Phatra Securities analysis of the political situation in Thailand
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Phatra Securities analysis of the political situation in Thailand

Below are some excerpts from a research report from Phatra Securities on March 24:

We believe that the Constitution Court ruling on 21 March [to void the Feb 2 election] significantly increases the likelihood of a political vacuum that would extend well into 2H 2014 or worse.

Our conclusion is that the Court decision to invalidate the 2 Feb elections makes it likely that such a ruling could happen again and again, suggesting that the chances of successful elections being carried out are now slim.

We believe that the Pheu Thai caretaker government will not yield and resign to allow opponents to invoke Article 7 to put in place an appointed prime minister and government. Already the red shirts are mobilizing to demand that elections are the only means by which a government can be formed. We believe the army will not intervene unless there is a widespread breakdown in law and order.

We could be proven wrong on two counts. First, new elections could be successfully held within three months according to the Election Commission chairman, allowing an elected government to be formed by the end of June. However protest leader Suthep has told his PDRC protesters already that “we will call a nationwide movement to make the new election void too” (Bangkok Post 21 March 2014). Second, the Yingluck government could give way and an unelected prime minister and government brought into power, and this is accepted without much resistance.


Ruling increases likelihood of a prolonged vacuum
The Constitution Court with a 6-3 majority ruled that the 2 February 2014 was null and void because no elections took place in 28 constituencies in which applications for candidates did not occur. As such, the Court ruled that elections did not occur on the same day (2 Feb) throughout the Kingdom which contravened Section 108(2) which states that “The dissolution of the House of Representatives shall be made in the form of a Royal Decree in which the day for a new general election must be fixed (our italics) for not less than forty-five days but not more than sixty days as from the day the House of Representatives has been dissolved and such election day must be the same throughout the Kingdom.”

We note that the Constitution requires that elections be held on the same day throughout the Kingdom, the date of which must be fixed between 45-60 days after the House dissolution. It seems that the idea is to have elections no later than 60 days from the date of dissolution so that a new government can be formed in order to avoid a prolonged political vacuum. Moreover, a separate election law made provisions for elections to be held at a later date in certain constituencies in which it was not possible to hold elections because of natural disasters or riots. However in this case the Court has decided that actual elections being held on the same day everywhere throughout the Kingdom takes precedence over the fixing of the election day within 45-60 days after House dissolution.

For us, this has far-reaching negative implications in that the likelihood of a prolonged political vacuum has increased significantly. The Court has already implied that another Royal Decree would need to be issued for another election date to be set and any opposition group could void the elections simply by preventing elections from happening in just one (out of 375) constituencies.

Suthep said on 20 March that the People’s Democratic Reform Committee (which has held anti-government rallies in Bangkok since November) will not allow a new election to be held even if the court nullifies the 2 Feb poll. No elections should be held unless reform of election law is completed while Pheu Thai should “stop dreaming of returning to power”. Our point is that the Court ruling gave emphasis not on elections happening within a given time frame from the date of House dissolution, but on the necessity of elections being carried out on the same day throughout the Kingdom. As such, it is legally possible for elections to be repeatedly blocked and repeatedly ruled null and void so that no elected government would be able to assume power in 2014.

BP: Somchai, the EC Commissioner responsible for organizing elections, has posted on Facebook that a new government might be place in October. The Bangkok Post:

A new general election would likely be held on July 20 or July 27 and a new government set up by October, according to election commissioner Somchai Srisuthiyakorn’s own “Thailand election timeline” posted on Wednesday on his Facebook page.

Cmr Somchai said in his Facebook message that there should be no reason for the new House election to be nullified because the EC would use many different methods for the registration of candidates.

BP: This assumes the PDRC won’t disrupt candidate registration and election and the Democrats won’t boycott. One change is that the EC has stated that they will allow postal and possibly Internet candidate registration. The PDRC can still try to disrupt candidate registration, but disrupting candidate registration won’t be as easy with alternative options for candidate registration. The reason BP mentions this is that in the brief summary of the decision from the Court, they specifically raised the point that there were no candidates in 28 constituencies. Hence, if there are candidates in all 375 constituencies, the Court may not nullify the election even there are disruptions in some constituencies on election day. It may be difficult for the Court to backtrack on its earlier decision, but the Court has been flexible and if candidate registration is not disrupted then the question is still open. BP raises this as may change the calculus that elections can be disrupted repeatedly again and again. This is not certain.

The excerpt continues:

Are we being too pessimistic?

We are familiar with the argument that the Yingluck government will face many legal challenges and hurdles in the weeks and months ahead such that it will forced to step down by rulings of independent agencies, creating a vacuum that would then be filled by an unelected “neutral” government that aligns with the wishes of the PDRC and its supporters. This train of thought assumes that the Yingluck government will not put up a fight and that their supporters will be too weak and ineffectual. But it seems to us that such bold assumptions, if proven wrong, would be a miscalculation with dire consequences. In our view Thailand appears to be moving closer towards making this high-stakes bet.

BP: This is the thing that puzzles BP. It is as if the Establishment is completely clueless and they think if they get their way and remove Yingluck and install an Appointed PM that the reds and pro-Thaksin supporters will simply acquiesce like what happened after the 2006 coup. Yes, the current red shirt protests last weekend were not big and BP doesn’t expect this weekend’s protests to be big, but last weekend’s protests were bigger than Pitak Siam in 2012. It is the removal of Yingluck and then the Senate (or would it be the Judiciary or some other body?) installing an Appointed PM which would be a trigger for larger protests in the same way the Amnesty Bill was the trigger of protests for the anti-Thaksin coalition.

The excerpt continues:

A conflict about the transfer of power 
We believe the lines of Thailand’s political conflict are now clearly drawn and we believe that this will not bode well for the country’s economic growth prospects. On the one side is Pheu Thai which is confident that it still has the support of the majority of the people and therefore insists on elections. On the other side are those who want to hold off elections until unspecified reforms are put in place. More important, they want the Pheu Thai to step down and be replaced by an unelected government. We see the risk that such an unelected government would be immediately challenged by the red shirts who would point out that such a government has no basis in the constitution. 

Moreover, we think the red-shirt protesters are likely to claim that they should be able to do everything that (i.e. be as disruptive as) the Suthep protesters are now doing since the Constitution Court ruled that the PDRC are exercising their democratic rights under the constitution. The Civil Court also ruled subsequently that the Suthep protesters should not be suppressed under the emergency decree subsequently invoked to deal with them. If there are similar red-shirt demonstrations, it is unclear how the courts will rule against them (unless the circumstances are different). Should the Courts rule differently against the red shirts, we think the political temperature is likely to rise. We believe we could see a situation where the unelected government would need the full protection of the military and severe limitations on activity to ensure national security which can only undermine overall confidence and the conduct of normal economic activity. 

In short, we believe the actions taken by the protesters, the courts and the independent agencies have eroded the power of the elected government, forcing it to dissolve parliament and call for reelections in order to reassert political dominance. In our view, the problem for those opposing the Yingluck government is that it is one thing to take power away, but it is another matter to vest such powers to an unelected prime minister. This is because the constitution makes it clear that the people elect MPs and MPs would then elect a prime minister from their ranks. We think Thailand appears to be in a political twilight zone where the Yingluck government seems to have no power and the elections cannot be held to transfer power, and those wanting to confer power on an unelected prime minister must find a fanciful justification for such exemption from the constitution. It is difficult for us to see Thailand’s way out of this political impasse which is the underlying reason for our pessimism.

BP: Exactly, the only way to try to stop the Reds would be nationwide martial law, but this then would only serve as another catalyst for protests although protesting in Bangkok may be difficult at first, the protests may then start from red shirt strongholds. AFP:

Yingluck falls, the Red Shirts could seize official buildings and block roads in their strongholds, potentially prompting the army to act to restore order, according to Matthew Wheeler of the International Crisis Group think-tank.

BP: Indeed.

Then, on March 26, another Phatra Securities analysis piece:

Another scenario is one in which the next Lower House election (with Democrat participation) is successfully completed sometime in 3Q 2014. This scenario is, we believe, less likely than the appointed government scenario since it would return Pheu Thai to power, something that government opponents have rallied against during the past four months.

BP: Then, the alternative here is to somehow further weaken Puea Thai. The Bangkok Post:

The National Anti-Corruption Commission (NACC) earlier resolved to press charges against 308 out of a total 381 lawmakers accused of misconduct in connection with the draft bill on charter amendment.

If they are found guilty, the NACC would forward the cases to the Senate to impeach them and then ban them for politics for five years.

After the premier, cabinet members and MPs are indicted, political attacks will be mounted against Pheu Thai for various issues, particularly graft, to weaken the party in the interim period before a new poll takes place, the source said.

A new alternative party, consisting of prominent figures and former MPs, could be set up to grab votes from Pheu Thai.

BP: This is similar to what happened after the 2006 coup with Puea Paendin. If there are problems with installing an Appointed PM, new elections and the above would seemingly be the back-up plan, but can we indict and impeach 308 MPs in the necessary time. Also, will we get the necessary three-fifths votes in the Senate for impeachment.