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The September 2006 Coup in Thailand:  A Business Assessment

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(Picture) Thailand Parliament building before the Coup on September 2006


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(Picture) Chris Runckel, President of Runckel & Associates in Thailand on September 19th.
On Tuesday, September 19, 2006, I was on the 10th day of a business trip with clients looking at alternate sites for a factory in China, Vietnam and Thailand.  Landing in Bangkok that afternoon from Ho Chi Minh City on what was noted to be “International Day of Peace” according to my day planner I expected an uneventful two days in Thailand.  This is not to say that I wasn’t aware that differences between Thai Prime Minister Thaksin Shinawatra and members of the Thai Military, particularly those in Class 10, weren’t seriously strained but because I like most international observers had seen Thaksin repeatedly twist and dodge to maintain his position and had consequentially been reluctant to count him out.

At 5 PM as I sat down to have drinks with Mr. John Muller, Head of Security Services Asia (SSA), one of Thailand’s most well regarded security firms and a senior security specialist in the Thai office of Spectrum OSO Asia, Ltd., an international security consultancy, plus head of the Security Committee for the American Chamber of Commerce and founder of the U.S. Department of State Overseas Security Advisory Council (OSAC) in both Thailand and Cambodia, Muller’s two cell phones suddenly began to sing with reports of the coup and with both incoming and outgoing calls from the many major international corporations he advises.

Mr. Muller had predicted a coup was near and was philosophical about the announcement which he fully realized would be viewed with alarm by his corporate clients who were generally not as well informed on Thai politics or Thai culture.

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As we both listened to reports and discussed our assessments, neither of us was pleased to hear the reports of the first coup in 15 years in Thailand as investment in Thailand had been slowing down recently in response largely to the Thai political impasse that has characterized the past eight months and to fears of terrorism largely driven by bombings and other acts of protest in the far South of Thailand.  The next day, I woke up to blocked international news channels, a temporary block on cell phone communications although to a continually active free press that reported on the coup and on the countries reaction.

At breakfast, my clients kidded me that my planning skills were impeccable in scheduling meetings with the Thailand Board of Investment (BOI) the day before as all government offices were closed today.  Further, when I confirmed that the days schedule would still proceed and we joined representatives from AMATA, the Thai industrial zone management company which maintains the largest market share of industrial land sales in Thailand, they further marveled at the clear streets of central Bangkok which except for a few soldiers with yellow ribbons on their rifles or bedecked with flowers from thankful residents saw little signs of the military.  As we reached industrial parks outside of the city, all were continuing to run largely at full capacity and shipping containers and commercial shipments continued to flow smoothly to the port.  This same business as usual approach was repeated at Industrial Park 304 which is increasingly drawing investors to Prachinburi province which borders the Eastern Seaboard to the South and the Northeast of Thailand which is the source of most labor.


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(Picture) In Bangkok's Sukhumvit area, the traffic was light, but no tanks or solders, except at some intersections
In the days since the coup, I have talked extensively with Thai government officials, influential Thai friends and business contacts.  The assessment they pass along to me and that I have grown to accept is that the actions of the military were an example of doing “the wrong thing (a coup) but for the right reasons”(national unity and an end to controversy which was splitting the nation).  They point out and my own nearly 35 years of experience in Thailand supports that Thailand is unique in Asia.  Thai’s have never been colonized and are alone in Southeast Asia in this position.  Thai culture emphasizes avoidance of conflict and resolution of problems through compromise and conciliation.

Although most educated Thais deeply regretted the coup and the loss of national face that a resort to it created, they all felt a sense of relief in that the controversies that had divided Thailand during the last eight months of Thaksin’s rule were now behind the nation and a new beginning was in the offing.


The peaceful nature of the coup, the fact that the coup leaders immediately noted that within two weeks that they would announce a civilian Prime Minister and exit the military from politics and the non-retributory policies they adopted toward prior government officials all helped to reassure the populace that although the exercise of the coup may appear to be a return to a post modern Thailand that the underlying reality was very different.

Today, less than a week following the coup press reports state that the four top contenders for Prime Minster in the soon to be announced new civilian government are former central bank Governor Chatumongol Sonakul, Supreme Administrative Court President Ackaratorn Chularat, former World Trade Organization chief Supachai Panitchpakdi and central bank boss Pridiyathorn Devakula.  All of these are first-rate choices and would be a big plus to reestablishing Thai progress and economic development.  All of this is still yet to be finalized but is a hopeful step.

What should companies who had been contemplating establishing a factory in Thailand or making an additional investment conclude from the Coup and its aftermath? 

Here is my assessment – that your investment is safe and those companies or investors who go ahead now and proceed with their investment will be pleased with the success that the next several years will produce for them.  This assessment is based on the following reasons. 

First, despite the changes in government in Thailand, all Thai governments have been pro-business and have observed the protection and the promotion of business and trade.  The new government will continue this tradition as it goes without question by the military or any other faction in Thailand. 

Second, the Thai economy is sound.  Thailand’s Gross Domestic Product is projected to grow at 4.5% and Thai exports are expected to grow 16% this year.  The International Monetary Fund’s Managing Director Rodrigo de Rato judged Thailand’s overall economy “fundamentally strong” in the wake of the coup noting the limited reaction of the financial-markets to the coup. 

Third, Thaksin no doubt had his faults, he also had his good points and one of them was overseeing deep investment in infrastructure throughout Thailand including a new International Airport, the rapid completion of the Bangkok subway, the extension of the sky train, an upgraded expressway and road network that now means six and eight lane links to most locations, a large port expansion, telecom and high speed internet upgrades plus a requirement that Thai government departments focus more attention on customer service, simplifying of regulations and support of the public.  All of this creates an even improved environment for investment as costs in China for land, labor and services continue to increase rapidly, particularly in the Eastern coastal region, Shanghai and Pearl River Deltas making Thailand an increasingly attractive alternative. 

Fourth, new investment and the country as a whole also stands to benefit from Thaksin and his governments emphasis on free-trade agreements (FTAs) which now extend to Australia, New Zealand, all of the Asia Free Trade Area (AFTA), early harvest agreements with China and India and an FTA with Japan which is just going into force and hopes of an FTA with the U.S. which is largely negotiated and hopefully will be supported by the new government.  

Fifth, Thailand has some of the best investment incentives in Asia overseen by the Thai Board of Investment

Sixth, a large core of professionally managed and experienced supporting industries that offer one of the best supply chains anywhere in Asia. 

For these and many other reasons, Thailand is and remains an attractive location for investment, which should be visited and evaluated as individuals and companies rethink their Asian investment options.



About the Author:  

Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)

Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. Mr. Runckel is one of only two non-Ambassadors to receive this award in the 200-year history of the U.S. diplomatic service.




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