The seven Red Shirt leaders detained on terrorism charges were released on Tuesday night at 7.45pm from Bangkok Remand Prison amid a group of supporters and an army of reporters who had gathered outside to celebrate the leaders’ freedom.

The Red Shirts leader release from prison is clearly a sign that the government is trying to ease the tension before the election campaign begins. Nevertheless Thai politics will likely remain divisive for some time. Talks of reconciliation have failed so far.

Fortunately, there will be a general election in 2011. This should reduce the risk of another major protracted street protest as the various political factions need to position themselves to win votes in the election, and causing major public inconveniences is a sure way to get a backlash in the polling booths.

So from the economic standpoint, the best scenario to hope for is a clear separation between political divisiveness and instability, and economic policies and economic development. Actually, this used to be the norm for Thailand back in the 1980’s and 1990’s. The government during that time changed very often, but economic policy directions remained fairly much the same, and the economy performed quite well (except of course after the 1997 crisis).

The year began ominously with massed Red Shirt protests in central Bangkok. While notionally loyal to deposed former Prime Minister Thaksin Shinawatra, the ‘Red’ side of Thailand’s colour-coded political landscape sought to voice a broad range of social and economic frustrations. Outrage at the lack of democratic reform motivated huge convoys of protestors to descend on the capital where they brought traffic to a standstill.

Then, from March 2010 until the protests ended in the violence of May, the Red Shirts besieged strategic intersections in an effort to disrupt the machinery of government and commerce.

The government of Prime Minister Abhisit Vejjajiva, no doubt hoping that Red Shirt resentments would just melt away, was nevertheless forced into a tense confrontation. The initial round of violence in April saw 25 people killed, including an Army Colonel and some of his subordinates.

Despite politics, Thailand continues to be an attractive place to do business

Economic fundamentals remain strong and Thailand continues to be an attractive place to do business. The government’s GDP growth forecast for 2010 was recently increased to 6.5%-7.5% on the back of continued strong export growth and sustained domestic demand. The currency and the stock market are at all-time highs. This strong rebound is again proof of the resilience of the Thai economy to the political uncertainty. Indeed, a more strategic approach to managing Thailand’s image overseas is required if Thailand is to remain competitive and thrive in the region.

Much like how Investor Relations Departments function in companies, a single government spokesman should be given responsibility and be held accountable for managing the perception of Thailand around the world.

Many U.S. businesses, however, enjoy investment benefits through the U.S.-Thailand Treaty of Amity and Economic Relations (AER), originally signed in 1833. The 1966 iteration of the Treaty allows U.S. citizens and businesses incorporated in the U.S., or in Thailand that are majority-owned by U.S. citizens, to engage in business on the same basis as Thai companies, exempting them from most of the restrictions on foreign investment imposed by the Foreign Business Act.

Under the Treaty, Thailand restricts American investment only in the fields of communications, transport, fiduciary functions, banking involving depository functions, the exploitation of land or other natural resources, and domestic trade in agricultural products. Prospective U.S. investors who would like to benefit from the Treaty must first verify their nationality by obtaining a certified letter from the U.S. Embassy in Bangkok. The investor must then present the letter to the Ministry of Commerce, along with an application form for a business operation certificate.

This process typically takes less than one month. Notwithstanding their Treaty rights, many Americans choose to form joint ventures with Thai partners, allowing the Thai side to hold the majority stake because of the advantages that come from familiarity with the Thai economy and local regulations.

Thailand should take the opportunity during the next few years to strengthen its productivity and competitiveness so that when demand resumes, Thailand will be in a position to jump the band wagon of global recovery. To do so requires serious efforts of all stakeholders in Thailand including the government, private sector, and academia. As these improvements take time, for Thailand to achieve them in time for the projected global recovery, the efforts must start right away.

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7 detained Red Shirt leaders released from prison

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