By George Abonyi

The United States has taken a strong stand against the Thai coup in May 2014. This may be consistent with the U.S. position on military coups, and with popular sentiment sympathetic to shared democratic values in other societies. However, it may represent a missed opportunity for the United States to help shape Thailand’s complex and ongoing political-economic transformation. While the United States has reduced the scope of military cooperation with Thailand, it can still find ways to constructively engage, even if informally, those in Thailand seeking to implement much needed, long-term institutional reforms.

Despite Thailand’s position as the oldest U.S. ally in Southeast Asia, fault lines have emerged in this relationship over the years, relating to Thai politics, shifts in the Thai economy, and Thailand’s societal transformation. As a result, a new generation of Thai leaders across the political spectrum has a more critical view of the general role of the United States in Asia. A deeper understanding of these fault lines and their implications can contribute to a more effective long-term U.S. policy toward Thailand especially in the context of an emerging new Asian order.

Politics

Thais see inconsistency in how the United States interprets democratic governance across societies. They note the vociferous and critical U.S. reaction to the Thai coup and military-led government, as reflected in the January visit of Daniel Russel, assistant secretary of State for East Asian and Pacific Affairs. At the same time, they see the administration of President Barack Obama begin to normalize relations with a not-quite-democratic Cuba, and the president send conciliatory letters to a less-than-democratic Iranian theocracy.

Economy

The Asian financial crisis in 1997 caused a shift in the attitude of Thailand and other Asian countries toward the United States and western-dominated institutions such as the International Monetary Fund (IMF), in which the region has had limited say. The muted U.S. response to the crisis in Thailand just three years after its Mexico bailout, and the IMF-led restructuring programs were perceived as worsening the crisis. The perceived lack of U.S. support for its “oldest Asian ally” during the financial crisis was juxtaposed with Japan’s proposed crisis assistance mechanism of an Asian Monetary Fund, which the United States opposed, and with China’s indirect support to crisis-hit economies by not competitively devaluing the renminbi.

The Asian financial crisis fundamentally transformed Thai politics. The perceived failure of the Democrat government to deal with the crisis by following IMF-led programs allowed the Thai Rak Thai party, under a charismatic Thaksin Shinawatra, to present itself as saving Thailand’s independence and promote populist initiatives such as cheap health care and village funds aimed at a changing rural electorate. The result was a succession of clear election victories by Thaksin-affiliated parties starting from 2001 (interrupted by the 2006 coup that removed Thaksin), until the coup in 2014 that removed from office then prime minister Yingluck Shinawatra, Thaksin’s sister. Current developments are partly the result of perceptions of deep-seated corruption and abuse of power by the Shinawatra family. They also reflect a struggle over control of key institutions, involving not only traditional elites, but also emerging reform-minded actors inside Thailand.

Societal transformation

The present challenges facing Thailand, then, go beyond a struggle between the “red shirts” (rural have-nots) and “yellow shirts” (urban haves). They reflect an Asia where sustained economic growth and modernization have been juxtaposed against traditional societies and political institutions that have been slower to change. As Thailand’s economy modernized, a mostly middle-income rural population emerged, but with lower productivity agriculture continuing to employ a much larger share of the population than in comparable Asian economies.

Thaksin recognized the changed reality, and shaped his policies, such as the development of village funds, around rural aspirations for a more active voice in the politics of economic decision-making. Slowing economic growth in recent years further complicated Thailand’s societal transformation. This was in part because of the global financial crisis, but more fundamentally because manufacturing, long the key driver of Thailand’s growth, has lost its competitive advantage in low-wage tasks. Thailand’s manufacturing sector has had only limited success in upgrading to higher value products and production processes. Thailand is thus faced with development challenges relating in part to a gap between economic modernization and political transformation, exacerbated by a slow growth environment.

Ultimately, Thailand’s continued economic progress and political stability hinge on its success in reforming key societal institutions. Parallel to the complex and contentious issues of constitutional and electoral reform and the timing of new elections are significant efforts underway to prepare for fundamental and wide-ranging institutional reforms. These include modernizing and strengthening a lagging education system, financial sector, and provincial and local governments, with detailed “roadmaps” for reform in preparation.

For example, planned reforms in education are aimed at decentralizing a moribund Ministry of Education, with a particular focus on fixing a broken education system in rural areas that has contributed greatly to lagging productivity and widening income disparities.

In the financial sector, in an effort to ensure proper supervision and corporate governance, control and regulation of eight state-owned financial institutions (SFIs), which account for a quarter of the Thai banking system’s total assets, will be separated. The Bank of Thailand is to become the regulator, while the Ministry of Finance will retain ownership of these SFIs.

Reform committees have also proposed the decentralization of budget allocation as a way to strengthen provincial and local governments, an area of governance where economics and politics often intersect. Provincial authorities may have a greater say in overseeing police affairs.

It is not clear to what extent planned reform efforts will be implemented or be successful. Implanting reforms involves a slow, long-term, and uncertain process in the best of times. However, a more nuanced U.S. policy toward Thailand, one that involves sustained engagement in constructive dialogue, even if informal, could be more useful to help the country navigate a middle path through the uncertain waters of institutional change. Senior representatives of the private sector, who unsuccessfully attempted to mediate prior to the coup and play leading roles in key reform efforts, are particularly important potential partners for such dialogue.

Dr. George Abonyi based in Ottawa, Canada, is visiting professor in the Department of Public Administration and International Affairs, and senior advisor in the Executive Education Program, Maxwell School, Syracuse University. He can be reached at (gabonyi@gmail.com).