When Prayuth Chan-ocha grabbed power in Thailand in 2014, he donned a dowdy military uniform. A political makeover in the five years since has seen the general-turned-prime minister adopt well-tailored western suits.
The restyling seems prescient as Prayuth's second term begins, after his success in March's general election. For as well as battling political rivals he must tackle the pinstriped ranks of global currency traders.
The Thai baht is far and away the best-performing currency globally, up more than 7% since November 1. Bangkok's safe-haven status amid global chaos also highlights a bull market in paradoxes.
The Bank of Thailand in early July downgraded its growth estimate for the first half to 2.8%. That contrasts with a 4.1% annualized pace in 2018, the fastest in six years. And it means Thailand is lagging growth in Indonesia, Malaysia, the Philippines and Vietnam.
Thailand, in the meantime, lacks a bold or coherent plan to compete with China, India or Southeast Asian peers vying for manufacturing jobs.
The secret to Thailand's success in the markets is a solid current-account surplus, near-record foreign-exchange reserves and strong tourism flows fueling domestic demand. These are enviable attributes as U.S. President Donald Trump's trade war with China shakes up Asian markets.
And yet, Prayuth's government may have too much of a good thing on its hands. The baht is becoming too strong for a nation deriving 67% of economic activity from the export of foods and services, according to World Bank data.
The downward movement in Thai growth reflects ebbing exports and slowing domestic investment. Exports fell 5.8% year-on-year in May alone. On July 3, the Thai National Shippers' Council reversed its 2019 export forecast to a decline of 1% from a 1% increase.
It is worrisome, too, that the baht rally is turning off travelers. The Tourism Authority of Thailand trimmed its estimate for revenue growth from arrivals in 2019 to 9.5% from 10%. This is not a devastating downgrade, but one sure to accelerate as the baht rises further. Strategist Homin Lee of Swiss asset manager Lombard Odier is among bulls betting the baht will soon rise into the 29-to-the-dollar range; it was sitting around 30.7 on July 5.
That worries Ratinan Choochaimangkhala, 31, who runs a T-shirt shop at Bangkok's Patpong night market. "The difference between sales six months ago and now is a little depressing," she told me on a recent visit.
This sentiment has the Bank of Thailand mulling a cut in its 1.75% benchmark borrowing rate. It is not clear, though, how that might cap the baht. The baht already seems unattractive against the dollar, which is underpinned by a 2.25% to 2.50% benchmark target, yet has nevertheless strengthened.
Moreover, Trump is browbeating the Federal Reserve into lowering rates, perhaps significantly. The dollar and U.S. bond yields would presumably drop in response, so the baht could become even more attractive to risk-on investors. Yields on 10-year Thai government securities are about 2%, versus 1.95% in the U.S. Any easing moves by Fed chairman Jerome Powell could send more capital Bangkok's way as U.S. yields adjust.
The biggest problem, though, is the absence of reformist motion on Prayuth's watch. His government has largely protected the national balance sheet since 2014, but it made scant headway raising competitiveness.
In fact, there are alarming signs of backsliding. In 2014, Bangkok ranked 18th in the World Bank's annual ease-of-doing-business report. In 2019, it deteriorated to 27th, trailing Azerbaijan. Five years ago, Bangkok ranked 85th in Transparency International's corruption perceptions index. Today it stands at 99th, equal with Tanzania, the Philippines and Colombia.
Much of the positive buzz on Prayuth's tenure concerns megaprojects like the so-called Eastern Economic Corridor and ambitious high-speed railway networks. The infrastructure boom and a current account in the black leave Thailand better equipped to ride out the Trumpian storm.
Whereas Bank Indonesia was forced to hike rates six times in 2018 to save the rupiah, the BOT was able to take a more hands-off approach. Its December tightening -- by 25 basis points -- was the first tap on the monetary brakes since 2011.
At the moment, BOT Governor Veerathai Santiprabhob is using technical tweaks to tame the baht. They include scaling back the size of short-term bond auctions in hopes of curbing capital inflows. What Thailand really needs, though, is a package of upgrades to increase innovation, productivity and competition.
The baht is also racing ahead of investments and improvements in education. Strengthening Thailand's human capital is crucial to avoiding the dreaded middle-income trap. That is when per capita income gains stall at or near the $10,000 mark. At the moment, Thailand is at about $7,000 in inflation-adjusted terms.
"Thailand has the raw materials to get to where it wants to go," Shuji Hashizume, senior investment specialist at the Asian Development Bank, told me in Bangkok recently. "Yet it needs a greater focus on where Thailand needs to improve."
Prayuth's government is spending roughly $45 billion to leapfrog Thailand into the ranks of the "4.0 economies" and move it up the technology curve. The cornerstone is the Eastern Economic Corridor project to boost growth and target investment into Hi-Tech industries.
"If you want to know where Thailand is heading, this is the area to watch," said Sudrutai Thongsong, senior vice president at Bangkok Bank.
That, however, is also the problem. Improving roads, bridges and power grids is plenty important. It is vital in encouraging companies from Toyota Motor to Samsung Electronics not just to stay in Thailand but to create more jobs. Doing so, said Peter Schultz of infrastructure investor Infunde Development, means cutting red tape, attacking graft and making the case for Thailand at a moment when Indonesia, the Philippines and others are wooing investments.
Herein lies the biggest failure of Prayuth's tenure: treading too carefully on getting big, controversial things done. Power grabs like the one that shook Asia in 2014 are normally about pushing through upgrades that escaped previous governments. Instead of internationalizing the economy, the junta clamped down on the media. It prioritized stimulus and cash handouts in rural areas to buttress support over policies to move Thailand forward.
The moral of this tale is that when you grab power from a democratically-elected government it is best to have a plan. To move Thailand beyond the legislative gridlock and massive street protests after nine leadership changes in just over a decade requires the kind of get-things-done competence that military leaders often use to justify a coup.
It is possible that Prayuth will use his second term to plot a bold path forward. But the baht's intriguing popularity with currency speculators is reminding Bangkok that the world is watching -- and that investors care less about what Thai leaders are wearing than the reforms they are weaving.
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."