Yingluck Court Ruling Deepens Political Divide

BMI View: The decision by the Thai constitutional court to oust Yingluck Shinawatra on charges of abuse of power resulting from her appointment of her national security chief risks fanning the flames of the ongoing political crisis. We reiterate our view that large-scale violence is looking increasingly likely as the level of rancour between the two opposing forces in Thai politics continues to grow.

While the constitutional court's unanimous decision to oust Prime Minister Yingluck Shinawatra may have been a legitimate attempt by the court to uphold the constitution, it is still likely to solidify the feeling of distrust on behalf of the Red Shirts (followers of Yingluck and her exiled brother Thaksin) that the establishment is heavily biased against them. Indeed, the former national security chief who lost his post, Thawil Pliensri, was appointed by a previous government that was deeply hostile to Yingluck's party. Still, charges of nepotism appear somewhat harsh given that the person she replaced him with, Paradorn Pattanatabut, was not himself a relation, but his promotion allowed a distant relative to receive a promotion. The Red shirts firmly believe that this is yet another coup to bring about the end of a democratically elected government, and this lack of faith in government institutions risks breeding violence.

The ruling will also do little to support the cause of pro-establishment forces, including the anti-government street protestors known as the People's Democratic Reform Committee (PDRC), led by former opposition MP Suthep Thaugsuban, as well as the largest opposition party, the Democrats. Indeed, while Yingluck has been forced to step down, as have a large number of her cabinet members, the party has not been disbanded. Commerce Minister Niwattumrong Boonsongpaisan has taken over the premiership, and has stressed that elections scheduled for July 20th will still go ahead. The PDRC appears no closer to implementing its plan of putting in place an unelected People's Council, made up of 'good people' chosen by the elite institutions.

BMI View: The decision by the Thai constitutional court to oust Yingluck Shinawatra on charges of abuse of power resulting from her appointment of her national security chief risks fanning the flames of the ongoing political crisis. We reiterate our view that large-scale violence is looking increasingly likely as the level of rancour between the two opposing forces in Thai politics continues to grow.

While the constitutional court's unanimous decision to oust Prime Minister Yingluck Shinawatra may have been a legitimate attempt by the court to uphold the constitution, it is still likely to solidify the feeling of distrust on behalf of the Red Shirts (followers of Yingluck and her exiled brother Thaksin) that the establishment is heavily biased against them. Indeed, the former national security chief who lost his post, Thawil Pliensri, was appointed by a previous government that was deeply hostile to Yingluck's party. Still, charges of nepotism appear somewhat harsh given that the person she replaced him with, Paradorn Pattanatabut, was not himself a relation, but his promotion allowed a distant relative to receive a promotion. The Red shirts firmly believe that this is yet another coup to bring about the end of a democratically elected government, and this lack of faith in government institutions risks breeding violence.

The ruling will also do little to support the cause of pro-establishment forces, including the anti-government street protestors known as the People's Democratic Reform Committee (PDRC), led by former opposition MP Suthep Thaugsuban, as well as the largest opposition party, the Democrats. Indeed, while Yingluck has been forced to step down, as have a large number of her cabinet members, the party has not been disbanded. Commerce Minister Niwattumrong Boonsongpaisan has taken over the premiership, and has stressed that elections scheduled for July 20th will still go ahead. The PDRC appears no closer to implementing its plan of putting in place an unelected People's Council, made up of 'good people' chosen by the elite institutions.

Fresh Elections Will Solve Nothing

If recent history is anything to go by, any elections held are likely to go the way of the Red Shirts, and knowing this, the opposition is likely to stage another boycott. This would bring the political deadlock back to square one, but with the intervening bloodshed on both sides widening the gap between the two parties and making a compromise even less likely.

Economy To Suffer Further As Uncertainty Lingers

In the meantime, the caretaker status of the government will remain in place, and this will continue to hamper the functioning of the government, undermining investment plans. Much-needed large-scale infrastructure projects have been shelved owing government's inability to sanction them in its current capacity. Meanwhile, anecdotal evidence suggests that foreign direct investment flows are drying up as investors wait on the sidelines for some stability on the political front. If violence flares up in Bangkok over the coming months, which we believe is more likely than not, the tourism industry will surely be dealt another blow. While we do not expect the economy to suffer a recession this year (we are forecasting 2.0% real GDP growth), increased economic hardship is likely to ensue, particularly in the rural areas due to the hangover effects of the rice price subsidy scheme. This, in turn, could increase political tensions further.

Compromise Looks A Long Way Off

The PDRC is calling for reforms to the political and electoral system in order to strengthen democracy, although details of such reforms are thin on the ground. Their allegiance to democracy is also unclear, given their calls to hand pick unelected officials, and it is notable that this would be advantageous to them, given the Democrats' track record of electoral defeat. If the two opposing sides can reach some sort of agreement on how the July 20 elections will be conducted, then there is potential for both sides to work together to find a compromise on how the country should be run. However, given the bad blood between the two sides, this will not be an easy task and it may take a further rise in violence and economic weakness before respective leaders can begin to work together. ?

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