Tan Hui Yee, Thailand Correspondent In Bangkok

Rough winds ahead for Thai generals

WITH his dishevelled mop grazing stern eyebrows, the young activist detained in a Bangkok police station looked straight into the camera and broadcast his message to the world: "We didn't do anything against the law, the real law. What we did was against the law of criminals… We will never leave any friend to be jailed here. We will all fight together."

The impassioned 80-second clip made its rounds on Thai social media last Friday, after Thai security forces broke up small-scale protests in the capital and Khon Kaen province in northeastern Thailand on the first anniversary of the military coup.

Youth and students took centre stage, unlike one year ago when the junta focused its attention on snuffing out resistance among the rural "red-shirt" activists from whom the deposed Yingluck Shinawatra government had drawn much of its support. Perhaps wary of the kind of sympathy youthful exuberance can draw, the military government later released the protesters without charge. A junta spokesman warned that "pure and inexperienced" students "should be careful about being used" by those with ill intent, according to the Bangkok Post.

Much as the Thai military retains absolute control over the kingdom, it will increasingly have to dance around delicate situations like this and more.

How will it maintain legitimacy without resorting to a mass, public crackdown? How will it placate conservative and middle-class supporters while pursuing fiscal change to tackle inequality? How can it prevent factionalism from wearing it down from within? And, perhaps the most difficult task of all - how can it avoid taking the blame if the Thai economy weakens to the point it starts to hurt?

Few are surprised at the likelihood that elections, due to be held early next year, will be delayed. Ostensibly, this is due to preparations that need to be made for a referendum on the draft Constitution. Calls for a public poll on this extensive document had been too loud to ignore, given the many controversial clauses designed to not just prevent the Shinawatra clan from returning to power but also to clip the wings of elected politicians vis-a-vis appointed bodies. Yet a rejection of the Constitution would reset the whole drafting process, drawing out the generals' time at the helm by at least a year or so.

Military rule was imposed in May last year after seven months of political turmoil caused by elite and middle-class protesters that tried and repeatedly failed to topple Yingluck's elected administration. The tussle between the two camps was the latest instalment of a deep, almost decade-long conflict that fused with deep anxiety about the twilight of King Bhumibol Adulyadej's reign. At 87, he is the world's longest-reigning monarch.

Thailand-watcher Ernest Bower, from the Washington, DC-based Centre for Strategic and International Studies, says: "Almost all analysts believe the junta plans to remain in control until the royal succession so it can maintain a level of control as that historic transition takes place."

This being the case, the annual military reshuffle later this year will be scrutinised closely, as the leadership tries to maintain a balance of promotions that would keep all factions happy. Some wonder, for example, whether a faster-than-usual rise of Premier Prayut Chan-o-cha's brother, assistant army chief Preecha Chan-o-cha, may spawn allegations of nepotism and restive troops.

More importantly, the longer the generals stay in power, the longer they risk being tripped up by the complexities of day-to-day governance in Asean's second-largest economy. The military government, backed by a military-dominated legislature, started out promising to implement deep fiscal changes that elected governments, beholden to their voters, were powerless to make.

Last Friday, the National Legislative Assembly passed a Bill that will require those who inherit assets of more than 100 million baht (S$4 million) to be taxed at 5 per cent on the portion above it if they were descendants. This has been watered down from an earlier version, which set the benchmark at 50 million baht and a tax rate of 10 per cent. Meanwhile, earlier plans for a land and buildings tax designed to broaden the tax base has been stalled after much opposition from the middle class.

Economic headwinds will create some turbulence. A slowing China has crimped exports of regional countries, including Thailand. Weak private consumption, coupled by a slower-than-expected Budget disbursement, capped the kingdom's first-quarter growth at 0.3 per cent from the October to December period. Last month, the central bank unexpectedly cut its benchmark rate by 0.25 percentage point, one day after the Finance Ministry lowered its full-year economic forecast to 3.7 per cent. This explains why the Prayut administration is planning to spend one-fifth of the coming fiscal year's Budget (starting October) on public investment.

How does it all look to private investors? It depends on where you stand. "For those who are already operating in the country, the current state of stability gives them some assurance that things are under control," says Eurasia Group analyst Ambika Ahuja. But investors "looking for policy clarity and some hint of long-term stability before coming in" might think twice before taking the plunge.

"The risk is too multi-layered and difficult to calculate and the return isn't that big, given how the economy is doing."

Thailand, under its second year of military rule, has little chance of descending into the turmoil experienced before the coup. But neither will its generals be in for a smooth ride.