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Turbulent Thailand

Thailand's Prayuth wins new term as prime minister

Former general faces challenge of reviving foreign investment

Prayuth Chan-ocha's thin majority in the lower house will be a far cry from the virtually absolute control he held during the half-decade of military rule.   © Reuters

BANGKOK -- Thailand's parliament voted Wednesday to keep junta leader Prayuth Chan-ocha as prime minister following the country's return to democracy, five years after he seized power in a military coup.

About 500 of the 750 members of the bicameral National Assembly voted for Prayuth to stay in power. His only rival, billionaire Future Forward party leader Thanathorn Juangroongruangkit, received 244 votes.

Prayuth is expected to form a government by the end of the month. As head of the junta government that took power in 2014, the former general presided over a recovery in Southeast Asia's second-largest economy, but he faces the challenge of restoring foreign investors' confidence to propel it higher.

Prayuth's thin majority in the House of Representatives will be a far cry from the virtually absolute control he held during the half-decade of military rule. It remains unclear how long he can hold the coalition together, and whether he will have support for votes on new legislation.

Wednesday's vote for prime minister followed a general election in March. The pro-junta Palang Pracharat Party, backed by 18 other parties, nominated Prayuth for the post.

As the new government settles in, attention will turn to the economy.

Thai lawmakers vote for a prime minister on June 5. (Photo by Kosaku Mimura)

Before the 2014 coup, economic conditions had deteriorated amid a political clash between the pro-Thaksin faction, supported by rural and low-income voters, and conservatives backed by the military and the urban middle class.

The economy gradually improved under military rule, with real gross domestic product growth accelerating to a six-year high of 4.1% last year from just 1% in 2014.

But inflows of investment from developed countries dropped amid concern about the retreat of democracy. Foreign direct investment by Japan, the top source, tumbled by half from 2014 to 89.7 billion baht ($2.86 billion at current rates) in 2017. Investment from the U.S. and the European Union sank about 60% over the same period.

Escaping the middle-income trap that ensnares countries seeking to join the ranks of developed nations will be another challenge. Thailand's per capita GDP totals about $7,600, well below the roughly $11,000 of nearby Malaysia.

Labor-intensive manufacturing such as apparel production has moved to neighboring countries like Cambodia where pay is lower. And the rise in labor costs looks set to accelerate, given that Palang Pracharat ran on a pledge to raise the minimum wage 30%.

"Thailand will become less competitive if that hike is enacted," said Kriengkrai Thiennukul, a vice chairman of the Federation of Thai Industries.

To promote sustainable growth, the government last year launched an industrial modernization plan dubbed Thailand 4.0, under which it will provide incentives to foster 10 industries including robotics and next-generation autos. Thailand also looks to draw high-tech companies to its Eastern Economic Corridor, and it has expressed interest in joining the revamped Trans-Pacific Partnership trade agreement.

"Thailand had been unable to form a growth strategy due to its years of political conflict, but the junta set out a direction," said Akio Egawa, associate professor of economics at St. Andrew's University in Japan.

Thailand's return to a democratic system -- even one in which the military retains heavy influence -- may help bring back the foreign capital the country needs to develop. But policies are likely to take longer to enact than when the junta held full control.

Because the pro-military coalition holds a narrow majority in the lower house, the main legislative chamber, passing bills is certain to be a contentious process. Any breaks within the 19-party ruling coalition would risk blocking budgets or other key legislation, making it difficult to govern.

Abhisit Vejjajiva, a former prime minister and former Democrat Party leader, told reporters just minutes before the vote that he would resign from parliament, saying he could not accept his party's decision to back Prayuth.

"There could be a string of rebellions by lawmakers unhappy with [decisions] such as cabinet picks," said Yuji Mizukami, a visiting research fellow at Thammasat University in Thailand.

Businessman-turned-politician Thanathorn was backed by an anti-junta coalition of seven parties, including the Pheu Thai Party linked to former Prime Minister Thaksin Shinawatra.

Thanathorn is currently suspended from the lower house pending a Constitutional Court ruling on his holding of shares in a media company. He says the case is politically motivated.

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