Thailand is Patient Zero once again

In Thailand, everything turns on the number 20.

At the same moment the nation commemorates the 20th anniversary of the Asian financial crisis, Prime Minister General Prayuth Chan-o-cha is rolling out his 20-year vision for the economy where it all began.

Odd, perhaps, given that Prayuth wears a military uniform — he headed the junta that grabbed power in 2014. Thailand’s has a long, sordid history of internment military rule, 19 coups since the 1930s.

But if you’d told Thais in 1997 that 20 years on men with guns would be running the place, few would’ve thought it remotely possible.

The nation today is, in many ways, a direct result of the lack of progress made since July 2, 1997, the day Bangkok’s baht devaluation set Asia’s financial meltdown in motion.

Thais hate it when foreign observers mention their dubious patient-zero role.

Thais hate it when foreign observers mention their dubious patient-zero role.

If Indonesia, South Korea and even Malaysia had healthier financial systems, cleaner governments and greenlighted fewer unproductive investments, Thais retort, the contagion never would’ve infected their economies.

Fair point, perhaps. But 20 years on, Thailand is again Exhibit A -– this time for economists mulling the next lost-decade patient. It’s become a macabre parlor game, of sorts.

Who might next follow Japan down the deflationary rabbit-hole of chronic malaise, mushrooming bad loans and governments ill-equipped to escape?

Prayuth and his fellow generals are making it too easy for the pessimists.

Try as he may, Prayuth can’t spin a 3.3% growth rate that’s the weakest among the eight biggest Southeast Asian economies. The Philippines and Indonesia, for example, are operating above 6% and 5%, respectively.

The generals have moved too slowly to accelerate infrastructure projects, including a US$5.2 billion high-speed rail undertaking with China.

They’ve also been slow to build more advanced industries and cultivate innovation. Now, as Donald Trump’s White House threatens trade wars and protectionism spans the globe, Thailand is more exposed to external shocks now than before the junta grabbed power.

Concerns about political paralysis and weak global demand are fueling a prolonged period of soft private-sector investment. Exports, after all, fuel about 70% of Thai growth.

Because of that structure, looser Bank of Thailand policies are getting little traction. One answer is marshaling the roughly US$67 billion of infrastructure projects the military government has unveiled into action.

Another is putting aside the short-termism that’s pervaded Thailand these last three years.

The irony of Prayuth’s reign is the extent to which he’s emulated the policies of the man from whom he claimed to be saving Thailand.

The irony of Prayuth’s reign is the extent to which he’s emulated the policies of the man from whom he claimed to be saving Thailand.

Much of the political turmoil from 2006 to 2014 surrounded the mercurial Thaksin Shinawatra, prime minister from 2001 to 2006.

Even after he was ousted in a 2006 coup, Thaksin played a larger-than-life role in local politics –- from exile.

His supporters, mostly the rural poor, clashed incessantly with the urban elite.

In 2014, Prayuth grabbed power pledging to settle the dispute for good. Oddly, though, he embraced Thaksinomics and its emphasis on populist cash handouts to rural communities to win support.

This strategy adds more to the national debt than competitiveness. Better roads, bridges, ports and power grids would encourage the Toyota’s and Samsung’s of the world to build more factories in Thailand.

Less corruption would ensure that economic growth reaches more of Thailand’s 68 million people.

Nor do Prayuth’s handouts strengthen government institutions, enhance human capital or build a credible legal system. Perhaps Prayuth can cajole President Donald Trump to broker a US-Thailand trade deal at the White House next month.

So, yes, Thailand is stable and devising 20 year-national strategies. But before Prayuth can take Thailand forward, his government must make up for lost time on economic and political reforms.

If not, today’s drift, on top of last two decades of start-and-start repairs, will ensure a lost decade -– one a developing nation wracked by inequality can’t afford.

(William Pesek is a Tokyo-based journalist, former columnist for Barron’s and Bloomberg and author of “Japanization: What the World Can Learn from Japan’s Lost Decades.” Twitter: @williampesek)