Situational analysis if Pheu Thai-led coalition government emerges: Control Risks

The violent and highly disruptive repercussions of political conflict in Thailand since 2008 should convince even the most sanguine that the implications of the elections for businesses will be anything but academic said Harrison Cheng, associate director and Control Risks' lead analyst for Thailand.

As more than two-thirds of Thai citizens cast their votes on March 24, it is likely that the Pheu Thai Party, together with former prime minister Thaksin Shinawatra, will be the best performing party. It will however struggle to attract support from other parties to form a non-military aligned coalition government.

Ultimately, it is expected that the Democrat Party, led by former prime minister Abhisit Vejjajiva, will lead a coalition that includes the Palang Pracharat Party (PPRP) to form the new government.

That being said, despite the odds stacked against it, a Pheu Thai-led coalition government may still emerge, especially if the DP and PPRP do worse than expected. The botched nomination of Princess Ubolratana Rajakanya as a prime ministerial candidate in February underscores the unpredictability of Thai politics. In addition, the DP is also facing renewed criticisms over its perceived hypocrisy of criticising the junta for being anti-democratic and yet holding out the possibility of forming a coalition government with PPRP.

With preliminary voting results likely to emerge soon after polling day, strong signs of a Pheu Thai victory could prompt further meddling noted Mr Cheng.

Immediate risks

Unrest will remain largely contained ahead of the king's coronation in early May as political parties would not want to be seen as disrespecting the monarchy. Thereafter, large-scale protests in Bangkok - whether by Pheu Thai supporters or their opponents - will escalate incidental security risks and the likelihood of operational disruption for businesses.

Medium-term risks

Power (especially coal) and mining sectors remain the most vulnerable to state interference, as political turmoil in Bangkok also means that the military and civilian authorities will remain susceptible to popular pressure to indefinitely delay or scrap projects which are locally unpopular and to erect new regulations that impose higher environmental compliance standards.

In the event that a Pheu Thai-led government is formed, investment deals signed under the junta in the past five years are likely to be exposed to risks of government scrutiny and politicisation, which could lead to contract revisions and suspensions.

Long-term risks

Any excessive military interference with politics will elevate the risks of Western sanctions. These are likely to target key government and military leaders, then expand to wider trade and diplomatic sanctions. Western investors may also face pressure to scale down their investments which carries significant reputational and compliance risks for investors he concluded.