Wednesday, March 5, 2014

Political Crisis Affects Thailand's Ability to Implement AEC Commitments

The protracted domestic political impasse in Thailand already has impacted the country’s immediate economic prospects.  Now foreign investors have expressed concerns that the difficulties will impact the country’s ability to implement its ASEAN Economic Community (AEC) commitments, beyond the 2015 implementation date.

For example, the Thai Board of Investment, which approves projects, has been stymied since its members’ terms expired last October.  The Thai Prime Minister, who serves as ex officio chair, cannot appoint new members due to her caretaker status.  Hence new projects cannot be approved.

"A number of specific changes to laws and procedures are required to ensure smooth implementation and to allow Thai companies and citizens to obtain the benefits envisioned. The current political situation, unclear outcome of elections, uncertainty of government functions and control issues raise significant concern in terms of decision making and implementation capabilities. Some changes will require a functioning parliament."

The JFCCT went on to note specific AEC-related issues which require immediate attention:

“For example, to allow the labour changes to work, the Thai labour law needs amendment. A sitting parliament needs to do this. To allow the services changes involving ASEAN national foreign ownership of up to 70%, the Foreign Business Act and some other procedures need to be changed. Other changes needed include a large effort to harmonize the many varied definitions, standards and procedures. These include labelling, university qualifications, taxes, and customs practices. The ministers of multiple departments and staff from many ministries need to agree and implement these.”

Of course, many of these issues were outstanding before the current political crisis in Thailand.   The Thais were among those most anxious about increased competition arising from the AEC, and so were already somewhat reluctant participants in the process.  The continuing political impasse makes them even more so.

Without a resolution, implementation of AEC and other ASEAN Community commitments by Thailand becomes delayed even further.  Will this spur ASEAN to intervene directly?  Very unlikely, given ASEAN’s principle of non-intervention in domestic political matters,  as well the current Thai leadership’s preference to seek assistance from the UN rather than ASEAN.  Nevertheless, the leaders of Thai society need to be reminded of the short and long term negative effects to the Thai economy, including AEC-related matters. Whether Thai leaders will seriously consider these effects remains to be seen.