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Turbulent Thailand

Thailand shelves Chinese submarine deal after public backlash

Calls for supporting economy prompt reversal on initial payment in $720m purchase

A 039G Chinese submarine is seen docked in Hong Kong. The S26T submarines that the Royal Thai Navy plans to buy from the Chinese are based on a newer 039A type.   © Reuters

BANGKOK -- Thai Prime Minister Prayuth Chan-ocha has delayed the purchase of China-made military submarines for a year after public opposition sparked a reversal of a controversial funding decision.

The Royal Thai Navy asked the parliament's budget committee Monday to cut the submarine procurement funding to zero for this fiscal year, a person familiar with the matter said. Government spokesperson Anucha Burapachaisri earlier on Monday said Prayuth, who concurrently serves as defense minister, had told the navy to postpone the deal until fiscal year 2022.

The decision marks a setback for Prayuth's government amid a wave of youth protests seeking political reforms and greater protections for civil liberties.

The two Yuan-class S26T submarines were supposed to cost a total of 22.5 billion baht ($720 million) over seven years. The government sought to allocate more than 3 billion baht as the initial payment in the 2021 budget, but the move met with a strong backlash from the public, with critics saying the money should be spent on support for the slumping economy.

Thailand will start negotiations with China on the details of the delay, Anucha said.

Thailand's Prime Minister Prayuth Chan-ocha attends a photo session with new cabinet ministers at the Government House in Bangkok on Aug. 13.   © Reuters

These are the second and third of three submarines Prayuth promised the Royal Thai Navy and China while he was leader of a junta that toppled Thailand's democratically elected government in 2014. The budget for the first submarine was approved in 2017. It is being built in China for delivery in 2024, according to the navy.

The deal attracted public attention, passing a lower house budget subcommittee on Aug. 22 by the narrowest margin. The meeting could not come to unanimous conclusion and was initially tied at 4 to 4, but a ballot from the chairman, a member of the ruling Palang Pracharat Party, allowed the deal to advance to the full budget committee.

Yutthapong Jarassathian, deputy chairman of the subcommittee from the opposition Pheu Thai Party, was among the four members who opposed the decision. A memorandum of understanding exchanged upon the first submarine order between Prayuth and then-Chinese Defense Minister Chang Wanquan did not state that Thailand was obliged to buy the two additional submarines, Yutthapong said.

"The prime minister must choose between the submarines and the economic survival of the people," he said.

The subcommittee decision drew criticism online, with a hashtag #PeopleSayNoToSubs trending in Thailand on Twitter. The navy was forced to present its view on Monday. Royal Thai Navy chief-of-staff Sittiporn Maskasem said the navy needed more submarines as part of its defense strategy. He urged the public not to politicize the deal.

Most of Thailand's coastal neighbors in Southeast Asia own submarines. Vietnam operates the largest fleet in the region with six subs. Indonesia, Singapore and Malaysia hold five, four and two, respectively. Myanmar, a far smaller economy than Thailand, has one, according to the navy.

Protesters oppose spending  taxpayer money on arms in Bangkok on Aug. 31.   © Reuters

While showing some respect to the committee's role, Prayuth pushed for a "yes" vote on the purchase, saying it was necessary for national security.

"In the next days, everyone will have to take responsibility if something happens to our country," he added.

The purchase drove a wedge into the ruling coalition, which elected the former army chief as prime minister. The arguments made by the navy and the prime minister failed to convince the Democrat Party, which is the third biggest of the allies.

Deputy Democrat spokesman Akkaradet Wongpitakrote said on Aug. 25 that at least seven out of 13 Democrats would vote against the deal, citing economic measures as a greater priority. The budget committee consists of 48 members from the ruling coalition and 24 from the opposition.

The COVID-19 pandemic has dealt a heavy blow to Southeast Asia's second-largest economy. Gross domestic product shrank 12.2% on the year in the second quarter. It was the biggest contraction since 1998, when Thailand was struggling in the Asian financial crisis.

The Office of the National Economic and Social Development Council predicts a contraction of 7.3% to 7.8% for 2020, which could become the worst slump in Thailand's history. The kingdom's economy shrank 7.6% in 1998.

Tourism, which accounts for around 20% of the economy, was the heaviest hit industry of all. Exports, which include spending by tourists, declined by 28.3%. The government has approved a domestic tourism stimulus package called We Travel Together that is expected to create 2 million domestic trips from July to October, helping to generate income for a wide range of businesses such as hotels, restaurants, airlines and travel agencies.

The government has set aside a 22.4 billion baht budget for the package, almost the same size as for the two Chinese submarines.

The coronavirus pandemic has prompted other Asia-Pacific governments to rethink their defense spending. In June, Japan decided to halt the deployment of the U.S.-made Aegis Ashore missile shield after its price tag ballooned from an estimated $2.15 billion to $4 billion. The decision will likely free up funds for economic recovery.

Australian Prime Minister Scott Morrison said last week that the government will boost defense spending by 1 billion Australian dollars ($736 million) to upgrade military facilities and offer additional paid employment to army reservists. The investment is expected to aid the Australian economy through construction orders and consumption.

Thailand's submarine purchase could be seen as an attempt to build better ties with China.

"In the past decade, several suppliers have restricted sales to Thailand on account of the conflict in southern Thailand, the 2006 and 2014 coups and the 2008 state of emergency," Swedish defense think tank Stockholm International Peace Research Institute wrote in a report released in December. "This and Thai unease about the impact of the coup on other arms deals probably helped China to win orders for tanks, armored vehicles and submarines after 2015."

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