April 29, 2010 / 10:46 AM / 10 years ago

SCENARIOS-How is Thailand's crisis likely to play out?


As the nearly two-month protests drag on, royalist and pro-government demonstrators take matters into their own hands, frustrated by the army’s reluctance to intervene.

This leads to skirmishes between red shirts and rival protest groups such as the royalist yellow shirts. Bottle-throwing is followed by petrol bombs and possibly guns.

The army is drawn in and launches a harsh crackdown on the red shirts, who respond with heavy arms, including M-79 grenades.

The army, after failing to disperse the red shirts for weeks, faces intense pressure to finish the job. Large numbers of soldiers are deployed. Fighting continues for hours or even days with many casualties before the red shirts are eventually overpowered by about 50,000 troops deployed in Bangkok.

The red shirts regroup in the northern provinces and other areas of Bangkok, creating a low-level rebellion that causes a new wave of political uncertainty, but they fail to pose a force strong enough to topple the government immediately.

MARKET REACTION: If the army manages to get the upper hand, this could be seen as opportunity to buy despite any violence.


Abhisit maintains a tough line, resisting talks and allowing tension to build on the streets in the hope of wearing down the protesters enough so they slowly disperse.

However, with no agreement for talks, frustration grows in Bangkok as the economic toll mounts. Abhisit’s position becomes untenable. He defies his military and establishment allies and dissolves parliament.

Aware polls would almost certainly return a government allied with Thaksin — the de facto red shirt leader despised by the establishment elites — the military stages a coup saying it is upholding national security and protecting the revered king.

This is not likely. Abhisit will not call an election without a nod from the military and the palace. The climate may be ripe for a putsch, but the army wants to keep the prime minister in power, as long as he stands firm against the supporters of Thaksin, who was ousted in the last coup in 2006.

MARKET IMPACT: A coup would cause stocks to plunge, and the baht to slide. Concerns about fiscal mismanagement, poor governance, and a public backlash — even civil war — would curtail long-term investment. Thailand’s credit ratings would be downgraded. There could even be a contagion effect in Southeast Asian emerging markets.


The pressure to find a political solution to buy time and calm down inflamed passions in the country is growing. Failure to do so means the crisis drags on with hardliners from both camps dominating the agenda.

Under one scenario for a political formula, Abhisit’s uneasy coalition partners hold behind-the-scenes meetings, perhaps with Thaksin or his representatives involved. This leads to a deal to end the ruling alliance and focus on a new election.

Abhisit’s Democrat Party could try to rule as a minority government, but his former allies echo red shirt calls for an immediate dissolution of parliament. Faced with a vote of no confidence in parliament, Abhisit agrees to dissolve the house.

Or the Democrats could dump Abhisit as leader in favour of another figure, who then produces a timetable for an early election.

These are unlikely scenarios. Any political deal would have to satisfy the army and the palace. Coalition partners may not be happy with Abhisit, but he is still their best bet right now.

MARKET IMPACT: A political deal would be seen as positive for the market. Stocks would likely rise, with the market’s low valuations tempting investors with an appetite for risk. (Editing by Bill Tarrant)

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