THAILAND: SCENESETTER FOR VISIT OF DEPUTY

C O N F I D E N T I A L SECTION 01 OF 05 BANGKOK 002838

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DEPARTMENT FOR DEPUTY SECRETARY ZOELLICK, EAP, EAP/BCLTV

E.O. 12958: DECL: 04/22/2015
TAGS: ETRD PGOV PREL PTER TH OVIP ZOELLICK ROBERT
SUBJECT: THAILAND: SCENESETTER FOR VISIT OF DEPUTY
SECRETARY ZOELLICK


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


1. (C) Mr. Deputy Secretary, on behalf of the entire
Embassy community, I welcome you to Bangkok. You are
visiting at an opportune point in our negotiations with the
Thai on a Free Trade Agreement (FTA). With Prime Minister
Thaksin Shinawatra no longer distracted by elections and
firmly back in power for four more years, your meeting with
him offers the best opportunity to move forward on an
agreement that will benefit both countries, and could stand
as one of his finest legacies to Thailand. Thailand and the
U.S. have deep historical ties of friendship and currently
cooperate in the War on Terrorism and generally in ensuring
international stability. Thailand has in recent years
provided access that allowed the U.S. to prosecute the war in
Afghanistan, sent non-combat troops there and to Iraq, and
helped us capture the Jemaah Islamiyah (JI) leader Hambali.
The Thai share many of our views on free markets, the free
movement of goods and people, and democratic principles. You
will encounter a Thai leadership that is confident, enjoying
an expanding economy, a relatively stable emerging democracy
and a growing political profile in the region. After an
overview of bilateral relations (paras 2-5),and an overview
of the domestic political and economic landscape (paras
6-10),our views on key issues you should raise begin at para

11.

THE BILATERAL RELATIONSHIP: COOPERATION ON TERRORISM, TRADE,
TSUNAMI

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2. (SBU) Bilateral relations with Thailand are generally
quite good. Thailand is a security treaty ally and has been
supportive of the Global War on Terror. The capture of the
JI leader Hambali in Thailand in 2003 highlighted the
willingness of the Thaksin government to cooperate fruitfully
against international terrorism. We are Thailand's largest
export market. American businesses have over $20 billion in
direct investment in Thailand, and we are the second largest
investor after Japan. Recent decisions to remove Thailand
from the President's list of major narcotics transit or
producing countries and to impose less stringent tariffs on
Thai shrimp exports to the United States than we impose on
Thailand's competitors were favorably received. Our quick,
massive, and unprecedented response to the tsunami disaster
last December reminded the Thai that the United States has
unique capacities to address crises and pursue humanitarian
goals. The U.S. military response to the tsunami validated
decades of close U.S.-Thai security cooperation and our
extensive bilateral exercise program. Your visit here will
help reassure Thai officials and the Thai public that the
United States is politically committed to remain engaged in
Southeast Asia and determined to work closely with Thailand
and other ASEAN and APEC members.

MILITARY COOPERATION


3. (C) The U.S. military conducts a wide range of major
exercises and training programs with Thailand each year,
including Cobra Gold, the annual exercise which in 2004
involved approximately 13,500 U.S. service members and 6,000
Thais. Cobra Gold 2005 -- which will be underway during your
visit -- will be smaller than last year, primarily due to
U.S. commitments elsewhere and the large number of U.S.
forces sent to the region for tsunami relief. In addition to
field training involving thousands of U.S. and Thai troops,
Cobra Gold this year will consist of a one-week Disaster
Seminar in Chiang Mai to capture lessons learned from the
tsunami response and a one week staff exercise during a

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disaster will be gamed out. Significantly, Singapore and
Japan will both participate in the Seminar and staff exercise.

AREAS OF DIFFERENCE -- HUMAN RIGHTS, BURMA


4. (U) There are also points of friction in our relations.
Human rights remain a key concern. On October 25, 2004,
poorly trained military and civilian security forces in
southern Thailand loaded 1,300 Thai Muslim protesters into
trucks to be transported to a military base nearly three
hours away. 78 of the protesters died, apparently
suffocating en route. The State Department's
Congressionally-mandated annual Human Rights Report (HRR)
also criticized the approximately 1,300 extrajudicial
killings that took place in early 2003 as part of PM
Thaksin's war on drugs. The RTG has complained this year
about the 2004 Thailand chapter of the HRR, as it has
previously.


5. (C) Thailand's policy of "constructive engagement" with
the military junta in Burma and provision of economic
assistance to Rangoon is a source of continuing frustration
for us. The Thai government supports democracy in Burma but
maintains, not altogether convincingly, that engagement with
the SPDC is the only realistic approach it has to make
progress on the major cross-border flows of refugees, illegal
economic migrants, and methamphetamines it faces from Burma.
While ASEAN members such as Singapore, the Philippines,
Indonesia and Malaysia are clearly uncomfortable with Burma's
assumption of the organization's chair next year, the RTG has
clung to the position that engagement with the regime offers
the best hope of promoting gradual change. We obviously
disagree and have told the Thai that they are increasingly
viewed in the U.S. and elsewhere as "part of the problem"
when it comes to Burma.

THE DOMESTIC SCENE -- PM THAKSIN'S DOMINATION OF THAI POLITICS


6. (SBU) Prime Minister Thaksin was returned to power with
a strong majority in early February, winning more than 375 of
the 500 seats in Parliament. His Thai Rak Thai (Thais Love
Thais) political party dominates domestic politics. This
election was the first time in Thai history that an elected
civilian Parliamentary government filled out its entire term
and was reelected. The Prime Minister's populist policies,
public relations savvy and a booming economy resonated well
with the Thai electorate. Thaksin comes from a prosperous
Sino-Thai family in Thailand's second largest city, Chiang
Mai, and placed first in his class at the National Police
Academy. He spent several years studying in the United
States -- earning a master's degree in Criminal Justice from
Eastern Kentucky University and a Doctorate in Criminology
from Sam Houston State University. (Thaksin likes to
jokingly refer to himself as an "honorary Texan.") After a
few years with the police, he left government service to run
the family business (Shinawatra Corporation or Shin Corp),
which he turned into Thailand's largest telecommunications
company, making himself a multi-billionaire in the process.
Thaksin characterizes himself as a "CEO Prime Minister" and
portrays himself as a decisive leader. Critics, with some
justification, accuse him of stifling dissent within his
government and filling key government positions with family
members or classmates. Following several meetings in
Washington and the very successful October 2003 Bangkok APEC
Summit, Thaksin believes that he enjoys a special
relationship with the President.

THE THAI ECONOMY


7. (U) The Thai economy grew 6.1 percent in 2004, continuing
its strong recovery from the 1997 financial crisis. The
recovery has been led by strong export growth to the
traditional Thai markets of the U.S., Japan and EU as well as
increased exports to ASEAN and China. To complement the
export sector, the Thaksin government promoted a "dual track"
strategy of increasing Thai consumption. By making credit
more easily available, especially in rural areas, an easy
monetary policy and the introduction of new consumer finance
products, consumer demand has been a key factor in the Thai
economy's recent growth. Thaksin recognizes that consumer
demand has pretty well run its course, however, as consumer
debt levels have almost tripled in the past four years.
Going forward, the RTG expects investment to become the new
second track to exports in the economy and the government is
promoting a massive program of infrastructure investment over
the next four years. There is concern that in 2005, the
effects of high oil prices and a slowdown in the economies of
Thai export markets will reduce GDP growth. The December 26
tsunami also will affect the rate of growth this year, with

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the falloff in tourism (which contributes six percent of
total GDP) expected to shave 0.5 percent off of this year's
economic growth rate. Most economists anticipate growth
slowing to 4-6 percent for the year while the official RTG
estimate is for 5.5-6.5 percent GDP increase.

AFTERMATH OF THE TSUNAMI


8. (U) The December 26 tsunami claimed about 5,400 lives,
including two dozen Americans confirmed or presumed dead. In
addition to large-scale provision of food, potable water and
clothing through the regional relief logistical base
established at Utapao airfield, the USG also dispatched a
team of forensic experts to the affected areas in the
vicinity of Phuket to assist in victim identification.
Longer-term assistance is being provided by USAID in the form
of replacement of small fishing boats and the provision of
start-up loans for the recovery of small-scale aquaculture
and tourism-related businesses. Thailand is also eligible
for a USD $150 million soft loan facility OPIC is making
available to tsunami-affected areas.

SOUTH REMAINS A TROUBLE SPOT


9. (U) Thaksin's biggest domestic challenge is the
unsettled security situation in the southern part of the
country. Southern Thailand, and in particular the three
southernmost Muslim majority provinces of Pattani, Yala, and
Narathiwat, has experienced episodic violence since it was
incorporated into the Siamese Kingdom in 1902. However, 2004
witnessed a dramatic increase in the level of violence, with
over 500 people killed either by militants or by security
forces. Local Muslim separatist militants have attacked
symbols of Thai and Buddhist authority, and there continue to
be almost daily incidents of violence, notably even after the
tsunami disaster of December 26. Attacks most often involve

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isolated shootings of local officials, although increasingly
sophisticated bombing attacks have become more common. On
April 3, bombs apparently set by separatists exploded at Hat
Yai International Airport, a French-owned supermarket in Hat
Yai and a hotel in Songkhla. Two Americans were injured in
the incidents, though there is no indication that they were
specifically targeted.


10. (SBU) Stepping back publicly from the strictly
hard-line approach he has taken since the upsurge of
violence, Thaksin approved in March a 48-member "National
Reconciliation Commission" (NRC) to examine long-term
solutions to the crisis in the south. Thaksin named former
Prime Minister Anand to lead the commission. (Note: Anand is
one of the most respected public figures in Thailand. He was
twice appointed interim prime minister in 1991-92 during the
political crisis stemming from the 1991 coup. He recently
chaired a UN High-level Commission on Reform. End Note.)
Thaksin said he wanted a diverse group of participants on the
commission, even naming several of the most vocal critics of
his southern policy as possible members. The NRC expects to
complete its work and to make recommendations within a year.

FTA: AGREEMENT ON COVERAGE, PUBLIC SUPPORT ARE PRIORITIES


11. (C) The third round of FTA negotiations with the RTG,
held only after the U.S. agreed to exclude discussion of
financial services, concluded on April 9 with modest progress
in most chapters of the FTA text. While Prime Minister
Thaksin remains publicly supportive of the FTA, there is
little indication that he has authorized his ministers to
make commitments on coverage, concessions, and possible trade
offs, that is, to actually negotiate the FTA. Agreement on
FTA coverage is Priority #1: still to be resolved is
inclusion of financial services and (to varying degrees)
chapters on IPR, labor, and environment. With the Thai
elections behind us and the reconstitution of the RTG's FTA
Oversight Committee, prospects for development of a
comprehensive negotiating mandate appear to have improved
somewhat. Your meetings with the Prime Minister, Foreign
Minister, and the outreach events present opportunities to
obtain a clearer Thai commitment to move these issues forward
in the FTA. The Thai press has been almost uniformly
negative in its FTA coverage. In your comments to the media
it will be important to emphasize not only the considerable
benefits the FTA will afford Thailand, but also the high
opportunity costs entailed in opting out.

THAILAND AND IRAQ


12. (C) Thailand dispatched two deployments to Iraq as part
of Operation Iraqi Freedom (OIF). In December 2003, two Thai
soldiers were killed by a car bomb while on duty in Karbala.
Thailand's second six-month deployment of 443 medics and
engineers to Iraq ended on September 30, 2004. While
participation in OIF did not cause the domestic furor in
Thailand that it has in other countries, Thaksin's critics
have used participation in the U.S.-led coalition against
him. Several RTG officials have told us that Thailand's
deployments have been used by separatist militants to fan
resentment in the Muslim majority southern border provinces.
The democratic political opposition has questioned his
judgment on the deployments as well, also claiming that they
contributed to tensions in the volatile South. Nevertheless,
Thaksin has shown the capacity to make a tough decision and
we want Thailand's renewed support for Iraq operations.
During your meetings with Thaksin and Foreign Minister
Kantathi you could express appreciation for Thailand's
previous deployments to Afghanistan and Iraq, and explain
that the Administration hopes Thailand will send a follow-on
deployment in support of OIF. Specifically, CJCS General
Myers recently sent a letter to his Thai counterpart asking
Thailand to consider sending staff officers to man the OIF
Multinational Headquarters, with an eye to future
deployments. It would be appropriate for you to press your
interlocutors on a positive Thai response to General Myers'
request.

LOCKHEED MARTIN F-16 SALE


13. (C) Thailand recently announced its plans to purchase
18 fighter aircraft to replace aging F-5s in the Thai Air
Force. (The RTAF presently has 59 F-16s in its inventory.)
The RTG is leaning towards purchasing Swedish or Russian
planes because of a belief, which we have worked hard to
overcome, that Saab or Sukhoi can offer a better business
deal to Thailand. Recently, Lockheed Martin executives have
made it clear to Thai decision makers that their company will
put together a countertrade package equal to up to 100
percent of the purchase price of any aircraft. This promise
has allowed RTAF officers -- who generally support the F-16
-- to put together a package more favorable to Lockheed
Martin. Rumors are rife that some senior Thai Air Force
officers may be receiving compensation from one of the other
two competitors to support their bids, but we believe that
pressure from senior U.S. officials like yourself can improve
Lockheed Martin's prospects. A genuinely transparent
competition that takes into consideration capability of the
aircraft, interoperability with U.S. forces, and cost would
result almost certainly in F-16 winning the contract. It
would be extremely helpful to this effort if you would point
out the interoperability advantages F-16 has over SU-30 or
Gripen, and how the F-16 is the best choice to defend
Thailand. Lockheed Martin is prepared to offer a 100 percent
countertrade package as part of the purchase agreement.

ENDORSING THE PROLIFERATION SECURITY INITIATIVE (PSI)
PRINCIPLES


14. (C) The RTG continues to move towards formal
endorsement of the Proliferation Security Initiative (PSI)
Statement of Principles (SOP). The RTG has indicated that it
supports the PSI but has been dragging its feet, largely
because of bureaucratic misunderstanding, over final
endorsement of the SOP. Given Thailand's strategic location
and our emphasis on practical nonproliferation steps, we are
very interested in gaining Thailand's participation in this
key nonproliferation initiative. It would be very helpful if
you could underscore the great importance we attach to
Thailand's endorsement of the PSI Statement of Interdiction
Principles. If your interlocutors question what that obliges
Thailand to do, you may note that endorsing the Principles is
a first step and does not obligate a country legally or
operationally, but is a significant statement of political
support.

REFUGEES


15. (U) Over 140,000 Burmese refugees live in camps along
the Thai-Burma border, some for more than a decade. Apart
from the camp population, there is a separate group of
so-called "urban" Burmese. Thailand agreed to a resettlement
program for this second, much smaller group and we are
currently working with UNHCR to process about 1,400 of them
(1,500 individuals have already re-settled in the U.S.). The
RTG recently implemented -- after twice agreeing to our
request for delays -- a decree that urban Burmese refugees
relocate to the border camps. Those who did volunteer to
relocate are likely to be resettled within months, many to
the U.S. You should be aware that NGOs and Congress have
expressed concerns that urban Burmese refugees who do not
report to the camps might be forcibly deported back to Burma,
but RTG officials have credibly assured us there are no plans
for either deportations or to actively hunt persons who did
not register for relocation to the camps. In a major
breakthrough, the Thai Government also approved last week our
project to begin resettlement of Burmese camp refugees -- a
development which could lead to the U.S. resettlement of tens
of thousands from this group over a multi-year period. You
could say that the U.S. welcomes the Thai government's
agreement to Burmese resettlement from the border camps and
looks forward to working with Thai officials to ensure that
the new program runs smoothly.
BOYCE