Will Thailand's election turmoil hit China-backed US$54 billion Eastern Economic Corridor?

Princess Ubolratana Rajakanya's abortive prime ministerial bid last weekend had stunned investors and political observers, as it brought to the fore questions about differences in the palace " King Maha Vajiralongkorn vetoed the move " and whether the Shinawatra clan that had backed the candidacy would allow the vote on March 24 to go ahead without protest.

In any other Southeast Asian economy, the political risks emanating from that episode alone would have triggered a major crisis in investor confidence.

But keen observers of Thailand say the "Teflon nature" of the kingdom's economy and the Thai baht, largely resilient to internal shocks, is likely to continue.

The baht has shown its mettle with a standout performance in 2018 even as the currencies of emerging economies like Indonesia were routed " something likely to be welcomed by investors in the corridor, or EEC.

Among the big-name Chinese corporate entities that have sunk their teeth into the investment programme are Huawei, Alibaba Group Holding, and China Communications Construction Company.

The mega project is the brainchild of the military administration that seized power from a Shinawatra government in 2014, and has been built by the junta leader Prayuth Chan-Ocha as the cornerstone of plans to transform the country into fully developed status.

It seeks to replicate an investment programme from the 1980s, also called the Eastern Economic Corridor, that is partly credited with making the country the world's fastest growing economy from 1985 to 1994.

Thai Prime Minister Prayuth Chan-ocha. Photo: EPA

The EEC covers an area greater than 13,000 square km " more than six times the size of Shenzhen " and its development is enshrined under a 20-year economic plan devised by the junta that future governments are obliged to adhere to.

The zone spans three coastal provinces, with the tourist hub of Pattaya at its heart.

Piti Srisangnam, a professor of international economics and finance at Chulalongkorn University, said the election " in doubt for months after repeated delays " was an upside factor for investments.

"Politics is one factor, but at least the upcoming election is a good signal because there's a clear time frame of what to expect," Piti said.

Even before last week's developments, top officials overseeing the EEC emphasised how the project was insulated from political turmoil, which has become a norm in Thailand over the last two decades.

Kobsak Pootrakul, a former top junta official who is now part of a pro-military party contesting the elections, told This Week in Asia that careful plans had been laid to ensure investors' interests were protected whichever way the polls went. His Palang Pracharat party, which has picked Prayuth as its preferred prime ministerial candidate, is viewed as the favourite because of election rules seen as stacked against the Shinawatra bloc.

Kobsak said that by the time the new government was in place " expected to be some time in May " about "five or six projects" in the EEC would be underway.

"These main projects will attract investors and change the landscape," he said.

Among five key infrastructure projects that have been given the green light are the development of two seaports, an "aviation city" in the town of U-tapao, and another aviation maintenance, repair and overhaul hub being spearheaded by Thai Airways.

Last week, trials began at a facility in Chonburi " 90km from Bangkok and within the EEC " for a Huawei 5G network.

Self driving cars and robots are reportedly part of the endeavour, which comes even as the Chinese firm faces an onslaught of bans and restrictions in the west.

Alibaba " the Chinese conglomerate that owns the South China Morning Post " is another high profile EEC investor from the mainland.

Last year it said it would spend US$350 million to build a distribution hub in the EEC.

Alibaba founder Jack Ma meets Thai Prime Minister Prayuth Chan-ocha in Bangkok during a visit to announce the group's investment in the Eastern Economic Corridor. Photo: AP

Kanit Sangsubhan, an economist appointed as the EEC's secretary general, is another official who has sought to shore up investor confidence ahead of the coming election.

Speaking to Thai business reporters in January, he outlined how the EEC was enshrined in law " the EEC Act enacted by the junta came into effect last May " which in turn means any post-election government cannot unwind the project.

With regional economies facing headwinds arising from China's slow growth and its trade war with the US, the EEC is seen as a means to "create domestic potential against the global recession and will act as a buffer against risks," Kanit said.

While not a magic pill for Thailand's myriad woes " including its seemingly never-ending political turmoil " observers have said the project is important to lure in Chinese investment.

Piti, the Chulalongkorn University professor, said the development was one way Thailand could benefit from Beijing's trillion-dollar "Belt and Road Initiative" that seeks to strengthen sea and land links between China and Eurasia.

"Thailand will benefit from the Belt and Road Initiative. It will see more money pouring in, some related to the EEC, some not," he said. One direct impact of the EEC's initial upgrade of a port in Laem Chabang, the professor said, would be greater trade with China's Guanxi region.

Kanit acknowledged as much in a Bloomberg interview last year.

"Japan and Europe have been the major players for more than 30 years," he said, adding that "Chinese investors can play a bigger role in EEC development in the future. The EEC will be a balancing ground for investment."

Kevin Hewison, a long-time observer of Thai politics, suggested there was another key reason why Chinese investors need not be too concerned about getting burned if the EEC goes south: mainland investment in the zone may not be that high.

"Despite a lot of highly publicised deals with China under the junta, little has materialised," he said.

A US$7 billion high-speed rail link connecting Bangkok to Nong Khai " the border with Laos " remains in limbo years after it was first proposed.

The link was envisioned by China as a seamless land route connecting Kunming to Bangkok via landlocked Laos.

"The high-speed railway is one example: lots of talk and hot air, but little result," Hewison said.

This article originally appeared on the South China Morning Post (SCMP).

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