Previous Quarterly Editions
Expropriation Risk: 45 44 44 41 Political Violence Risk: 50 46 42 40 Terrorism Risk: 56 58 58 60 Exchange Transfer and Trade Sanction Risk: 43 42 44 42 Sovereign Default Risk: 44 43 42 42
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The long process of constitutional and legal preparation for Thailand’s next election is now complete, and the date has finally been set for March 24. The military government’s National Council for Peace and Order (NCPO) had originally announced that the election would be on February 24, but a delay in securing the necessary royal decree meant pushing the vote back by a month. This raises the risk that the final, certified results will not be available by the legally mandated date of May 9, particularly given the traditional cessation of activity that will take place during the days surrounding King Vajiralongkorn’s coronation early in May, but the government looks set to ensure that the results are available by the deadline. This will enable Thailand, which is the new chair of ASEAN, to use its hosting of the organisation’s 2019 summit in Bangkok at the end of June to unveil a new civilian government. The long-delayed announcement of an election date appears to have been the result of international rather than domestic pressure, despite some recent small-scale protests calling for an election date. The election itself will see voting for a re-established, 500-member House of Representatives while the NCPO will hand-pick the 250-member Senate. Across the two houses, the support of 375 members will ensure that a party can secure the prime ministership for its candidate. The pro-military Palang Pracharath Party (PPP) and the Pheu Thai Party (PTP) affiliated with deposed prime minister Thaksin Shinawatra remain the frontrunners, although legal moves against the PTP could yet see it dissolved prior to the election. Its leaders have already created an alternative party for this eventuality. Having redrawn the country’s constitution to ensure that its influence will continue under a civilian administration, the military is confident that it will retain ultimate power in the country regardless of the electoral outcome. However, it expects the PPP to win with the present prime minister, former general Prayut Chan-o-cha, staying in office. The Asian Development Bank estimates economic growth will be 4.1% for 2019, slightly down from its mid-2018 projection of 4.3%. In November, exports to China declined by 8.9% while exports to the US grew by 11.9%, providing some evidence that Chinese demand is slowing and that US companies are seeking alternatives to Chinese supply chains. In 2018, exports accounted for 65% of GDP.
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Thailand’s cabinet has approved a draft Air Navigation Law allowing for 100% foreign ownership of aviation companies engaged in manufacturing or maintenance. The new law reflects the government’s on-going revision of foreign ownership limits as a means of generating foreign direct investment. New regulations for the Eastern Economic Corridor (EEC), which will strengthen road and railway links across three eastern provinces along the Gulf of Thailand while adding new air and sea ports, will allow for 100% foreign ownership of property developments and 100-year leases for corporate leaseholders, who will be able to sublet parts of their space. As Thailand’s property law currently prohibits foreign ownership beyond 49%, the government hopes that this show of flexibility will stimulate further foreign participation in development along the corridor. Combined foreign and domestic investment in the EEC has already reached 10 billion dollars.
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The military government has tolerated the small number of rallies that have called for the election date to be set, mainly because of their inability to attract more than a few people after four years in which the government has cracked down harshly on any attempted displays of political protest. However, there are no signs at present that any resumption of large-scale protests is likely, and there is little likelihood of any disruption to the coronation or any major protests during the run-up to the March elections. If the election process appears to be significantly flawed, or the ultimate result appears to be of out of line with expectations, then protests are possible but are unlikely to be substantial.
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With the insurgency in southern Thailand now fifteen years old, the government is hoping that a new Malaysian moderator can revive the peace process that stalled in May 2018. Although there was an increase in attacks against security forces and volunteer defence units during December and January, this may have been to make a statement by the National Revolutionary Front ahead of new talks. In general, the level of violence is gradually decreasing. Claims by members of the Thai government that there may be elements of the Islamic State group operating in southern Thailand remain improbable given the deeply domestic roots of the conflict. There have been no recent attacks outside the region, and no significant incidents since the bomb attack on a temple in Bangkok in 2015.
In January, Brussels lifted its ‘yellow card’ against Thailand’s fishing industry after the government satisfied EU policy requirements to prevent illegal and unregulated fishing. The EU had been threatening to ban all seafood imports. In September 2018, the U.S. Treasury imposed sanctions against a small Thai aviation company for assisting an Iranian airline in organising air travel to Syria. This case demonstrates Thailand’s continuing exposure to the US-led sanctions regimes against Iran and Syria, and indeed North Korea, as well as Washington’s readiness to go after individual Thai companies. In December, the central bank raised interest rates from 1.5% to 1.75%, the first increase since 2011. The baht remained strong against the US dollar in 2018, out-performing all other Asian currencies by losing less than 0.5% of its value.
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Thailand’s public debt ended 2018 at about 43% of GDP, slightly up on the previous year but still well within the 60% legal cap established in 2018. Although government figures suggest it will reach 50% within five years, this will mainly be due to stimulus investment in infrastructure improvements. Thailand’s foreign reserves ended 2018 above 200 billion dollars after a slight dip earlier in the year.
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