Special Briefing
The Impact of Thailand’s May 2014
Military Coup
Overview
In May 2014, Royal Thai Army Commander-in-Chief
Prayuth Chan-ocha declared martial law. Two days later,
he triggered a military coup by ordering the arrests
of political leaders after the failure of a crisis meeting
he had chaired between leaders of the government
and opposition parties (and their respective popular
movements). Arrests, media censorship and a night
curfew continue.
This is Thailand’s first military coup since September
2006. It is rapidly evolving into a more ambitious
crackdown than in 2006, on all forms of activity in
support of the elected Pheu Thai Party government and
the 2007 Constitution. The army has the support of the
metropolitan elite and establishment political parties, and
has been able to declare royal assent from King Bhumibol
Adulyadej (born in 1927).
We expect the army to maintain a hold on power, without
swift resolution via elections or a new permanent
constitution, for an indefinite period. This could include a
period extending after Bhumibol’s reign ends, as the royal
succession remains highly politicised. We expect the coup
to be broadly successful on the army’s terms but with
impacts on Thai society, politics and the economy (with
2014 growth of 1%).
Investment and household spending have been
contracting violently since Q3-Q4 2013, with trade also
starting to be affected by the political impasse from
Q1 2014. At best, the coup could stabilise output and
facilitate army-approved investment from Q3 2014. At
worst, it will depress private consumption, tourism and
foreign investment as it stirs new forms of anti-coup
resistance, and counter-repression.
Commercial Implications
n The 2006 coup led to a recession in construction
and public spending in the Pheu Thai-voting north
and northeast, with less of an impact on Bangkok.
We expect this regional pattern to repeat in 2014
n The 2006 coup had a nationwide negative impact on
‘community, social and personal service’ activities to
end-2007. This includes activities to do with recreation
and media content; this pattern will repeat even if
tourism is stable
n The more comprehensive military control is, the less
dissent will be able to disrupt the economy, but the more
such restraints will have an impact. Much depends on the
uncertain modalities and intensity of anti-coup activity
Recommendations
n DO NOT disseminate this Special Briefing to associates
based in or due to travel to Thailand; it covers the royal
succession, punishable under Thai law
n Expect the core industrial base to suffer little disruption
to supply chains over the short term, as long as the
former government’s mass support base is too shocked
or cowed to respond with popular mobilisation against
the army coup
n Expect the security situation in the islands and resorts
to remain benign; with a limited impact on tourism,
so long as the successful military control of media
and public space does not necessitate repeat bouts of
violent repression
n Expect discretionary spending to remain depressed
(despite flexible policing of the curfew in urban areas
with high concentrations of spending) as censorship
restrains sales and advertising, and as consumer
sentiment dims
Outline Scenarios
Scenario A: The effective planning, precision timing and
evident royal assent for the coup demoralises supporters
of the Pheu Thai Party and its leaders. Its electoral base is
fragmented and exhausted by army arrests of organisers.
Generational change occurs as the formerly aspirational,
poor northeast concentrates on survival under army rule.
Nuanced control of the media and of army rule win the
confidence of tourists. Thailand’s currency and its economy
and investment are stabilised, if at the cost of democracy.
Sectors sensitive to consumer sentiment reshape strategy
and begin to grow. Capital flight fails to materialise and the
stock exchange starts to strengthen over 2015.
Scenario B: The army’s detention of journalists, academics,
‘red shirt’ organisers and elected officials in penal centres
outside of the judicial system snowballs as the army
panics and spreads the sweep of arrests wider and
deeper into the pro-Thaksin support base. Corporate
and national travel advisories continue to deter visits
to Thailand. The US and EU feel impelled to criticise the
military government, and the hint of sanctions has a
chilling effect on the baht, FDI and portfolio flows. Political
differences among mid-level army officers emerge,
hampering the army’s response to a gathering, radicalised
anti-coup movement employing sabotage, direct action
and pinpointed (but violent) reprisals against perceived
collaborators; GDP falters into 2015.
We expect Scenario A to predominate over Scenario B, in a
ratio ranging from 70:30 respectively, to 50:50.
Background and Context
The Thai armed forces intervened in Thailand’s politics
ten times in the 20th century, and have done so twice
in the 21st (2006 and now 2014). Of these episodes,
only the 2006 and (distantly) the 1991 coups offer any
meaningful lessons. In the late 1970s, until the second
oil shock, Thailand’s GDP was growing extremely
strongly and, despite army-linked civil rights violations,
was not disrupted from its high-growth export and
industrialisation path. By contrast, Thailand’s economy in
2014 stands at a different juncture, with a mid-income
trap, sub-USD6,000 GDP per capita which its institutions
seem unable to improve on much; this in a far more
rigorously complex and mixed international economic
environment.
The country’s conflict is commonly characterised as
between the Bangkok elite, establishment Democrat
Party and royalist army echelons, on one side, and the
poor north-eastern, farmer-denominated electorate, and
the crypto-republican ambition of exiled billionaire and
political entrepreneur Thaksin Shinawatra, on the other.
In fact, the polarising political competition of Thai society
is more complex, pitting rival elites based on old and
new money against each other, and mobilising income
segments from high to low against each other on the
streets as constitutional politics deadlock.
The coup was triggered by the Pheu Thai Party cabinet’s
refusal to resign, following the judicial annulment of
the February elections (which returned it to power
despite widespread disruption by the ‘yellow shirt’
anti-government movement), and the constitutional
court’s removal of Prime Minister Yingluck Shinawatra.
This followed months of civil society-led agitation and
disruption of state offices and public spaces by the
‘yellow-shirt’ mass campaign against corruption and
money politics.
The army’s veneer of being ‘above politics’ and without
partisan bias is superficial, but was a valuable cloak to
gain legitimate cover for its actions before royal assent
could be demonstrated. The risk of two-way mobilisation
of pro-Pheu Thai/Thaksin ‘red shirt’ and ‘yellow shirt’
mass movements nationally while the government lay
entombed in a legal limbo (with executive and judiciary
at odds) gave a powerful incentive for the army to take
control, providing relief to businesses fearing interruption
to supply chains (as the ‘yellow shirt’ movement’s
occupation of Bangkok’s main airport threatened to cause
in 2008) and a further sinking of confidence.
The concern for Thailand’s human rights reputation and
its foreign partners is that there is a prolonged reprise 3
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of the May 2010 repression against the United Front of
Democracy Against Dictatorship ‘red shirt’ movement, which
saw 90 people killed and a 25% year-on-year fall in tourist
numbers. Since the May 2014 coup the military government
of Thailand has appointed four generals to super-portfolios
for security, economic, social and psychological, and legal
and judicial affairs, indicating a complete ‘game-plan’. D&B
believes that the army will do whatever is necessary to
maintain its control and the appearance of consent from the
broader public and business.
This will include prolonged media censorship and arbitrary
control of the internet and social media, reshaping the
media environment in Thailand over at least the medium
term. The armed forces will prefer to interfere in the internet
and media sector rather than allow co-ordinated platforms
of dissent to create risks of confrontations in the streets
between security forces and the public (where rank-and-file
soldiers may feel that they are confronting members of the
public with similar backgrounds to their own).
It is commonly held that the army’s coup is intended to
overcome the political impasse which has seen ‘red shirt’-
backed, democratically elected governme