Political Economics

164_6445-4.JPGWhile I was on my trek, Thailand held much-anticipated national elections. The elections were very important and highly publicized as they were the first since the military’s coup in 2006. I’m not sure if they do this for all elections, but Joylani said that no one was able to sell alcohol on the day of the election. Anyways, the electorate voted overwhelming for the PPP, which was the party that was sacked during the coup. The results look pretty good with the exception of three PPP members who were caught by the election commission with large amounts of cash and lists of registered voters. Unsurprisingly, with his party back in power, ousted former PM Thaksin Sinawatra immediately announced he would now return to Thailand to face the military’s corruption charges.

Regardless of the Thaksin fiasco, free elections to install a civilian government and the military’s promise to respect the result is good for Thailand. Personally, as an investor and an international traveler, I have been disappointed in the failure of the generals’ economic policies. Their coup pummeled the Thai stock market and their inept policies further battered it, all this in addition to the volatility that results from military rule. Their monetary policy was a failure and they let the baht rise out of control, which has wreaked havoc on Thai exporters. The baht has risen to 30/dollar from the mid forties! It has risen so much that the military government regulates domestic exchange rates, setting the (current) ceiling at around 33.6/dollar, about a 10% premium international spot rate! As a traveler, the baht’s appreciation has increased our Thailand expenses by about a third, although the fixed domestic forex rate presents some interesting arbitrage ideas… The rise of the baht has, of course, benefited Thai importers and ultimately Thai consumers who have become significantly richer, so to speak. I think this partly explains why there seems to be so many brand new cars in Thailand.

I was going to keep this post solely on Thailand, but I cannot help but draw comparisons to Nepal. On paper, they look somewhat similar; medium sized nations (25m and 45m people, respectively), tourism is the number one industry in each, and both are engulfed in the latest of a long history of political turmoil. Yet things could not be more different in reality. Besides superficialities like Nepalis hate their king and Thais practically worship theirs, its two different worlds. Despite having undergone a dozen coups and just as many constitutions, Thailand is a growing economy. And when there is a political hiccup (which Thai coups have become), the country continues to function. Contrast that to Nepal, where a single party of ignorant ideologues can jerk the nation around. They use a guerilla war to get every single one of their demands met, including elections. When they realize they’ll lose any such election, they cancel it and make more demands (accompanied, of course, with threats of “renewed armed struggle”). And even in times of peace, they enjoy calling arbitrary transportation strikes, shutting the entire country down for days on end. I would say the Nepalis should take some plays from the Thai military’s playbook, but since Nepal is a poor country the military and law enforcement is ripe for bribes and corruption. Anyways, I just think its interesting to compare the differences in these two states that are in somewhat comparable situations.

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