The Leaked Phone Call that Plunged Thailand Into Crisis

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1:26For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at CINFIN.com. Bloomberg Audio Studios. Podcasts. Radio. News. In late May, troops from Thailand and Cambodia exchanged gunfire in a disputed border area, leaving a Cambodian soldier dead and relations between the historic rivals at a dangerous inflection point.

2:12The conflict set off a chain reaction that included border closures, threats of retaliation, and finally, a phone call between Thailand's Prime Minister Peh Tongtarn Shinawat and Hoon Sen, the former leader of Cambodia, who still holds power as president of the country's main political party and the father of its prime minister. Can you hear me, Uncle? Yeah, yeah. Well, as you can hear in the phone call, she started by calling him uncle. Papicha Tanaka Sempipat covers Thailand for Bloomberg out of Bangkok. She's known by her Thai nickname, Best. She says Peh Thang Tharn is the fourth member of the Shinawatt family to lead Thailand in the last quarter century.

2:55Her father, former Prime Minister Thaksin Shinawatt, still holds sway in Thai politics. He and Hoon Sen forged a friendship years ago. She started calling him uncle in the call because to her, Hoon Sen was a family friend. and Hun Sen had been there time and again for the Shinawad family, providing them refuge when they needed. They were so close that Tak Sin even had a room reserved at Hun Sen's house. Peh Tang Tharn's differential tone and calling him uncle was the tip of the iceberg. During the 17-minute call, she appeared to side with Hun Sen on multiple occasions, referring to a top Thai military commander as an opponent and promising to take care of Hun Sen's concerns.

3:47She sounded critical of the Thai military and she characterized them as the other side while putting her and Hun Sen on the same side. And that is probably a breach in the diplomatic protocols. It also reflected that the Thai army and the Thai government were not seeing eye to eye about the conflict, which did not inspire confidence in the Thai people. A few days after the call, Hun Sen posted audio of the conversation on Facebook, plunging Phaetang Tharn's coalition government into crisis.

4:25The phone call set off a big and dramatic chain of events, pushing the government to the brink of collapse with the exit of a key coalition party. The strong public reaction to the call also set off several protests, including a massive one that called for Peh Thong Tharn to resign on June 28. 20 ,000 people came out that day, and that was the biggest turnout in a long time. Peh Thong Tharn eventually apologized for the phone call and claimed that her methods were actually a negotiating tactic. But the conversation has left her political future and Thailand's government in limbo. In the wake of the protests, Thailand's constitutional court suspended her as prime minister, citing alleged ethical misconduct.

5:11The court's verdict, which is expected to come later this year, could permanently remove her from the job. This spiraling political turmoil might all seem very dramatic, but for Thailand, it's a recurring theme. The nation has seen about 20 constitutions and roughly a dozen coups since Thailand became a constitutional monarchy in 1932. This is really another day in Thai politics, and also not the first time you find Taksin or the Shinawad family at many turning points or crossroads in contemporary Thai history. After all, this is the dynasty that has dominated Thai politics for the past quarter century.

5:51But now people are wondering if this is the beginning of the end of their dynastic rule.

5:58This is the Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today on the show, what the recent suspension of Thailand's prime minister could mean for its battered economy. And after nearly three decades, is the Shinawatt family's grip on Thai politics finally coming to an end?

6:31Paetong Tharn Shinawat is the fourth member of the powerful Shinawat clan to lead Thailand. Her family has dominated Thai politics ever since her father, Thaksin, first came into power in 2001. They absolutely have huge influence over Thai politics. You cannot talk about Thai politics without mentioning Thaksin or his family. Thaksin, the main character, was prime minister from 2001, for which he served a full term after winning a landslide victory. But then his second term in office was cut short in 2006 when the military seized power. The generals in charge accused him of corruption and abuse of power.

7:10His party was dissolved and he eventually went into exile. But even then, as he faced corruption charges, Taksin continued to influence Thai politics through Pertai, his family's political party. When people were voting for Pertai, they knew that they were essentially voting for a Taksin government without Taksin in the picture. The Chinawats came back to contest the election in 2011 with the Puecai Party under Yingluck, who is Taksin's sister. But her term was, again, cut short. And now that brings us to the most recent election in 2023, which saw Taksin's daughter, Pèrong Tán, rise to power and bring her dynasty back to the top political office.

7:52And that's where we are. Now, why is it that the Shinawats are so popular and loved by some in Thailand? Why is it that they have maintained their dominance politically for so many years? A lot of that had to do with the lasting legacy that Taksin left behind when he was prime minister. Tuxin is best known for taxonomics, which is a way of calling his populist economic policies that were spent heavily on grassroots measures designed to stimulate domestic consumption. But at the same time, it was also benefiting big businesses. So he was seen as both pro-business as well as supporting grassroots.

8:33And one of the most lasting legacies that he left behind is the universal health care that he established in 2002. His supporters loved him so much for spreading the benefits of wealth and growth in a country with big gaps between rich and poor. You could say that it was really the first time that the grassroots rural farmers felt like they had a leader that saw them truly. Toxin's immense popularity and overwhelming election victories disrupted Thailand's longstanding political order. His politics alienated the old guard and created powerful enemies among conservatives. That's one of the reasons he was forced into exile.

9:14So the establishment saw Takshin and his clan as a threat to its political power, social hierarchy, and also a threat to the monarchy, which is revered as the linchpin of Thailand's national identity. Takshin came to power on a pro-democracy platform. But in order for him to be able to secure a safe return to Thailand, he cut a deal with the establishment. And critics say he abandoned the pro-democracy cause. His party is now in a coalition with one backed by a general who ousted his sister's government. Now, certainly when people think about Thai politics, military coup come to mind. Why is the political situation in Thailand so turbulent and why have there been so many coups?

10:00It really comes down to the establishment elites who don't respect elections, but also don't have enough power to sustain authoritarian rule. The bottom line is Thailand is perhaps a cautionary tale for what happens to a society where democratic institutions fall apart, leaving the rich and powerful to fight it out. And election, protest, coup, party dissolution, rinse and repeat. That's what happens in Thai politics. Now, in your story, you interviewed a political analyst, a professor at Bangkok's Chula Lungkorn University, who said very interestingly that, you know, essentially the powers that be aren't interested and don't care about Thailand moving forward with any kind of stability and workability.

10:43And I wonder then what do they care about and what do these political groups and these political factions want for Thailand? The elite establishment care about maintaining the status quo, the elite fear that the real democratic reform could unravel the entire system that they have been building to protect their privileges, positions and immunity from accountability. They want to maintain political control, which safeguards their massive economic networks, including lands and concessions and monopolies and military run businesses and the elite patronage system. The repeated systematic pattern of dissolving political parties, especially those that won elections over the last 20 years, seems more than a deliberate way to keep democratic institutions weak and to keep the traditional status quo for the elites to stay in power.

11:41After the break, what the political chaos in Thailand has meant for its economy and its status in the region.

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14:58The potential removal of Thailand's prime minister and the ensuing political upheaval comes as a country faces economic and geopolitical threats. Bloomberg's Papicha Tanaka Sempipat, or BEST, says the latest political fallout and a revolving door of leaders highlight what has been a persistent problem in Thailand. There's never been an elected government in power long enough to actually address the problems the country is facing. Thailand has one of the highest income inequality between the rich and the poor. Thailand is suffering from poor educational system, high household debt, low private investment, and also really slow economic growth compared to its regional neighbors.

15:43Much of the country's current predicament stems from almost nine years under the rule of former Army Chief Prayuth Chan-ocha, who rose to power in a coup in 2014. The political instability has had long-lasting consequences for Thailand's economy and its standing in the region. During the time between 2014 to now, the economy has crawled at a pace of just under 2 % annually. Political uncertainty, like frequent changes to governments or military crews or mass protests, have made foreign investors wary of making long-term commitments in the country because they don't know what's going to happen.

16:22Some companies have postponed or redirected investments. to more stable countries in the region like Vietnam or Indonesia. And we have seen that foreign direct investment into Thailand have lagged behind most of the neighbors. Not only is Thailand lagging behind its neighbors in Southeast Asia, it's also found itself distanced from what was once a powerful ally, the U.S. The U.S. downgraded diplomatic ties with Thailand after the 2014 coup and scaled back the annual military exercises. So this has led the military and the military-backed governments at the time to cozy up to China through economic ties and lessened dependence on Washington.

17:07So this makes it harder for the U.S. to count on Thailand as a stable ally, particularly in efforts to counter China's growing influence in the region. And the constant upheaval in the country also reduces Thailand's strategic leverage between the U.S. and China and makes it less relevant as an ASEAN power. That doesn't mean Thailand lacks appeal. To much of the world, Thailand is associated with scenic beaches, Buddhist temples, wild nightlife, which was all depicted in the hit series White Lotus. What happens in Thailand? It stays in Thailand. What does that mean? Thailand is also the largest manufacturing hub for automobiles in Southeast Asia.

17:50Automakers from Toyota and Nissan to Ford and BYD make their cars in the country, earning it the nickname the Detroit of Asia. And it's a big exporter of agricultural products. It's the world's biggest rice exporter after India. Thailand is also a big commodities player. It is one of the world's rice bowls. Thailand is also the world's biggest exporter of natural rubber and one of the biggest exporters of sugar, which the world cannot live without. Bess says Thailand can't leverage these strengths at home when the country's leaders have failed to get their act together over and over again. Prime Minister Pha Thong Tharn Shinawatt was criticized for being slow on negotiating a deal with President Donald Trump on tariffs.

18:37The country's goods now face a 36 percent levy, among the highest in the region. The cost of political turmoil in the country is that it makes the country look inward and forget the outside world. And frequent leadership changes have also weakened Thailand's ability to take consistent positions on global and regional issues like global supply chain disruption or the reordering of the global trade. And because we spent so many years trying to put out fires in our own home, it's really hard to look beyond the smoke and plan for any modernizations. So what happens is you don't get to look that far ahead or see long-term potential or see policies that are more for long-term reforms than short-term stimulus.

19:25There's concern Thailand's economy could slide into a deep recession in the second half of the year if the country fails to get a better deal to avoid the steep U.S. tariffs. With the stakes so high and so much hinging on Thailand's political future, what happens next to the suspended prime minister is key. If the court finds her not guilty of the ethics violation, she returns as prime minister and everything goes back to normal. But that could also mean more protests and even military intervention if the army wants an opportunity to seize power. If Phnom Thun is deemed guilty by the court, then two potential scenarios could happen from that.

20:06First, Xi would be disqualified immediately and removed from office, and that would trigger a new prime minister vote in the lower house of parliament. The best outcome is that the transition of power goes smoothly to another prime ministerial candidate from the same ruling Poitai party. Even though it's not a Shinawati in power, it's still a Shinawati ally and the Shinawati party that's still leading the government. And there's another possible outcome that could spell trouble for Thailand. If the coalition collapses during or before the prime ministerial vote, we're likely headed for a protracted political deadlock where no single candidate has enough support from the sitting lawmakers to become prime minister.

20:53Then all hell kind of breaks loose with no functioning government, and that would threaten the passage of the budget bill for the next fiscal year that begins as soon as October. So unless Pua Thai hangs on, this could be the end of the Shinawats' dominance in Thai politics. Now, Best, we started this episode talking about how a suspension of a Thai prime minister over a leaked phone call is just another day in Thai politics. Even with the Shinawat family out of the picture, if that were the case, would that bring about any fundamental change for Thailand's politics and its future, you think? This crisis is eye-opening.

21:30but it will likely not bring about any fundamental changes to Thailand. The Shinawats have been a key player in politics for a quarter century, and they may be losing their appeal or it may be fading as players in this game, but the game still remains perfectly intact. And if anything, this episode shows that the game is as rigged as it is efficient in helping the elite establishment eliminate its enemies. It also shows that even if you try to reconcile and coexist with the old guards, you will be allowed to govern only with the blessing of the very forces that you opposed. You can be a pawn in their chess game, while those forces will never fully trust you.

22:20Bess says right now, despite whoever happens to hold public office, The real power in Thailand lies with individuals and institutions that are not elected. This episode, Another Day in Thai Politics, shows that without a big enough progressive win in Thailand, there seems to be no way to implement reforms to eventually break this cycle. And Thailand is possibly set to remain trapped in this vicious cycle that prevents true democracy from sticking around long enough after elections to fully take roots in the country.

23:01This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you like the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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