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Thailand: An accidental pariah

Military government described as inept, while foreign business wobbles.

When the tanks rolled into Bangkok in September 2006 to effect a bloodless and oddly anticlimactic coup, investors reacted with enthusiasm. Thailand’s controversial prime minister, Thaksin Shinawatra, had been bad for market sentiment, fund managers said; even having the army in charge should be a change for the good.

It hasn’t quite worked out that way. The interim government – whose definition of interim already seems to be erring towards the permanent – has lurched into unpopular revisions of finance and business policy that have quickly made Thailand a pariah of world economic opinion.

Or has it? The capital controls announced in December (mostly since reversed) and the mooted changes to the Foreign Business Act (likely also to be diluted) have much scope for irritation and even scorn. But those who deal with the country, although discomfited, paint a picture less of anti-foreign posturing than of accidental ineptitude. And proving that foreign capital has fled as a consequence is tricky.

Exemptions

The interim government’s first market-shaking step came on December 18 when the Thai central bank announced that, from now on, foreigners would have to deposit 30% of all the money they invested in the country in non-interest-bearing accounts at the central bank itself.

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