Red Shirts Evolve and Dong Still Under Pressure

Thailand:  This blog has followed the “Shinawatra Saga” in Thailand for awhile.  Thitinan Pongsudhirak has an interesting editorial on the issues at OpinionAsia.  Mr. Pongsudhirak contends that the core issue is not Shinawatra, but democracy and social justice.  For this reason, he believes the Red Shirts (a.k.a. The United Front for Democracy Against Dictatorship, UDD) movement is evolving beyond Shinawatra, although his treatment is still the primary focus of the group.  He also addresses the class issues involved.  Thaksin was corrupt, but he is also a populist who addresses many of the issues of the rural poor, especially in the North and Northeast areas of Thailand.

The current ruling party and their Yellow Shirt Supporters (a.k.a The People’s Alliance for Democracy, PAD) are primarily composed of urban elites, bureaucrats, and the military.  The PAD leadership has made it quite clear that they see Shinawatra as a corrupt opportunist who manipulated the “ignorant and gullible” masses of peasants.  Since Shinawatra was deposed in a coup in 2006, the elites believe that the Red Shift protest are simply episodes of “public disorder” orchestrated by Shinawatra, who is in exile abroad, currently from Cambodia.   The government and its backers seem oblivious to  the fact that browbeating, condescending, and dismissing a political movement, followed up by harsh security measures to beat it into submission is not more effective than listening to the concerns of  the Red Shifts and attempting to accommodate and represent them.

The government will likely face a new test soon, as the Feb. 26th court decision on the confiscation of Shinawatra’s frozen assets, estimated in the billions, might start widespread riots.

Vietnam:  At the end of 2009,  the World Bank tried to bolster the Vietnamese government by expressing its confidence in the measures Hanoi is taking to stabilize its currency.  However, two months later, it appears that Vietnam is still in trouble.  Local confidence in the currency has dropped and there is worry that this attitude could spread to foreign investors.   Things might become clear after the smoke clears from last years collapses in stock market value, which was originally forced up by speculative spending,  which, in turn, was funded on loose credit.

If the economy continues to destabilize it could  empower conservative communist party members at the 11th National Party Congress in January 2011.  They will likely seek to slow or turn back some economic reforms over key sectors, in a hope of retaining one-party rule.  Prime Minister Nguyen Tan Dung and his faction have already been weaken by the economic turmoil of 2008.

“…a rising trade deficit and sustained downward pressure on the dong vis-a-vis a globally weak US dollar. Even with last November’s 5% devaluation of the dong and a hike in baseline interest rates from 10% to 12%, state-owned enterprises and private companies continue to hoard dollars over dong, underscoring the lack of local confidence in the SBV’s [State Bank of Vietnam] ability or willingness to check inflation.”

Vietnam has already issued bonds and it may increase interests rates, all in an attempt to relieve downward pressure on the Dong.  Still, State Owned Enterprises (SOEs) have also been uncooperative with the government in changing over their massive USD reserves to Dong.  The SOEs are controlled by high ranking party members, which suggest an internal party fight over how best to deal with the situation.

All is not gloomy, Vietnam’s debt is modest and its external borrowing is fairly low and stable.  Still, foreign investors often take their queue from locals, and until the government can establish confidence in its  population that inflation will not get out of control, Vietnam will continue to be in the  “hot seat”.