Thai Leaders Seek to Limit Economic Damage

As work crews scrubbed this city?s streets clean of debris and arson scars left by protesters after two months of demonstrations, Thailand?s finance minister turned his attention to another sort of damage control.

 ThailandSo on Friday, he stood before a meeting of business leaders in Japan, the source of about a third of Thailand?s foreign investment, and delivered a sober assessment of the convulsions that had racked his country.

?Ladies and gentlemen, this is not a ?Welcome back to the Land of Smiles, let?s go shopping and invest in Thailand? speech,? said the minister, Korn Chatikavanij. ?I do not underestimate the challenge that we must face or underestimate the responsibility to our Asian partners to put our house in order.?

Mr. Korn?s attendance at the event underscored the concern within Thailand?s business community and around the world about the effects of the demonstrations on the country?s economy.  As the week limped to a close here, analysts, scholars and business leaders were trying to figure out whether the images of luxury shopping malls set ablaze by antigovernment ?red shirt? demonstrators were a metaphor for the Thai economy?s future.

?Thailand has a history of political tensions,? said Frederic Neumann, a head of Asian economic research for HSBC in Hong Kong. ?But we?ve never seen them escalate to this level, with department stores burning.?  Bangkok was mostly calm on Saturday, with a state of emergency still in effect and security forces maintaining a cordon around the main commercial district, where the demonstrations ended on Wednesday when troops stormed the protesters? encampment.

Public transportation was operating on a severely curtailed schedule, many businesses downtown were shuttered and an overnight curfew remained in effect for at least one more day.  In a televised speech, Prime Minister Abhisit Vejjajiva called for a national reconciliation.

?We recognize that, as we move ahead, there are huge challenges ahead of us, particularly the challenge of overcoming the divisions that have occurred in this country,? he said, adding that he would initiate ?an independent investigation of all the events that have taken place during the protest.?  At least 80 people, mostly civilians, were killed, and hundreds were injured during the two months of protests by demonstrators calling for Mr. Abhisit to step down and for new elections.

After the occupation of Bangkok?s international airport by antigovernment demonstrators in 2008, the tourism industry slumped for about a quarter before rebounding. But analysts predict that this time around, the tourism sector may not begin to recover until early next year.

The immediate effects of the protests have also been felt in the retail, production and energy sectors, including lost business and structural damage in the main commercial district; temporary cutbacks in production at Japanese-owned automobile plants in Thailand; and temporary cuts in deliveries to the Bangkok refinery of the country?s top energy firm, PTT, news agencies reported.

But beyond the damage to the tourism industry, it remained unclear whether the demonstrations would have more lasting effects.  Several analysts said that much depended on how the political situation unfolded, and whether the violence of the past week was a short-lived spasm or a harbinger of a new, darker phase in populist political expression in Thailand.

Mr. Korn sought to reassure foreign investors on Friday, saying the economic fundamentals of Thailand remained very strong.  The government is expected to release its first-quarter gross domestic product report on Monday, and some economists are predicting that it will show that the economy expanded at its fastest pace in 14 years. But they are also anticipating a contraction this quarter because of the unrest.

Uncertainty and turmoil have been a near chronic feature of modern Thailand?s political landscape, and several analysts concurred with Mr. Korn that investors would continue to tolerate it as long as the country remained fiscally stable and the government strove to find political solutions to the protesters? grievances.

?The economy is fundamentally sound, and there are no major macroeconomic imbalances to worry about,? Mr. Neumann said. ?It?s purely a matter of sentiment among consumers and investors, and the longer these uncertainties exist, they will have an impact.?

The business community, analysts say, will be watching to see whether the Abhisit administration moves quickly to seek compromises with its opponents, including holding early elections. If not, they say, the country could plunge into a more violent phase of political unrest.

Ammar Siamwalla, an economist at the Thailand Development Research Institute, said seething resentment among demonstrators could ferment into an armed insurgency. He imagines they may return to their home regions ?and start organizing for the long underground struggle.?