Political Risk Analysis - Yingluck Verdict The Next Test For Political Stability - SEPT 2017

BMI View: F ormer Prime Minister Yingluck Shinawatra ' s criminal negligence case, relati ng to her role in the costly ric e subsidy scheme in 2014, will draw to a close on July 21. A guilty verdict could lead to increased protest activity among her supporters, posing the latest challenge to political stability. That said, the military establishment ' s tight grip on power is likely to ensure policy continuity, and Thailand ' s short-term political risk score remains above the regional average for this reason.

The Thai military government, along with the monarchy, have managed to maintain a high degree of stability over recent years following the 2014 coup despite a number of political events such as sweeping changes to the country's constitution and a royal transition. The combination of shrewd politicking and increased use of defamation laws has been successful in quelling opposition resistance. Prime Minister Prayut Chan-o-cha has continued to promise a return to civilian rule and offered financial support to rural provinces, while at the same time he has stepped up restrictions on public assembly and overseen a surge in criminal defamation charges, mostly relating to violations of the country's lese-majeste law, which criminalises all perceived insults to the monarchy.

The latest test for the establishment comes from the potential reaction of Thailand's rural population to the upcoming verdict of former Prime Minister Yingluck Shinawatra's criminal negligence case. The sister of exiled populist leader Thaksin Shinawatra, Yingluck is accused of her role in the government's costly rice subsidy scheme in 2014 and could face a 10-year prison sentence, a political ban, and will have to pay a fine if the court delivers a guilty verdict on July 21, when the final hearing is expected.

Guilty Verdict Could Trigger Redshirt Backlash...

Yingluck's rural supporters (often referred to as Redshirts) vehemently claim that her arrest is politically motivated, and the verdict is highly likely to go against her. If found guilty, Yingluck has stated that she would stay in Thailand and accept justice, in contrast to her brother who fled under similar circumstances and continues to live in exile. There is potential therefore for her imprisonment to catalyse a backlash among her hardened supporters as she would be seen as a populist martyr among many Thais.

...And Potentially Unite Opposition Factions ...

It could also potentially galvanise opposition to the military among both her Pheu Thai Party and the Democrats, which are both against military rule and want a swift return to democracy. As we outlined recently (see 'Labour Crackdown A Risk Given Deteriorating Demographics', July 6), prospects of a return to democracy in 2018 appear to be dimming as the procedures required before an election can be held have yet to be completed. The Constitution Drafting Committee (CDC) must first draft and submit four 'organic laws' that will act as a template for the new electoral system. Only after these have been ratified by the National Legislative Assembly (Thailand's sole parliamentary body) and signed off by King Vajiralongkorn can the five-month election window open. The longer the military holds off elections, the greater the risk that traditional political parties become more vocal and united in their opposition.

Policy Continuity Supports Overall Index
Thailand - Short-Term Political Risk Index

...But Short-Term Risk Index Score Remains Solid

That said, Thailand still scores relatively well in our short-term political risk indices, with a score of 70.8 out of 100 compared to a regional average of 69.0, and the score remains higher than it was three years ago when the coup occurred. We expect the military government to maintain a strong grip on power and from a business environment perspective, policy continuity is likely to remain high, which largely explains Thailand's solid ranking in our political risk indices.