Thailand’s worst political crisis in 20 years has been at least temporarily eased with the return of former Prime Minister Anand Panyarachun as head of the country. The surprise appointment by his majesty the King of Mr. Anand as prime minister June 10 buoyed the hopes of the business community, which had been reeling from the effects of the turmoil created May 17-22 when the military shot scores of democracy demonstrators.

          The crisis caused that Thailand’s economy to fall to its lowest point in two decades, according to a report of Thai Farmers Bank economic research department release before Mr. Anand’s appointment. Earlier projections for economic growth of 8 percent this year have been scaled down to 7 percent.

          But even a 7 percent growth rate cannot be achieved a stable, acceptable new government forms within the next few months, according to the report.

          Mr. Anand is viewed by many as the best stabilizer to prevent further turmoil as Thailand strives to break out of an iron-clad tradition of military rule and achieve a full democracy. A respected technocrat, Mr. Anand gained broad-based support from the Thai people for his democratic principles and progressive economic outlook while serving a temporary prime minister after last year’s military coup d’etat.

          Perhaps the most endearing quality of Mr. Anand for the Thai people is his obvious distaste for power and politics. He had candidly revealed in the past that he is a reluctant prime minister who looks forward to returning to his private business. His new appointment as prime minister is also temporary – only four months, until general elections can be held and a new government formed.

          “Mr. Anand is perfect,” Pornsit Sriorathaikul, president of the Thai Gem and Jewelry Traders Association, told the Bangkok Post shortly after the appointment was announced.

          The timing of new elections is also perfect, commented Pongat Pongsiribanyat, manager of the World Gold Council’s Thailand office. “The atrocities of the military are still fresh on everyone’s mind. There is no chance that the puppets of the military regime can be re-elected by the Tahi people.”

          But even with the welcome news of the temporary solution, businesses across the board were hard hit by the crisis.

          Local gem and jewelry trading – already hurting from the effects of a new 7 percent value added tax – showed a steep drop in revenue for May.

           The country’s main gem market in Chantaburi in eastern Thailand lost an estimated B100 million (US$ 4 million) May 18-20, reported Pracha Pongsopa, president of the Chantaburi Chamber of Commerce. The market virtually shut down since both local and foreign buyers were afraid to travel during the height of crisis.

          All gold shops in Bangkok’s Yaowarat, or Chinatown, district closed for two days due to the lack of police protection, causing a loss of “no less than B200 million (US$ 8 million),” Mr. Pongpan of the World Gold Council estimated. No estimates were immediately available for the scores of other retail jewelry shops that closed throughout Bangkok.

          The once promising figures projecting rapid growth for the local gold market will have to be scaled down, Mr. Pongpan said, since the political uncertainty is likely to slow the economy overall. “The GDP will be affected. People will have less disposable income so they will spend less on luxury items like gold and jewelry.”

Export business stalled

          The export sector of gem and jewelry industry is also re-evaluating its once buoyant growth projections. The industry was already hit the depressed world ,market, concerns over stalled negotiations on the Section 301 trade dispute with the US, and the Commerce Ministry’s inaction on formulating value added tax exemptions and amendments. The May massacre dealt another crushing blow.

          “It really set us back production wise,” said Cecelia Banker, owner of Gem Essence (Thailand).” It was virtually impossible to get orders completed. Half of our workers didn’t come in. And those that did   hard trouble concentrating. They only worked day because they were worried about getting home before dark.”

          A temporary closure of customs and other government clearing offices paralyzed shipments for several days.

          Traffic from foreign buyers also came to a standstill. Pranda Jewelry Co said many buyers cancel their trips to Bangkok during the most critical two weeks period. The company reacted quickly by sending its representatives to the buyers. This action helped allay fears of clients by proving that even in the wake of the turmoil orders could be filled, said Prida Tiasuwan, president of Pranda.

          Harry Gan, a Malaysian who heads White Diamond in Bangkok, said that his Japanese clients were “quite frightened” by the crisis and that a lot of long-term harm had resulted. “Buyers want to know that they can get consistent supply and they don’t want to be associated with a country that has both an unstable environment and a government run by military dictators,” he said.

          Foreign investors who had been considering Thailand may take a closer look at neighboring countries, Mr. Gan said. “Now India, China, Malaysia and even Cambodia must look a whole lot more interesting. Finding new partners for expansion will also be difficult; however, I am optimistic that economy will again pick up. It will take a few months after everything settles down.

          Chirakitti Tang, president of Oriental Lapidary and the Thai Diamond Manufacturers Association (TDMA), said that the effects will mainly come in the long term as foreign investors will be reluctant to commit funds to a country undergoing major political upheaval. “We are not likely to see much expansion.” He said.

          “For the manufacturers up and running, however, I don’t feel that there is cause for alarm.” Mr. Chirakitti added. “Even though we must wait for a new government to form, policy direction is not immediately essential. While many sectors need annual guidance, our industry can just keep moving based on being competitive and satisfying our existing clients.”

          Mr. Chirakitti hopes that the push for democracy will continue – starting with making the military accountable for the shootings. “The army leaders must be ostracized and prevented from ever repeating such destruction,” he said.

          Mr. Prida agrees that the carnage was inexcusable, but consider it an “evolutionary-type thing.”

          “However bad it was, the result was certainly pushed the cause for democracy and severely dented the military hierarchy. As a Thai, and having seen the military toppling the government in periodic coup d’états, I can understand the action behind the protestors, the burgeoning middle class and democratically-minded academics – all of whom won’t sit around and accept military dominance. The people are, however, winning and even though it has taken a long time and will probably take still more years, Thailand is on the road to political change. You can’t compare us to China.”

          In the long-term, the political crisis will be an advantage, Mr. Prida said. “Unfortunately, in the short term, we all have to suffer international condemnation and lower economic growth.”

          New projects by foreign investors are highly unlikely, Mr. Prida said. “It takes a long time to understand politics in this country and I fear that foreign businessmen will not be prepared to learn, subsequently, Thailand may just be crossed off their expansion plans.”