Business takes wait-and-see stance on divided Thailand (News Feature)

By Peter Janssen May 21, 2010, 6:04 GMT

Bangkok - Thailand is a divided nation in more than just its politics these days. Take the economy.

Despite two months of bloody street battles between troops and anti-government protestors, culminating Wednesday with the defeated demonstrators running amok and setting alight 35 buildings, the macroeconomic outlook is still OK.

'If the problem is solved in three months, then it will have taken off about half a per cent of GDP. Not a big deal,' said Nipon Poapongsakorn, president of the Thailand Development Research Institute, a think tank.

The economy is still driven by exports, which account for more than 65 per cent of Thailand's GDP, or gross domestic product. Exports rose about 20 per cent in the first quarter, thanks to increased demand in the kingdom's traditional markets of the United States and Europe and fast-growing Asian markets, such as China.

Thailand's leading exports - electronics, electrical appliances and automobiles - are not manufactured in Bangkok but in provincial industrial zones, such as the eastern seaboard.

'A lot of my business friends are saying, 'So what?'' Christopher Bruton, Bangkok director of the consultancy Dataconsult, said of the protests. ''The ports are open, the airports are open, so as long as we can get the goods out and the workers are working, we're happy.''

Of course, tourism, which accounts for 6 to 7 per cent of GDP, is set to take a beating after only beginning to recover this year from the global recession and the 2008 airport closures by a competing group of protestors.

Tourist arrivals at Bangkok's international airport were down 30 per cent in April, and the country would need a marketing miracle to meet its target of 15 million visitors this year.

While exports are still the main growth engine, tourism and services are bigger employers, so unemployment is expected to rise and the income gap between the rich and the poor to widen.

One good thing about this year's protest was it focused the attention of the government on some of Thailand's inherent inequalities, which have gone unaddressed for decades despite a dynamic economy.

Former premier Thaksin Shinawatra, a key player behind the recent protests, used populist policies when he was in power that were designed to win votes from the rural poor, giving them their first sense of political entitlement.

The protest leaders succeeded in raising expectations further in recent weeks with their radical rhetoric about 'class war' and a 'people's revolution,' pitting the 'prai,' or peasants, against the 'ammat,' or bureaucratic elite.

Although the protests might have been stopped, the anger remains, as does the need for social change.

'I think that even the middle class and business leaders have come to see the problem has become a destabilizing factor,' Prime Minister Abhisit Vejjajiva said. 'Everyone is waking up to this and it is a problem that has to be addressed as part of our reconciliation process.'

The prime minister has laid out a road map to address some of the issues raised by the protestors as a means of restoring peace.

Foreign investors have welcomed moves toward a more egalitarian Thai society and see a particular need for investments in the country's educational system.

'Many foreign investors find themselves closer mentally to the people of Issan than to the Chinese elite in Bangkok,' said Stefan Buerkle, director of the German-Thai Chamber of Commerce.

Issan, Thailand's impoverished north-eastern region, is home to most of the labour force that mans the country's factories. It is also the main stronghold of the protestors.

There are fears among both the foreign and local business community that ongoing social inequalities could lead to an even deeper, bloodier conflict than what has been witnessed over the past few weeks.

Wednesday's rampage in Bangkok could be followed by urban terrorism in coming weeks, or something worse.

'If we're talking about civil war, we're not talking about one year, we're talking about 20 years,' Nipon warned. 'We're talking about Colombia in the 1950s.'

Avoiding such a scenario is the task ahead for the government and for the country as a whole.

'Let's wait and see, but are we going back to the Thailand we have always known? I fear not,' Buerkle said.