strengthen the U.S./Thailand alliance and has included Bangkok in the Indo-Pacific Economic Framework. Cobra Gold, the annual multinational exercises co-hosted by Thailand and the U.S., have been restored to full strength after a decade of limited exercises because of the 2014 Thai coup. At the same time, Thailand has built security relations with China including joint exercises, training, and arms sales, although these are less extensive than those with the U.S..
One critical issue is over the sale of weapons; Bangkok is attempting to acquire F-35 fighter jets from the U.S., but the Pentagon is wary of the risks of technology transfer to China.
Expropriation Risk 52 (Medium) TREND ▼
Although expropriation risks remain because of Thailand’s plans to strengthen infrastructure and the land use issues those involve, at present there is little risk of expropriation. On the contrary, Thailand’s involvement in the Indo-Pacific Economic Framework and the prospect of closer economic relations with the U.S. will discourage moves towards greater protectionism for the time being.
Political Violence Risk 59 ( Significant) TREND ►
The risk of political violence in Thailand has risen in recent weeks. Although Prime Minister Prayuth Chan-ocha and his cabinet survived the fourth attempt to mount a no-confidence motion against them in parliament, the opposition has scored an interim victory.
In August, the Thai Constitutional Court agreed to consider a petition from opposition politicians to remove Prayuth from office because he had exceeded his term limit under the constitution. The decision will rest on whether the Court agrees with the opposition that Prayuth’s term as prime minister began in 2014, when he seized power by coup, or in 2019, when he was elected. The Court has indicated it will deliver a decision on September 30.
Either outcome of the case against Prayuth carries possibility of political violence. A decision in favour of the prime minister will spark public demonstrations and re-energise the pro-democracy movement. If the decision goes against him, the political establishment, which has close ties to the military, could take measures to suppress an opposition it fears will gain power in the next election. More generally, Prayuth’s removal would create some chaos in the ruling coalition, which had assumed he would be re-elected for a second term in 2023.
Terrorism Risk 55 (Significant) TREND ►
Thailand was ranked 22nd in the 2022 Global Terrorism Index for vulnerability to terrorism, which places it in the upper quadrant. However, at this point there are few indicators of an increase the terrorism level. The separatist movement in Thailand’s four southern-most provinces remains at a low level of insurgency, although there are few prospects for a peace agreement with the central government. Increased political turbulence would raise the risk of international terrorist groups using or transiting Thailand, however.
Exchange Transfer and Trade Sanctions Risk 45 (Medium) TREND ▼
The widening divergence between Thai and U.S. interest rates helped to drive the baht downward in recent months, and in June the rate reached its lowest point in 15 years, at just under 36 baht to the dollar. The government is hopeful increase in foreign tourism in the high season will improve the situation.
Thailand is not at major risk for direct sanctions, but it may be liable for secondary so-called or ‘third country’ sanctions on two fronts, namely the country’s continued economic involvement with military governed Myanmar after the latest coup, including with military-linked enterprises, and Bangkok’s attempts to keep relations with Russia at previous levels despite the Russia/Ukraine crisis.
Sovereign Default Risk 47 ( Medium) TREND ►
The rise in Thailand’s national debt thus far in 2022 has accelerated beyond original estimates. It was forecast to reach a debt-to-GDP ratio of 62.7%, a figure was not expected before 2025, by the end of fiscal year 2022. However, this is still below the current ceiling of 70% of GDP.
The government attributes the velocity in debt-to-GDP ratio growth to the continued impact of COVID-19, including ongoing Chinese lockdowns. This and current negative conditions in the global economy have kept Thailand’s economic growth rate just below 3% to date this year, one of the poorest performers in South-east Asia, although the recovery is expected to pick up in the medium term.
