Thailand: China Delivers

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February 4, 2020: Over the last few weeks the government has managed to revive the peace talks with the southern separatists, particularly the BRN (Barisan Revolusi Nasional). This is the oldest (founded in 1960) separatist group in the south as well as one of the largest. BRN had earlier rejected the army safety zone proposal that would have experimented with some autonomy in the south, along with a ceasefire by all concerned. The main BRN objection was the government refusal to allow foreign observers to monitor any peace agreement. BRN considers the Thai government an occupying force but the government refuses to accept that label. These attitudes are the main reasons it has been so difficult to get peace talks going at all, much less making any progress. The government openly blames disagreements among the southern separatist organizations for the difficulties in achieving a negotiated settlement. There is some truth to that but many negotiators on both sides agree that it is something of an endurance contest.

Moslem majority neighbor Malaysia has long been serving as a facilitator for the peace talks and provided a safe place to do it. The new talks were made possible by the return of elected government in Thailand and loss of enthusiasm in the south for continued separatist and Islamic terrorist violence. The violence has been going on since 2004 and left more than 7,000 dead so far. Violence has sharply declined in the last few years and the southern Moslems are eager to try some of the long offered economic development efforts.

For the first time since 2013 Thai and BRN negotiators have met face-to-face, rather than negotiate via Malaysian intermediaries. Both sides have agreed to work out a framework for negotiations to include goals both sides could agree on, either now to eventually. Meanwhile, the government has started a major economic development project in Songkhla province, which has a large Moslem minority and is just north of the three Moslem majority provinces. If the Songkhla economic effort works it will encourage the three Moslem majority provinces to try it themselves.

The Trouble From China

Thailand once had the fastest growing economy in the region and but has had one problem after another since the 2014 coup. The March 2019 elections returned democratic government, which now has to deal with a growing list of economic problems. A major source of such problems is China.

The recent outbreak of coronavirus in China halted Chinese tourist visits to Thailand at the busiest time of the year for Chinese vacationers. It may take months for the virus related panic to subside and that will cost Thailand a few percent of its usual annual tourist income. This comes at a time when the economy's rate of growth was already stalled, despite growing tourism activity and more businesses moving their operations out of China to other nations in the region, like Thailand. But Thailand is not the best destination because it has a lot of economic problems other regional states do not suffer from.

There were some record-breaking droughts in Thailand recently and there is a growing shortage of new workers. The local currency (the baht) refused to cooperate and remained stronger than it should be. The GDP growth rate for 2019 was 2.5 percent and that is now expected to be no more than 2.5 percent and possibly a lot less. In late 2018 there were forecasts for 2019 GDP growth of between three and four percent. Ever since then the forecasts have been lower and lower. Economists point out that since the military took over in 2014 the economic fundamentals have changed for the worse. China has become a major source of economic problems. Before the coronavirus, there was the continuing unrest in Hong Kong. That city is a key economic component for the regional economy and its growing problems were already contributing to the possibility of another regional or global recession. The Hong Kong stock exchange is the fifth largest in the world and Hong Kong financial services are key elements in the economic success of China and most of East Asia. For Thailand, the economic angle appears to be less of a factor than the military hoped. Add to that the regional and worldwide economic disruption of the coronavirus and Thai economists have ample reasons to be pessimistic.

Chinese tourist activity in Thailand had already become an accurate indicator of how the Chinese economy was actually doing as well as how good Thai-China relations were. In mid-2019 Chinese tourists were not visiting as much as they used to while tourist traffic from India was increasing

A year earlier, in 2018, there was a tourism-related accident in which two boats carrying 127 tourists capsized off the island resort of Phuket and left 47 Chinese tourists dead. Chinese tourists comprised a growing portion of the three million tourists who visit Phuket each year and as a result of this accident, several thousand Chinese canceled their plans to visit Phuket. The cancellations were made worse as the Thai government shifted blame to the Chinese company that operated the boats. The crews were Chinese and all but two of the tourists were Chinese. This did not play well in China. But the Chinese government noted that there was indeed a problem with Chinese establishing Thailand based businesses in the areas frequented by Chinese tourists and often breaking Chinese and Thai laws along the way. While denouncing Thailand publically the Chinese officials quietly conferred with their Thai counterparts to deal with the Chinese tourism businesses that were causing problems. This sort of thing is happening in most areas now favored by Chinese tourists. There are more of these tourists since the 1990s as millions more Chinese enter the middle class and can afford to travel abroad.

By 2017 annoying changes in the south were largely traced back to the growth in Chinese tourism. Many of the Chinese tourists are troublesome and, worse yet, on budget tours and don’t spend much money. Tourism accounts for 11 percent of GDP and the big spenders tend to cause less trouble. Thus, while Chinese tourism accounts for nearly 30 percent of tourist income, it seems wise to change the visa rules to block the low budget Chinese tourists. That didn’t happen but the Thais were warning the Chinese tour operators that the Chinese government was not going to protest them if their bad behavior continued. The Thais have a reputation for being tough negotiators, even with powerful nations they want to (or must) cooperate with. The Chinese, like the Americans and Japanese (especially during World War II) learned it was better to negotiate with the Thais than try to bully them.

Despite the tough Thai negotiating methods, China has since 2015 attempted to make Thailand a partner in the construction of a high-speed rail line from China to Thailand. This could more than double the number of Chinese tourists. The Chinese still did not pay attention to the Thai lack of enthusiasm for more Chinese budget tourists. The Chinese high-speed (180 kilometers an hour) rail line from southern China (Kunming) to Bangkok would cut the cost of travel (currently mainly by air) for Chinese by more than half and increase the number of Chinese tourists to Thailand by at least two million a year. China offered to supply most of the $23 billion costs and construction was expected to be completed by 2021. So far the basic terms of the deal are not yet agreed on because the Thais are still tough negotiators while the Chinese refuse to give in. The Thailand section of the high-speed railroad is part of a larger effort to build a “Shanghai to Singapore” high-speed rail line. With the growing Chinese economic, political and diplomatic problems, the ambitious schedule for completing the Shanghai to Singapore line is now subject to major changes and delays while more urgent economic matters are attended to.

January 22, 2020: In the south (Yala province), a local soldier was killed, while his young son was wounded, by two unidentified gunmen.

January 21, 2020: In the south (Songkhla province), the government has agreed to set up and finance (with $600 million) an SEZ (Special Economic Zone) to boost the local economy. The construction of infrastructure improvements will improve transportation and local electricity supplies. All this is expected to create at least 100,000 new jobs. Songkhla is just north of the three Moslem provinces and also borders Malaysia. Separatist and Islamic terrorist activity is rare in Songkhla province but not unknown. Only about 25 percent of the people in Songkhla are Moslems. Moreover, they speak Thai rather than Malay and have not shown any support for Moslem separatism. Despite that police have warned since 2015 that some of the Islamic terrorists to the south have discussed carrying out attacks in nearby non-Moslem majority provinces.

January 15, 2020: Thailand and Indonesia signed an intelligence-sharing agreement that covers Islamic terrorism. This will help Indonesia more than Thailand because Indonesia has more active Islamic terrorists than Thailand. Yet sharing data on citizens confirmed or suspected of Islamic terrorist activities will benefit both nations because Indonesia is not a safe place for active Islamic terrorists and when the police pressure gets too intense the Indonesian Islamic terrorists often move to a less hostile country and either continue terrorist operations or just take a break. Neighboring Malaysia also has an intel sharing arrangement with Thailand as well as more Islamic terrorist activity. But, like Indonesia, Malaysia has a track record of eventually running down active local Islamic terrorists and many of them flee to Thailand to recuperate. With these intel sharing deals, Thai security forces have a better chance of encountering, identifying and arresting foreign Islamic terrorists. These intel sharing deals also make it more difficult for these criminals to get into the country, even when using forged documents.

January 12, 2020: In the south (Narathiwat province), gunmen attacked an outpost manned by local defense volunteers. One of the defenders was killed but the others fired back and then pursued the attackers, killing one of them. Seven of the defense volunteers were wounded. Reinforcements arrived along with air support and the pursuit of the attackers continued. It was unclear if the attackers were separatists or Islamic terrorists. It the dead man can be identified that would help clarify who was responsible. Police do know of a separatist group in the area that has been active for nearly a decade and often pays locals to help with attacks.

 

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