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December 16,2008

Thailand Politics:
New PM faces deep divisions, poor economy

Thailand's new prime minister faces the difficult task of unifying a country torn apart by months of violent anti-government protests - demonstrations that battered the key tourism industry just as the global economy was slipping into its worst crisis in decades, reported the Associated Press.

The selection on Monday of Abhisit Vejjajiva - the 44-year-old, Oxford-educated opposition leader - marks the first time in eight years that a civilian government will be led by an opponent of exiled Prime Minister Thaksin Shinawatra, who has loomed over Thai politics since he was ousted by a military coup in 2006.

Abhisit began Tuesday to put together his Cabinet, which will struggle to heal the rift between the middle class that is his base and the rural poor who backed Thaksin - and manage an economy buffeted by Thailand's political turmoil and a global slowdown.

"It will be more difficult for the Democrats to achieve fast results in tackling the economic problems now than in 1997," when most of Asia sunk economic recession, said Ekamol Khiriwat, former head of Thailand's stock exchange. "Now everything is kind of slowing down."

Abhisit, who has a strong economic background, is expected to unveil a solid economic team when the cabinet positions are announced, probably on Friday.

Abhisit must still be officially endorsed as prime minister by the constitutional monarch, King Bhumibol Adulyadej - likely within several days.

His appointment is expected to bring at least a brief period of calm, although the move unleashed new protests by supporters of the previous government. Abhisit's image as an upper-class elitist also could hinder his attempts to end the turmoil.

In Monday's vote in the lower house of parliament, Abhisit received support from 235 lawmakers, compared with 198 for a pro-Thaksin former national police chief.

As lawmakers arrived for the vote, Thaksin supporters tried to block the gates of parliament in a last-ditch attempt to prevent the outcome. Riot police later cleared a path for lawmakers to leave the compound. The demonstrators hurled rocks at vehicles and abuse at lawmakers inside but most dispersed peacefully.

From a wealthy family of Thai-Chinese origin, Abhisit was born in England and educated at Eton and Oxford, where he earned an honors degree in philosophy, politics and economics. His first name means "privilege" in Thai and his friends call him by his foreign nickname, Mark.

He joined the country's oldest party, the Democrats, in 1992 and became one of the youngest ever members of parliament. He rose in the party ranks and in popularity, especially among the educated in Bangkok who took to his clean record, polite demeanor, articulate if somewhat bland speeches and movie-star looks.

The Democrats had been in opposition since 2001, when Thaksin, a former telecommunications tycoon, first took power.

Military leaders ousted Thaksin in September 2006, accusing him of corruption, keeping him in exile and controlling the country for an interim period until elections in December 2007 brought Thaksin's allies back into power. He returned to Thailand in February 2008 to face corruption charges but later fled into exile again, and was convicted in absentia.

However, Thaksin, whose whereabouts are unknown, still enjoys significant support among Thailand's rural masses. Until Monday, his supporters had remained in control of the government.

Monday's vote ended six months of instability caused by anti-government demonstrations that began with a takeover of Thailand's government house, and culminated with last month's airports takeover.

In a related story, Reuters reported that Thai stocks were up 2.9 percent while the baht  was steady around 34.90 per dollar after the election of a new prime minister. But analysts doubted the optimism would last.

"It's a positive scenario. The stock market should become more stable during this honeymoon period. But given their thin majority, political stability is not convincing," said Warut Siwasariyanon, head of research at Finansa Securities.

Kongkiat Opaswongkarn, CEO of Asia Plus Securities, said nothing could offset the damage caused by recent airport closures and the economic slowdown. "For markets, it's not going to change anything over the long run," he said of the new government.

Outgoing Deputy Prime Minister Olarn Chaipravat said tourist arrivals could be halved next year and a million jobs were at risk. Tourism directly employs 1.8 million people and brings in the equivalent of 6 percent of gross domestic product.

The government says the economy will struggle to grow in 2009, with the acting finance minister expecting it to contract by 0.5-1.0 percent in the first quarter from a year earlier and post no growth at all in the second quarter.

"We still expect to see growth next year. Despite uncertainty, we've got the new PM as many had expected and they should be able to get to work now," Capital Nomura Securities economist Nuchjarin Panarode said.

"Their economic team should be acceptable and their policies to speed up spending and tackle unemployment are right to the point," she added.

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