(For a Q+A on Thai politics, click [ID:nBKK178169] and for a table on Thailand political risk, click [ID:nBKK526303])
By Jason Szep
BANGKOK, Aug 28 Former Thai premier Thaksin Shinawatra is showing he can still whip up supporters and flex his political muscle while in exile, signalling trouble ahead for Thailand's fragile ruling coalition and chronic political crisis.
Plans for thousands of the fugitive billionaire's red-shirted supporters to rally on Sunday are a reminder of Prime Minister Abhisit Vejjajiva's failure to overcome Thailand's deep political divisions -- and of the potential for further instability after violent anti-government riots in April.
By putting down April's protests, the armed forces were believed to have crushed the dreams of a political comback for the populist Thaksin, who was ousted in a 2006 coup and now lives in self-imposed exile to avoid jail on a corruption conviction. Public opinion swung behind Abhisit, a 45-year-old, British-born, Oxford-educated economist who came to power in December as Thailand's third prime minister in four months with support from the royalist, military and business elite. Fast-forward to August. Abhisit has yet to win over the majority rural poor, Thaksin's red-shirted political base who fume at being cut out of the democratic process, overlooked in Thailand's economic boom and marginalised by the Bangkok elite.
"Thaksin remains very popular. He is effectively chipping away at Abhisit's coalition rather successfully," said Stephen Vickers, Hong Kong-based chief executive officer of FTI International Risk Ltd, which advises investors in Thailand.
"The trouble for Abhisit is that he has not done any damage or significant damage to Thaksin's support level. And I think occasionally we're seeing some examples of panic -- not too much -- but some elements of panic in the government," he added.
Illustrating his point, the government invoked a seldom-used Internal Security Act on Tuesday to clear the way for Abhisit and the military to move quickly, without declaring a state of emergency, if Sunday's crowd becomes unruly.
Government security agencies are urging Abhsit to deploy 5,500 soldiers on Sunday and ban protesters from gathering in front of his office, as the red-shirt leaders had planned.
Political analysts say the government may fear a reprise of a three-week blockade of the premier's office in April that sparked Thailand's worst street violence in 17 years, forcing Abhisit to call a state of emergency and stoking concerns over the stability of Southeast Asia's second-biggest economy.
'RATTLING THE ADMINISTRATION'
"Obviously, with what happened in April, you can't rule out any clash between the red shirts and the security forces," said Danny Richards, senior economist at the Economist Intelligence Unit. "Hopefully that won't happen."
Thaksin's supporters have said they have no intention of violence and plan to end their protest peacefully at midnight. It would be the fifth big show of support for Thaksin since April. Abhisit has said he fears troublemakers will incite violence.
"These rallies are more a show that Thaksin is still there. That he is still very much a significant figure. That's really what is rattling the administration," Richards said.
Part of the problem, he added, is that Abhisit has pursued with little success Thaksin-style policies, such as cheap health care and development funds for rural villages, as part of stimulus measures during the worst recession in 11 years. But while these gave Thaksin election victories, they've done little to help Abhisit. In opinion polls by Assumption University, Abhisit was rated a less competent economic leader than Thaksin. A July poll showed Thaksin marginally more popular.
"Abhisit went on a charm offensive. They've come up with these populist policies that are very much the same as those Thaksin had in office. They realise to win over these core Thaksin supporters, they have to look at what Thaksin did. But it hasn't really succeeded," Richards said.
NO SIGN OF PULLING BACK
But despite Thaksin's stubborn popularity, it is unclear what he hopes to achieve from his self-imposed exile, mainly in Dubai. He has sought a royal pardon from 81-year-old King Bhumibol Adulyadej in a bid to return a free man. Legal experts expect that to fail.
He shows no sign of pulling back from his challenge to Abhisit and his allies, the urban elite centred in Bangkok who wear the king's traditional colour of yellow at protests.
Some analysts say he hopes to return to recover $2 billion from his days as a telecommunications tycoon that was frozen by the government after the 2006 coup.
Others say he is trying to stop Abhisit from consolidating power, hoping to raise enough pressure to force a snap election that could take place next year -- a scenario in which Thaksin's popularity could help the Puea Thai party he backs win the most votes, if not an outright majority.
Abhisit, who leads the Democrat Party, rules a shaky coalition cobbled together in December by senior military leaders, bringing in some of Thaksin's old allies.
"I don't know whether he really does want to come back to power. People just assume that," said Chris Baker, author of several books on Thaksin. "I think he's more interested in the money than the power."
Thaksin's red-shirted supporters seek compromise, he added. "It's a simple compromise -- a return to the electoral process."
The toll on the economy, meanwhile, is growing. Business leaders say the street protests following an airport takeover in November undermined the confidence of their clients. Economists say the political uncertainty damages tourism and will limit how fast Thailand's $260 billion economy rebounds from recession.
"I worry, but what can we do?" said Richard Han, chief executive of Hana Microelectronics, a Thai integrated circuit packager. "My customers tell me, 'I want you to have some backup plan in China in case of an airport shutdown'. They remember it. Every time they see some political unrest, they get scared." (Additional reporting by Martin Petty and Arada Kultawanich; Editing by Alan Raybould and Bill Tarrant)