* Caretaker government has limited powers over spending
* Preparation of budget for next fiscal year months behind schedule
* Foreign policy on hold with acting PM unable to travel or host official visits
* Protest leader has set up office in near empty Government House complex
* Civil servants gripe about policy paralysis, broken elevators
By Alan Raybould
BANGKOK, May 20 (Reuters) - Bangkok’s Government House, the seat of power in the heart of the Thai capital, has stood empty for six months, except for the troops guarding it from protesters who want to oust the administration and overhaul Thailand’s democracy.
Last week, as if to illustrate just how dysfunctional Thai politics has become, leaders of the protests were allowed to move into a building in the sprawling compound. The prime minister’s office, cabinet meeting room and the rest of the premises housing the apparatus of government remained shut.
Thailand has been without a properly functioning government since December, and the strain is starting to show, from a failure to draw up a state budget to civil servants’ complaints of an inability to fix ministry elevators.
Bangkok has all but withdrawn from the international stage, with the country led by a caretaker prime minister unable to take foreign policy decisions, travel on state business or officially receive international leaders.
The crisis, the latest instalment of a near-decade-long power struggle between ousted former Prime Minister Thaksin Shinawatra and the royalist establishment, has already pushed the economy to the brink of recession.
And things could worsen if there is no budget in place for the coming fiscal year, which starts in October.
“The new budget from Oct. 1 may be only partially processed, and mainly for fixed expenditure such as payrolls,” said Manas Jamveha, comptroller general at the Finance Ministry. “There’ll be no new investment for certain, except for projects carrying over from the previous budget years.”
Ministers should have sent a budget to parliament in May - but parliament was dissolved late last year when then Prime Minister Yingluck Shinawatra, Thaksin’s younger sister, called a snap general election.
The vote in February was disrupted and later annulled and her caretaker government had to limp on with limited powers.
Last year the budget for 2013/14 was passed on Aug. 23. This year Thailand will be lucky to have a parliament by August.
The Finance Ministry’s Manas reckoned it would take a new government five or six months to start discretionary spending under a new budget.
There is little sign, however, that a new government is close to being formed. The Election Commission has backtracked on plans to re-run the general election on July 20.
Yingluck herself was ousted by the courts this month, and the farce threatens to descend into tragedy if the “acting caretaker prime minister” appointed by her party finds his already feeble authority contested by an alternative premier that the anti-government protesters want installed.
Protest leader Suthep Thaugsuban, from his new base amid the Venetian Gothic splendour of Government House, promised at the weekend to launch a “final push” to sweep away the remnants of Yingluck’s administration.
The finance department does not even have a full-time minister: Kittirat Na Ranong was removed by the courts along with Yingluck. Acting Prime Minister Niwatthamrong Boonsongphaisan will keep the seat warm but will be spread thin, as he has also kept his old job as commerce minister.
The Revenue Department is functioning normally, said Suttichai Sangkamanee, its director general, noting taxes from individuals were holding up but revenue from some businesses, such as importers of machinery, was down, reflecting a slowdown in industry due to the grim political and economic outlook.
As elsewhere, however, policy decisions are frozen.
Suttichai said the government had to roll over a cut in the corporate tax rate to 20 percent, otherwise it would lapse at the end of December, and it needed to extend the 7 percent value-added tax before it reverted to 10 percent in September.
“We can try to get approval from the Election Commission, as needed, if there’s still no new government. It’s crucial for businesses to plan ahead and they need to see if the tax cuts will remain in place in the coming year,” he said.
By law, a caretaker government can only embark on new spending with the approval of the Election Commission and it cannot initiate projects that commit the next government.
“Our everyday work hasn’t been affected but, of course, budgets have,” said Sophon Mekthon, director of the Centre for Disease Control and Prevention at the Ministry of Public Health. “We can’t think ahead, we can’t plan and decisions such as human resources allocation have been difficult.”
Yingluck failed to secure funds for a ruinous rice-buying scheme, angering her traditional supporters in the northeast, and the government has found itself powerless to help other farmers as rubber prices have fallen to 4-1/2-year lows.
“We can’t do anything. The Thai government itself has no right to borrow money or allocate any budget to intervene in the market,” said Chanachai Plengsiriwat, head of the Rubber Estate Organisation, the state body overseeing the industry.
As the region’s second biggest economy, Thailand considers itself a big hitter in the Association of Southeast Asian Nations, but finds itself hamstrung on the international stage.
“The Thai government doesn’t sign international agreements because that would need parliamentary approval,” said Foreign Ministry spokesman Sek Wanamethee.
Yingluck was a frequent traveller - she spent more time abroad than in parliament, the opposition mocked - apparently undeterred by the fate of her brother, who was toppled by the military in 2006 whilst on a trip to the United Nations.
But her globetrotting dried up when the protests started, as did visits by foreign dignitaries.
Surong Bulakul, chief financial officer at top energy company PTT, noted a hold-up on several major projects.
A planned initial public offering for its Star Petroleum Refining Co (SPRC) was awaiting approval from a committee that is chaired by the prime minister.
PTT wants the government to raise the retail price of gas used for cooking and fuelling vehicles.
“No one is in charge of this and it needs a new government to make a decision,” Surong said.
For civil servants, frustration at such policy inertia is compounded by the everyday irritation of having no one to sign off on spending.
“There are several trivial problems ... We need approval for a budget to fix the elevators at our building since officials can’t get to their office,” said Theerapong Rodprasert, deputy permanent secretary at the Transport Ministry. “This has to be delayed as we can’t get the money to pay the contractor.” (Reporting by Khettiya Jittapong, Pisit Changplayngam, Amy Sawitta Lefevre, Kitiphong Thaicharoen, Apornrath Phoonphongphiphat and Viparat Jantraprap; Editing by Simon Webb and Alex Richardson)