As the coalition government of Thai Prime Minister Srettha Thavisin gets going, it faces multiple daunting challenges, from public expectations and policy deliverables to the maintenance of political stability.
While no post-election honeymoon period appears in the offing, government action is being demanded to shore up the economy and boost public welfare. Addressing these challenges will require patience, grit and new thinking. This is not the best government outcome after the election, but the alternatives could be worse.
Public expectations are high because the best coalition government would have put the poll-winning Move Forward Party (MFP) with Srettha’s Pheu Thai in charge of the country, but the constitutional set-up after the 2014 military coup prevented it.
Instead, the MFP was isolated and forced to lead the opposition, while Pheu Thai was enticed to form a coalition with pro-military parties and their allies, led by Palang Pracharath (PPRP), United Thai Nation (UTN) and Bhumjaithai.
As a result, more than one-third of the 39.5 million voters who chose the MFP and its reform agenda became disappointed and resentful after seeing their party being systematically denied a role in the government. As these voters opted for the MFP’s anti-coup and anti-military platform, they are now forced to put up with yet another government dominated by pro-military parties.
Srettha’s civilian-led government bears the brunt of this resentment. In addition, the previous government under Prime Minister Prayut Chan-o-cha’s dismal performance made members of the public crave change and better prospects.
The two-sided reality for Srettha is that Prayut’s bar for managing the country was so low that there is a lot of upside potential. At the same time, because the bar is so slow, people want it swiftly raised by a lot. Managing expectations will thus be critical for the prime minister to perform sufficiently to satisfy the public.
Because the new Srettha government has similar cabinet faces as the previous lot, many in the public are sceptical about how much it can get done and whether or not it will be beset with mismanagement, cronyism and graft allegations like before.
This scepticism is compounded by the division of portfolio spoils among the governing parties, with Pheu Thai conceding key ministerships, including interior, energy, education, industry, labor and agriculture, to coalition partners. The policymaking setting is split along party lines, lacking an integrated approach.
Pheu Thai also does not have as much leverage as it did in the past when it ran coalition governments because this time, it came in second to the MFP with 141 out of 500 elected representatives. The combined number of MPs among the three like-minded coalition partners—Bhumjaithai, PPRP and UTN—is greater than Pheu Thai’s.
Policy deliverables are, therefore, crucial. The Srettha government’s policy directions are two-pronged. On the one hand, a raft of tried and tested populist measures featuring subsidies and handouts are to be deployed.
These include reductions in electricity and petrol prices, a guaranteed daily minimum wage of 600 baht and a monthly salary of 25,000 baht in a progressive structure over four years. The signature handout will be a 10,000-baht digital wallet for all Thais above the age of 16 to spend in their localities.
This policy plank will incur substantial public debt, which already breaches the traditional threshold of 60 percent of gross domestic product under Prayut’s leadership. This figure could rise to 70 percent, which would then put pressure on debt servicing and, ultimately, the national budget.
With mounting interest payments on public debt in view of routine state expenditures on sustaining the bureaucracy, there will be less and less room for public investment to stimulate growth.
Growing the economy this way can be profligate, irresponsible and unsustainable because it takes money from future generations for spending today.
This populist push is premised on multipliers that are supposed to boost consumption.
But with household debt approaching 100 percent of GDP and the structure of the Thai economy increasingly concentrated in an oligarchy of big businesses, it is doubtful whether this approach will work as planned.
People might choose to pay down debt as much as they can while the oligarchs gain the lion’s share of populism-driven state largesse.
If these spending plans could be considered as the debit side, then the credit column would have to more than make up for the debt. On this point, the government’s inchoate and tentative “soft power” strategy offers upside potential.
This strategy sounds more like industrial policy than soft power because it calls for an integrated approach across cabinet ministries to convert hidden assets and talents and harness them into pro-growth strategies.
If this growth strategy can be more comprehensive and coherent, it can lead to policy innovations, upskilling and Thailand’s upsloping global value chains.
Trade policy is another component of the credit column. Until recently, Thailand’s trade policy, strategy and capacity have been dormant. The last major free-trade agreement was the Japan-Thailand Economic Partnership Agreement in 2007.
Trade liberalization and free-trade agreements were politicized and used to attack governments led by Pheu Thai’s predecessors, the Thai Rak Thai and Palang Prachachon (People’s Power) parties.
Now that Thaksin Shinawatra, the Thai Rak Thai founder with influence over Pheu Thai, has made peace with his opponents, trade policy can be depoliticized in a tough new world full of geopolitical and geoeconomic tension.
Thailand needs to complete trade agreements with the European Free Trade Association and the European Union and apply to join the Comprehensive and Progressive Trans-Pacific Partnership.
Its role in the Regional Comprehensive Economic Partnership should be more salient, and its participation in the Indo-Pacific Economic Framework can be more proactive.
So much was lost on trade policy from the two military coups in the past two decades, particularly during Prayut’s nine years as prime minister.
Making progress on these policy fronts will require Srettha and the Pheu Thai Party to navigate the rough and tumble of Thai politics and maintain political stability while moving forward on reforms and drafting a new constitution. This is what both Pheu Thai and Move Forward Party voters wanted when they went to the polls.
Thitinan Pongsudhirak, PhD, is professor in the Faculty of Political Science at Chulalongkorn University and a senior fellow at its Institute of Security and International Studies.
