THE THAKSINIZATION OF THAILAND -- IMPRESSIONS

C O N F I D E N T I A L SECTION 01 OF 05 BANGKOK 002219

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E.O. 12958: DECL: 03/29/2015
TAGS: PREL PGOV ECON TH US FTA
SUBJECT: THE THAKSINIZATION OF THAILAND -- IMPRESSIONS
AFTER THREE MONTHS

Classified By: Ambassador Ralph L. Boyce. Reason: 1.4 (d)


1. (C) After six and a half years away and three months back,
this seems as good a time as any to review the landscape in
Thaksin Shinawatra,s Thailand. For starters, there is the
towering figure of the Prime Minister himself. Dominating
the scene as no previous civilian leader has ever done,
Thaksin,s influence is everywhere. The Bangkok elite, which
embraced him as the next new thing four years ago, has grown
scornful of him, but he actually revels in thumbing his nose
at the capital's chattering classes. Himself a self-made man
from the provinces (according to his myth makers),he has
successfully tapped into the aspirations of Thailand's
millions. And unlike previous regimes that rode into power
by buying the loyalties of the rural areas, Thaksin has also
won over the millions of Bangkok residents who are not from
the traditional elite ) the mom and pop shopkeepers, the
taxi drivers, the food stall vendors, department store
salespeople and the day laborers. In 2001, for the first
time in history, Bangkok voted along with the north, the
northeast and the central plains. In 2005, this phenomenon
actually grew stronger, as Thaksin,s machine swept 32 of
Bangkok's 35 seats. (The south -- as noted below -- was a
significant and problematic exception.) In the country as a
whole, Thai Rak Thai's (TRT) grip on 377 of Parliament's 500
seats is an unprecedented feat for a single party.

ONE-PARTY RULE?


2. (C) But is this really &one-party rule,8 as the
newspapers love to shriek? A look at the 377 seats shows
that Thaksin is actually atop what amounts to a four- or
five-party coalition, i.e., more in line with recent Thai
political experience. Leaving aside the 67 party list
members who were elected on a national slate, a break out of
the 310 constituency seats reveals the following: 165
previous TRT members, 46 from three defunct parties
(Seritham-12, New Aspiration Party-17, and Chart Pattana-17)
that merged with TRT, 21 defectors from other parties (Chart
Thai-12, Rassadorn-1, and Democrat Party-5),11 pre-2001 MPs
and more than 40 &inheritances,8 i.e., sons and daughters
of MPs from feudal-like constituencies. In putting together
his cabinet this time around, Thaksin had to juggle and
placate the various factions just as Prem Tinsulanonda or
Chatchai Choonhavan used to have to do repeatedly with their
unwieldy coalitions.


3. (C) That said, Thaksin has significantly altered the Thai
political scene, possibly forever (or at least as long as he
is around). In the 2001 and 2005 elections, he and his party
campaigned on issues and promises (affordable health care,
village loans),and then essentially delivered the goods.
Today Thailand basically has a two-party system, with Thaksin
having run the most recent campaign as a referendum on him, a
referendum that he most definitely won. The opposition is in
disarray, with the Democrats having been reduced to a weak,
regional party and the rest of the rabble having almost
disappeared (or been absorbed by Thaksin's juggernaut).
Thaksin accomplished this by mastering the reforms of the
liberal 1997 constitution, which altered the electoral
mechanics from three-member constituencies to the party
list/single member format. In power, he took full advantage
of the new charter's creation of a strong executive, while
distorting, dismantling or delaying the new "watchdog"
institutions that were supposed to check and balance that new
executive power.

"CEO" MANAGEMENT AND THE CABINET


4. (C) Now Thaksin has a second term and a new cabinet with
29 of the 35 ministers reshuffled from the previous slate.
This is probably a good place to note that Thaksin,s vaunted
&CEO style of management8 differs markedly from the model
which would have the company listed on the stock exchange,
shares traded on the market, stockholders to placate and a
board of directors to be responsive to. No, Thaksin,s style
is much more like the family-owned private company where the
CEO speaks and the lieutenants carry out his will ) much
like, say, Shinawatra Corporation used to be while Thaksin
was making his billions, or dozens of other Thai
conglomerates.


5. (C) And now he runs his cabinet just like that. Among the
35 ministers are Thanong Bidaya, Thaksin,s former banker
(and widely rumored to have tipped Thaksin off about the
coming baht devaluation when Thanong was Finance Minister in
1997),four former aides, six business friends, one police
classmate, one family doctor and only eight MPs. Thaksin
today has ably positioned himself to be the only star in the
political constellation and could thus well be around for the
next eight years or more.


6. (C) That is, unless he stumbles. Analysts have been
predicting another debt-driven economic crisis since the day
he put his rural lending scheme into effect and everyone
upcountry suddenly had a cell phone and a pickup truck. Or
the south could erupt (see below). Or, simply, the Thai
people could exercise their penchant to tire of the same old
thing and go for the next new thing. For the moment,
however, there is no other thing than the Thaksin thing.

TENSIONS WITH THE PALACE


7. (C) Except maybe the King. In the age of Thaksin, the
King has on several occasions made public his differences
with Thaksin,s style and more importantly, his philosophy.
As respected former Prime Minister Anand Panyarachun puts it,
Thaksinomics teaches that it is OK to be greedy and that
money fixes everything. The King's idea is somewhat
different and has been neatly summarized in a short pamphlet
called, "What is Sufficiency, Economy?8 This pamphlet
draws on royal utterances over the past 25 years and
essentially calls for a rural-based model of sustainable
development. Of late, the pamphlet is being flogged by Privy
Councillors, the head of the Crown Property Bureau, and
noteworthy columnists as the antidote to Thaksinomics.


8. (C) In addition, Bangkok observers have been aghast at
what they perceive as Thaksin,s unwillingness to be
appropriately obeisant to His Majesty. In the recent
campaign, they claim, he swanned about upcountry as though he
were the sovereign of the country. He is visibly impatient
with the many royal ceremonies he has to sit through where he
is not the center of attention. In this year's Mahidol
Awards, he fussed and fretted in his seat while the King
spoke softly to the American and German doctors who were
being honored.


9. (C) But the King will not be around forever, and Thaksin
long ago invested in Crown Prince futures. Nevertheless, the
debate over Thailand's direction has been joined, with the
outcome still in question.

CORRUPTION


10. (C) Thaksin is very rich. According to Forbes, after
distributing some of his assets to his children, the PM is
the third richest man in Thailand (after Charoen
Sirivadhanabhakdi, Chairman, TCC Group, who owns Chang beer
and has extensive real estate and hotel holdings, and Chalieo
Yuwittaya, who produces and sells the "Red Bull" energy
drink). Does Thaksin really need to make more money? Or do
people just unfairly and lazily ascribe every thing he does
to an ulterior profit-making motive? Every indicator seems
to suggest the adage that power corrupts and absolute power
corrupts absolutely. Thaksin, his family and his business
and political allies have made immense profits in the past
four years and seem on track to continue doing so. Is it
something in the entrepreneur's gene pool that cannot switch
off the quest for more, better, greater, now, now, now?
There are nuances to understand, but in all aspects of public
life (Burma policy and the current follow-on jet fighter
acquisition deal come to mind),a good case can be made that
business or political considerations are uber alles.


11. (C) Recall that Thaksin was driven out of the Foreign
Ministerial portfolio in 1994 because he refused to make
public his assets. Recall that he entered his Prime Ministry
in 2001 under a cloud when he finally grudgingly gave up
control of his wealth -) and even then only to his wife,
children and, in one memorable instance, his servants. In
any event, if corruption has indeed reached historic
proportions, as many claim, the people seem willing to
tolerate it as long as the rising tide lifts all boats.

FREE TRADE AGREEMENT PROSPECTS


12. (C) If business considerations are indeed primus inter
pares, shouldn't that bode well for our FTA negotiations?
The answer is a guarded yes -- Thaksin has made it clear this
is his initiative and that he understands a U.S. FTA will
have to be comprehensive. This will be our single most
important weapon, to be deployed when the bureaucrats and
single-issue players create stumbling blocks. But that
assumes we will be able to get his attention. As long as his
laser beam is focused on an issue, he dominates that issue.
But the minute the beam moves on to another area, the carpet
mice run back out. And in the Free Trade area in general,
the current feeling in many pivotal sectors like financial
services, indeed, in the country as a whole, is that FTAs are
not in Thailand's interest.


13. (C) When Thaksin is not engaged in the process -) and
that will be most of the time -) his two most senior
economic aides and loyalists, Pansak Vinyaratn and Somkid
Jatusipitak, will call the shots. Pansak seems to understand
his boss's desires, and while he can always be counted on to
come up with nutty, flaky ideas, he essentially will be an
ally in the negotiations. Somkid is another matter. He
talks a good game, and parrots Thaksin,s free trade
rhetoric, but we have our doubts about his true commitment to
the cause. We need to mount an aggressive public relations
campaign to the effect that &both sides give8 so &both
sides get8 in a successful FTA. We can also point out the
high opportunity costs entailed in passing up the FTA. This
will be an uphill battle, in the aftermath of Chinese and
Australian FTAs widely perceived to have been in Thailand's
disfavor.

A NEW FOREIGN POLICY PARADIGM


14. (C) Thai traditional foreign policy style has been
understated, subtle, even graceful, and widely lauded within
ASEAN as among the most professional. Together with
Malaysia, Singapore and Indonesia, Thailand has helped define
the &ASEAN way8 over the years. Eschewing conflict, always
seeking that elusive &consensus,8 keeping problems behind
closed doors -- this was the formula within ASEAN for
decades. But notably, under Thaksin, Thai foreign policy
style has been most un-ASEAN, and even un-Thai. Today, with
Thaksin often in the lead, Thailand is much more
unilateralist and often prone to practice megaphone diplomacy
in place of quiet persuasion.


15. (C) The recent tsunami conference in Phuket was a
perfect example. Even as conferences were being organized in
Japan, Indonesia and elsewhere, Thaksin,s then-Foreign
Minister Surakiart suddenly announced that Thailand would
host a conference with a view towards establishing an early
warning system for the Indian Ocean region as a while.
(Admittedly, much of this had to do with Surakiart's
bombastic style, and his own naked ambitions.) The Thai made
little secret of the fact that they expected the center to be
established in Thailand. Surakiart browbeat key countries
unceasingly to send ministerial-level attendees. In the U.S.
case, he was nothing short of delusional, seriously proposing
that Secretary Rice attend as her first official act after
being confirmed. (He even promised to &personally8 escort
her to the devastated Khao Lak area.)


16. (C) In the event, the conference was largely attended by
technical ministers or resident Ambassadors, and the Thai
dream of achieving consensus on establishing the center here
fell apart when the hosts forgot the cardinal tenet of ASEAN
diplomacy ) always pre-cook the deal in the hallways.
Instead, they crudely tried to ram their preferred outcome
down the throats of the 40-odd attendees. When several
significant countries objected )- including India,
Australia, and most notably fellow ASEAN member Indonesia -)
the conference ended with Surakiart suggesting that those
countries not happy with the Thai proposal should take a
hike. It was not a pretty sight.


17. (C) The tsunami conference was a recent example, but in
general Thailand's relations with Malaysia and Indonesia over
the south have taken on a shrillness not frequently seen
among these founding members of ASEAN. In Burma policy, the
Thai effort to come up with a &Bangkok Process8 to give
them cover to pursue largely their own narrow interests in
Burma has collapsed. It is telling that the lead efforts in
recent weeks on the problem of Burma rotating into the 2006
ASEAN Chair have come from Singapore, Malaysia and Indonesia
rather than from the Thai.


18. (C) And then there is China. Some are concerned about
Chinese inroads into Thailand and indeed the region as a
whole. The Thaksin government seems to be embracing the
Chinese wholeheartedly. Thailand is being portrayed as the
gateway to China. Is this a concern for the U.S.? With the
benefit of three months, reflection, it seems to be less of
a zero-sum game than might appear. The Chinese are
indisputably very active. Yes, they have better tailors and
speak better English. Yes, they are very close with the
largely Sino-Thai crowd that dominates the Thaksin
government. But is every Chinese gain necessarily at our
expense? It seems to be more a return to traditional
patterns in the region over hundreds if not thousands of
years. This is China's neighborhood, and while they were out
of the picture for fifty years after the end of World War II
(precisely the period when U.S. presence was paramount),they
are back, and they are bringing the A team. For reasons of
geography, we cannot realistically match the Chinese
visit-for-visit. But we are capable of directing more
high-level attention to the region, and we should.

THE SOUTH - A YEAR OF MISSTEPS


19. (C) The past twelve months have brought a series of
increasingly serious developments in the three southernmost
Muslim-majority provinces. In January 2004 the armory was
raided. In April the Krue Se mosque incident raised the
level of violence and government response to new proportions.
Increasingly violent protest was met with more and more
force. Last October, the horrific Tak Bai event saw 78
prisoners suffocate while in police custody, after which the
Prime Minister most unhelpfully suggested that the prisoners
had died because they were &weak from fasting8 in the holy
month of Ramadan! The February election was a debacle for
TRT in the three provinces, as the party lost all but one
seat. Still the hard-line approach continued, with Thaksin
unveiling his plan to withhold all government funds for
districts judged to be problematic. Indeed, Thaksin and many
of his hard-line supporters around the country view the
election outcome in the South as vindication of the
government's policies.


20. (C) Fortunately, of late there are signs the PM may be
willing to consider a new approach. His appointment of the
Anand commission would seem to be a no-lose proposition -)
provided he is really willing to consider whatever
recommendations the panel ultimately makes -- and, more
importantly, conveys that impression to skeptics in the
south. Some cynics have suggested the Anand appointment is
simply a cynical sop to mollify the Bangkok elite Thaksin so
despises. If it is (and we don't think it is),Thaksin will
have made a mistake, because Anand will not let himself be
used by anyone and he won't be shy to speak his mind.


21. (C) The south is not a new problem. Some point to
Thaksin,s 2001 disbanding of a joint
military-police-civilian task force (at the urging of his
fellow policemen) as the root of the problem, but in fact its
origins go back a hundred years, to the very incorporation of
these ethnically and religiously different areas into the
Siamese Kingdom. The Thai have yet to make a concerted
effort to understand the culture and values of the Muslim
south, a fact which has only compounded Muslim sensitivities
in general since the onset of the global war on terror. It
is high time that this neglectful, superior attitude changed.


THAILAND STANDS UP


22. (C) There are plenty of areas where Thaksin deserves
credit. The tsunami disaster was generally well handled,
turning a national calamity into an opportunity to
demonstrate that Thailand can take care of itself. Moreover,
the fact that the relief effort was centered out of Thailand
was greeted in the region without dissent. The image was of
an emerging leader helping weaker states in the neighborhood
like Indonesia and Sri Lanka.


23. (C) And however Thailand's quixotic campaign to put
now-former Foreign Minister Surakiart in the UN Secretary
General's job ends up, if nothing else it is further
demonstration the Thailand desires to play more of a global
role. Bangkok is a much more livable city today than it was
twenty years ago, traffic is manageable, the air is cleaner,
the airport is first-class, the Thai smile is still charming
and as a result the country is legitimately challenging
Singapore and Hong Kong as a regional business hub. That is
a good thing, it started before Thaksin rose to power, and it
is a trend we should encourage.

THE BILATERAL RELATIONSHIP


24. (C) In Indonesia, everything we do charts new territory
and defines our relationship with a country that is literally
reinventing itself from soup to nuts. In Thailand, we have a
mature, deep-seated, historic friendship with a stable,
sophisticated partner. The scars of the 1997 financial
crisis (when the U.S. was widely perceived as having failed
Thailand in its hour of need) linger, but not with Thaksin.
He very much sees the past as past, and is focused much more
on the here and now, and prospects for the future. He
studied in the U.S., and likes our business model. All of
this is very good for us.


25. (C) The U.S. response to the tsunami was a huge public
relations plus for us, but we do have to confront a general
sense of unhappiness with elements of U.S. policy that have
nothing to do with Thailand -) the war in Iraq is not
popular here, despite the Thai having sent forces.


26. (C) In general, though, we continue to enjoy huge
advantages in Thailand that few other countries can rival.
The fact that the Embassy is among our largest in the world,
and growing, is testament to this. The real challenge for
us, and increasingly for the Thai, is to resist relying too
much on the mantra of the "historic relationship." Instead,
we need to bring this important partnership into the 21st
Century, and channel our long-standing influence in positive
directions, including the further consolidation of democratic
institutions in Thailand. Despite the unprecedented
concentration of political power recently under Thaksin,
civil society continues to develop in a healthy, Thai way.
Thaksin's style is to push the envelope, but democracy in
Thailand is more resilient than his critics, Thai and
foreign, are willing to acknowledge. Here in Thailand, we
can have our cake and eat it too -- by mixing classic
"realpolitik" (which Thaksin understands and responds well
to) with principled interventions when the need arises.
BOYCE