Removal of U.S. Aid Could Hurt Thai Economy

Thai Economy
In Thailand, the Thai military forcefully removed the nation’s elected government two days after declaring martial law, which poses new risks to a U.S. ally that is “rapidly losing appeal to the investors and tourists who have fueled its economic growth.”

Washington officially declared the Thai takeover a coup. This could prompt the U.S. to remove all cooperation and aid programs from Thailand.

“While we value our long friendship with the Thai people, this act will have negative implications for the U.S.-Thai relationship, especially for our relationship with the Thai military,” said Secretary of State John Kerry.

General Prayuth Chan-ocha and other army leaders called the coup “a chance to reset politics and enact reforms” that they claim are needed to ensure respect for democracy.  However, there is no current plan to bring peace to the region.

Political disruptions had curbed Thailand’s economic growth to 2.9 percent last year, and in the first economic quarter of this year, the economy shrank 2.1 percent. The auto and auto parts industries laid off around 10,000 people this month and around 30,000 autoworkers are expected to lose their jobs should the political unrest ensue.

In foreign aid, Thailand receives a total of  $16.75 million a year from the U.S. government money that may be eliminated according to U.S. law. Under U.S. law, no U.S. foreign aid may flow to “any country whose duly elected head of government is deposed by military coup d’etat or decree.”

This could result in as much as $10 million dollars being cut from bilateral aid to Thailand.

“The Thai economy has been insulated from the unstable Thai politics for decades,” said Krislert Samphantharak, an associated professor of economics specializing in Southeast Asia at the University of Chicago. “This is no longer the case.”

In October, the White House asked Congress to allot $5 million to Thailand for development aid, $1.9 million for anti-drug and law enforcement, $2.1 million for military training and $900,000 for arms sales.

The decrease in aid is on top of the decrease that took place after the last Thai coup in 2006, where Washington removed around $24 million in aid, including funds for military training and peace keeping.

There is debate over whether Thailand’s economy will be able to survive this latest coup.

“There’s a pernicious long-term effect in that the economy could be better but all this infighting is undermining it,” said John Kurlantizick, senior fellow for Southeast Asia at the Council on Foreign Relations.

Thailand’s tourism sector, which normally brings in around $73.8 billion and creates around $2.5 million jobs, is on the decline. Cancellations have been predicted to cut earnings by $2.5 billion.

“They have got quite a good economy, but you need a government,” said Rajiv Biswas. He elaborated that many economists aren’t confident that the next government will be able to grow the Thai economy.

“Historically, Thailand has grown 4 or 5 percent when you don’t have political chaos,” Biswas said.

This coup was the 19th Thailand’s had since ending their absolute monarchy in 1932.

– Monica Newell

Sources: ABC News, Aljazeera, Daily Mail, International Business Times, Just Foreign Policy
Photo: News Vice