WikiLeaks Thailand #4: Thailand fails on refugees, police cooperation and extradition, the economy and Shincorp

June 14, 2011

[FACT comments: More than 3,500 US diplomatic cables posted to WikiLeaks relate to Thailand. We are posting these latest Thai releases  exactly as received in cooperation with other Thai free speech media. This is what America thinks of us. Only when govt is forced to be transparent will it become accountable to us, its stakeholders.]

“239893”,”12/15/2009 9:41″,”09BANGKOK3145″,”Embassy Bangkok”,”CONFIDENTIAL”,”09BANGKOK213|09BANGKOK611|09BANGKOK690|09BANGKOK706″,”VZCZCXRO6284

PP RUEHCHI RUEHDT RUEHHM RUEHNH

DE RUEHBK #3145/01 3490941

ZNY CCCCC ZZH

P 150941Z DEC 09

FM AMEMBASSY BANGKOK

TO RUEHC/SECSTATE WASHDC PRIORITY 9279

INFO RUCNASE/ASEAN MEMBER COLLECTIVE

RUEKJCS/SECDEF WASHINGTON DC

RHEHNSC/NSC WASHDC

RUEAIIA/CIA WASHINGTON DC

RUEHGV/USMISSION GENEVA 2180″,”C O N F I D E N T I A L SECTION 01 OF 05 BANGKOK 003145

SIPDIS

DEPARTMENT FOR EAP/MLS AND PRM/ANE, PRM/A

GENEVA FOR RMA

E.O. 12958: DECL: 04/10/2019

TAGS: PREF, PHUM, TH, BM

SUBJECT: THAILAND: A KEY, IF SOMETIMES RELUCTANT, PARTNER

IN REFUGEE AFFAIRS

REF: A. BANGKOK 213 (MIL-MIL)

B. BANGKOK 706 (LAW ENFORCEMENT)

C. BANGKOK 611 (DISEASE RESEARCH)

D. BANGKOK 690 (REGIONAL MANAGEMENT PLATFORM)

Classified By: Ambassador Eric G. John, for Reasons 1.4 (b and d.)

INTRODUCTION AND COMMENT

————————

1. (C) Introduction: Thailand is one of our closest partners

on refugee affairs, having hosted perhaps the largest number

of long-term refugees in the world over the past four

decades. Over the past thirty-five years, some half-million

refugees have moved through Thailand to resettle in third

countries, predominantly in the United States; no other

nation can make that claim. Nevertheless, Thailand has never

signed the 1951 Geneva Convention and has often proven a

reluctant partner in providing refuge and facilitating onward

passage to willing third countries on the full set of terms

we would prefer. The history of vulnerable groups entering

Thailand continues due to the poor governance and repressive

policies of its neighbors near and occasionally afar, as well

as Thailand\’s reputation for tolerance/lax enforcement; as a

result, the Royal Thai Government (RTG) maintains its

traditional concerns about being inundated by new inflows of

what it calls displaced persons.

2. (C) In practice, the RTG makes practical accommodations

towards certain vulnerable populations, while other arrivals

are formally regarded as illegal migrants with little

recourse to international standards of refugee protection.

Camp-resident Burmese minorities, currently numbering about

150,000 and in Thailand in large numbers since 1990, are

generally not returned to Burma, and the RTG has established

an asylum mechanism to consider their cases. The large scale

resettlement program of Karen and Karenni Burmese to the U.S.

receives Thai support. Other arrivals – North Koreans, Lao

Hmong, Rohyinga boat people, politically sensitive Chinese

and Vietnamese, and a virtual United Nations of \”urban cases\”

in Bangkok – are all officially subject to detention and

deportation, although in practice there are gradations of

treatment for each group. Such differences are based on the

RTG\’s weighting of the value of the bilateral relations with

the country of origin, and the personalities in charge at the

National Security Council (NSC) and Immigration Bureau.

Advocacy for non-Burmese groups involves intervention with

RTG officials in several different ministries.

3. (C) Comment. While there has long been a legal gray zone

in Thailand for vulnerable groups, we have generally been

able to achieve our objectives over the years working

persistently and quietly, often with multiple, simultaneous

challenges, from established populations likely to be

resettled to time-sensitive dissident/asylum cases. Our

advocacy goal on vulnerable groups in Thailand is to

encourage basic protections, to include non-refoulement, in

line with the 1951 Convention on Refugees, to which the RTG

is not a signatory. Thailand agreed to resettlement of the

largest group, ethnic minority Burmese, in 2005, thus

enabling us to provide the first available durable solution

for that static refugee situation.

4. (C) Comment, cont: Given the wide range of refugee-related

interests in Thailand, we must occasionally balance optimal

outcomes in a specific case with our equities in other

programs which depend on the same decision-makers and

relationships. This dynamic is currently in play as we head

to a seeming resolution of the Lao Hmong populations. With

the investment of political capital, we can eventually win

permission for high-profile individual cases to depart

Thailand, including political dissidents from China and

Vietnam. This cable is the final of a series which examines

crucial operational elements of the broad and deep U.S.-Thai

relationship that benefit U.S. interests; previous messages

have examined the mil-mil relationship; law enforcement

cooperation; health/disease research; and use of Thailand as

a regional management hub (Refs A-D). End Introduction and

Comment.

Ambivalent Attitudes Toward \”Refugees\”

————————————–

5. (SBU) Buffeted by the winds from thirty years of armed

conflict and near genocide in neighboring countries, Royal

BANGKOK 00003145 002 OF 005

Thai Government (RTG) attitudes towards vulnerable groups

entering Thailand are informed by a fear of being inundated

with new refugee inflows. RTG anxiety and conflicting

attitudes towards vulnerable people arriving in Thailand are

reflected in the language used by officials. The nine

established refugee camps, which have housed over a hundred

thousand ethnic minorities from Burma for almost two decades,

are officially referred to as \”temporary transit centers,\”

and the refugees themselves as \”temporarily displaced

persons.\” However, with UNHCR assistance the RTG has

established Provincial Admissions Boards (PABs), an asylum

mechanism which considers whether individual cases should be

allowed to stay in the camps.

6. (SBU) RTG attitudes are simpler for the other, smaller

vulnerable populations in Thailand – Lao Hmong, North

Koreans, Rohingya boat people, Chinese and Vietnamese

political dissidents, and people fleeing unrest in Somalia,

Pakistan, Sri Lanka and elsewhere. All are formally

considered as illegal migrants subject to detention and

deportation to the last country of embarkation, and no

domestic asylum mechanism exists to hear their cases. But

even within this non-Burmese universe of refugees, there are

gradations of treatment. RTG cooperation is provided to the

Republic of Korea in \”deporting\” arriving North Koreans to

Seoul, rather than to China (usually the last country of

residence) or to North Korea. Asylum seekers confined in the

main IDC in Bangkok are generally not deported if the

individuals managed to contact UNHCR and begin the refugee

status determination process before their arrest on

immigration law violations.

The Groups: The Burmese

———————–

7. (SBU) The sheer weight of numbers of ethnic minority

Burmese entering Thailand, primarily to escape village

relocation campaigns by the Burmese military (and associated

forced labor), forces practical accommodations on the part of

the RTG. About 130,000 are registered with UNHCR and the

RTG, but it is thought that some 20-50,000 additional people

are in the camps. New arrivals fleeing fighting are not

forced to return to Burma. In June, for example, about 2,000

Karen Burmese entered Thailand when attacked by a Burmese

government-backed militia and were allowed to remain in a

temporary site on Thai soil.

8. (SBU) The PABs were established in the late 1990\’s to

review whether arriving ethnic minorities from Burma are

\”fleeing fighting\” and should be allowed to stay in the

camps. At UNHCR\’s urging, \”fleeing political violence\” has

recently been added to the PAB screening criteria, and has

begun to be used in practice. In 2004-2005 the PABs formally

admitted almost all of the ethnic Burmese minorities in the

camps. A second round of PAB screening was completed in four

pilot camps in November, and the remaining five camps will be

processed in the first half of 2010. An estimated 30,000 or

so new refugees will be permitted to stay, partially

replacing the 54,000 who have departed for third country

resettlement-the great majority to the U.S.

Third Country Resettlement for Burmese

————————————–

9. (SBU) In 2005, the RTG agreed to allow a large-scale third

country resettlement program for ethnic minority Burmese. In

FY09, 14,300 refugees entered the U.S. from Thailand, one of

the largest such resettlement programs worldwide. About half

of the current population of refugees has expressed interest

in US resettlement. Although mildly disappointed that the

large scale program has not \”emptied\” the camps, the RTG

continues to support the effort as a measure to ease crowding

(and related tensions) in the largest facilities.

10. (SBU) The long term solution to the plight of the ethnic

Burmese refugees in Thailand is improvement in the human

rights situation in Burma. In the interim, donor attention

is focused on reducing their dependency on donor aid.

Refugees in Thailand are not permitted to work or travel

outside the camps, although in practice many in the larger,

more accessible camps do so. The RTG has been resistant to

attempts to link the major resettlement effort to a policy

change allowing limited steps towards self-sufficiency for

refugees. We have begun, along with other major donors in the

established camps, an advocacy campaign to leverage our

BANGKOK 00003145 003 OF 005

substantial investment in the resettlement program to

increase the policy space for refugees to work and grow food

outside the camps.

The Lao Hmong: Petchabun and Nong Khai

————————————–

11.(C) RTG policy towards Lao Hmong entering Thailand is

formed by the particular history of this group, and the

fervent desire to deter new arrivals. Some of the remaining

4,200 Lao Hmong in the army-run facility in Petchabun

province were drawn to Thailand by a U.S. resettlement

program in 2004-2005 of 15,000 Hmong from a long-established

settlement at Wat Tham Krabok. Others are longer-resident,

having migrated from Laos in the 1980\’s and 90\’s to live with

kinship groups of Thai Hmong. Nervous that a new third

country resettlement program would draw further numbers from

Laos, the National Security Council (NSC) directed that all

Lao Hmong should be treated as illegal migrants and returned

to Laos. A 2007 MOU with Laos stipulates that the group

should be returned by December 30, 2009.

12. (C) Actual implementation of the policy for the large

Petchabun group is in the hands of the Royal Thai Armed

Forces Headquarters (RTARF), which treats the issue as one of

several (including drug and contraband trafficking) addressed

in a regular Thai-Lao bilateral border commission. Over the

past 18 months, about 2,800 people from Petchabun have been

returned by the RTARF to Laos, induced by a combination of

monetary incentives and threats of forcible deportation.

Recent RTG pronouncements indicate that the remaining

population – including some 500-plus identified in an

internal screening process in January 2008 as having

protection concerns – may well be returned to Laos in the

coming weeks.

13. (C) A second humanitarian situation is presented by the

detention of 158 Lao Hmong (including 87 children) in the

small immigration jail at Nong Khai, along the border with

Laos. The RTG attempted to deport the group, which has

received UNHCR refugee status, in 2006. The forced return

was stopped mid-stream after international community

objections, and the group has languished in Nong Khai for

three years. We have eased the crowding by constructing a

temporary day-time rest facility outside the IDC and are

funding nurse and teacher visits by IOM. In order to find a

solution for this group, we have begun discussing with UNHCR

(and other resettlement countries) the possibility of a

exceptional, transit-in-Laos mechanism for third country

resettlement. The concept rests on the willingness of the

refugees to participate, which in turn will depend on the

credibility of security guarantees by the Government of Laos

during a planned short stay in Laos. Another 267

UNHCR-recognized Lao Hmong refugees live freely in Lopburi

province and Bangkok, and their fate complicates any solution

for the Nong Khai group.

Asia\’s Boat People: The Rohingya

——————————–

14. (SBU) The Rohingya, a Muslim minority group historically

resident in Burma\’s Northern Rakhine State along the border

with Bangladesh, are a de jure stateless people stripped of

even the most basic civil rights by the Burmese regime. For

several years, many Rohingya men have set sail in rudimentary

vessels from Burma and Bangladesh in an attempt to reach

hoped-for employment in Malaysia. The first inhabited

islands encountered on the sea route belong to Thailand, and

many boats landed there. In November 2008, local military

commanders decided to begin pushing back to sea new arrivals

as a deterrent. Lacking resources, local civil defense

groups (typically local villagers) were given brief crowd

control training and charged with rounding up and returning

the Rohingya back to sea.

15. (SBU) Immediately after the first press reports surfaced

of the push-backs in January 2009, we visited the arrival

sites, advocating better treatment of the Rohingya boat

people with local civilian defense volunteers and Thai

military officials. The temporary policy was quickly

abandoned, and the inhabitants of the next boat to arrive

were turned over to immigration officials for normal

processing. UNHCR was given access, and after the death of

two of the detainees in a local immigration detention center

(IDC) the group was moved to Bangkok\’s main IDC in August,

BANGKOK 00003145 004 OF 005

where they remain. It appears this more humane policy will

be followed during the upcoming sailing season (November to

May, when seas are calmer.) We do not yet know what the

ultimate disposition for this group will be.

The North Koreans

—————–

16. (C) Reflecting its pragmatic approach to certain

vulnerable groups, the RTG permits North Koreans entering

Thailand illegally to resettle in the Republic of Korea (ROK)

and, in much smaller numbers, in the U.S. The accommodation

takes into account the relatively small numbers (1-2,000 per

year), concerns regarding overcrowding in Bangkok\’s main

immigration jail, and effective lobbying by the ROK

government, an important trade partner and market for Thai

labor. The special policy is publicly presented by the RTG as

\”Koreans being deported to Korea\”, with geographic

distinctions between North and South conveniently blurred.

UNHCR is not permitted a protection or refugee status

determination role by the RTG. The \”deportation\” requires

that all North Koreans are required to report to immigration

detention before they are allowed to depart Thailand.

Detention time depends on processing speed, and is currently

is about 3-4 weeks for ROK-bound cases.

17. (C) U.S.-bound cases fortunate enough to have avoided

arrest by Thai police can wait out processing steps in

private accommodation or a local NGO shelter, and then enter

the IDC when travel-ready to pay the fine and be \”deported\”

via Seoul. For those arrested before U.S. processing is

complete, waits in immigration detention can be months-long.

After Ambassadorial meetings with the Immigration

Commissioner, we are now generally able to gain access for

the required U.S. processing steps to be completed. We are

working with IOM to improve physical conditions in the IDC\’s

cells, and to provide medical care for the detainees. As of

December 13, only six North Korean cases/seven individuals

remained in the active U.S pipeline in Thailand. Stricter

control along the China-North Korea border, and refugee

disenchantment with the longer wait times (compared to the

ROK processing) needed for the U.S. resettlement program,

appear to be the causes of the decline in numbers.

The Political Dissidents (PRC and Vietnam)

——————————————

18. (C) High-profile political dissidents from Vietnam and

China make their way, either alone or more often with the

help of advocacy NGOs, to Bangkok in an attempt to gain U.S.

resettlement. (Note: Political activists from Burma, found

mostly in the town of Mae Sot along the border, are not

allowed to resettle unless they are in an established camp.

Few enter, as they enjoy far greater freedom of movement and

communications outside. End Note.) Vietnamese and Chinese

dissidents normally enter Thailand without passport and/or

visa, subjecting them to arrest and setting the scene for

high-level interventions with RTG policy makers to enable

them to depart Thailand. A recent case, involving the family

of a prominent Chinese dissident, required the Ambassador\’s

personal intervention with the Minister of Foreign Affairs.

19. (C) The procedure for obtaining the exit permit in such

cases is deliberately left unclear, and in practice we must

make separate, simultaneous representations to the National

Security Council, Ministry of Foreign Affairs, and the

Immigration Commissioner. All cases require, at a minimum,

payment of a fine for illegal entry into Thailand. Ideally,

approvals are received from more than one bureaucracy,

although ultimately the Immigration Commissioner is the key

player: like any refugee, dissidents must pass through

immigration departure at the main airport before leaving

Thailand for the U.S. The process, which can take several

weeks, takes significant investment of political capital on

our part. Our requests cannot be repeated too often to avoid

the perception that we are organizing an \”underground

railroad\” of politically sensitive cases through Thailand.

Low-key discretion without publicity is also key,

particularly given Thailand\’s desire to improve relations

with countries it viewed a generation ago as adversaries.

The Urban Cases: Bangkok as Asia\’s Crossroads

———————————————

20. (SBU) UNHCR currently has 2,000 so-called \”urban cases\”

BANGKOK 00003145 005 OF 005

on its books in Bangkok, a catch-all category which includes

Chinese Falun Gong, Pakistanis, Sri Lankans, Khmer Krom, West

Africans, and others. All are attracted to Thailand by its

status as a regional transportation hub, and its reputation

as a center for fraudulent documents and lax law enforcement.

The common denominator for urban cases is that many are in

immigration detention in Bangkok\’s main jail, a crowded,

dismal facility. Many spend months there, frozen in place by

the lack of options for their departure. Access for

resettlement waxes and wanes depending on the personal

policies of the Immigration Commissioner. Until September

2008, access (and therefore resettlement) was strictly

limited. Since then, a new commissioner has proven more

flexible, and we receive regular referrals from UNHCR.

Access by our other partners in the refugee resettlement

program (USCIS, IOM and Overseas Processing Entity) is

normally permitted without significant delay.

Regional Refugee Work out of the Bangkok platform

——————————————— —-

21. (U) This message has focused on our efforts on refugee

protection and resettlement in Thailand, as part of a series

of deep and broad operational partnerships forged with Thai

counterparts over the past several decades (reftels). In

common with many other Mission Thailand sections, the Refugee

and Migration Affairs office has a regional role as well. A

large refugee resettlement program from Malaysia (over 5,000

people this FY) is managed from Bangkok, and we travel also

to Cambodia, Laos, Bangladesh, and China to assist smaller

refugee populations.

JOHN

“197904”,”3/20/2009 4:14″,”09BANGKOK706″,”Embassy Bangkok”,”CONFIDENTIAL”,”09BANGKOK611″,”P 200414Z MAR 09

FM AMEMBASSY BANGKOK

TO SECSTATE WASHDC PRIORITY 6457

INFO ASSOCIATION OF SOUTHEAST ASIAN NATIONS

AMCONSUL CHIANG MAI

DEPT OF COMMERCE WASHINGTON DC

DEPT OF HOMELAND SECURITY WASHINGTON DC

DEA HQS WASHINGTON DC

DEPT OF JUSTICE WASHDC

USCINCPAC HONOLULU HI

JIATF WEST

“,”C O N F I D E N T I A L BANGKOK 000706

DEPT. FOR INL, EAP AND DRL

E.O. 12958: DECL: 02/19/2014

TAGS: ASEC, PHUM, PTER, SNAR, PREL, PARM, PGOV, KCRM, KJUS,

TH

SUBJECT: LAW ENFORCEMENT COOPERATION BETWEEN THAILAND AND

THE UNITED STATES RUNS DEEP

REF: BANGKOK 611

Classified By: Amb. Eric G. John. Reason: 1.4 (b) and (d).

1. (C) Summary: As one of five U.S. treaty allies in Asia,

and the only such on the mainland of SE Asia, straddling a

major force projection air/sea corridor, and as one of Asia\’s

democracies, Thailand remains crucial to U.S. interests in

the Asia-Pacific region and beyond. For decades law

enforcement (LE) cooperation has been a core component of a

broad and deep relationship which has served both countries,

interests. From an initial primary focus on

counter-narcotics efforts, chiefly in combating heroin

trafficking from the Golden Triangle and promoting

alternative development to opium cultivation within Thailand,

the LE relationship has expanded greatly, defending U.S.

interests and persons. For instance, the U.S. and Thailand

co-host the International Law Enforcement Academy (ILEA) in

Bangkok, a regional platform to promote law enforcement

professionalism. Nearly every federal law enforcement agency

and even some local ones are represented in the Embassy,

often with regional responsibilities. The Embassy\’s Law

Enforcement Working Group (LEWG) has 18 different agencies

and offices as members.

2. (C) American law enforcement agencies interact with their

Thai counterparts smoothly on the whole, and the

counter-narcotics relationship has been a model for LE

development. In recent years the USG\’s LE emphasis has

expanded from counter-narcotics to encompass all aspects of

transnational crime, as well as to building capacity in the

Thai criminal justice system (CJS). This includes reforming

training and education and enhancing professionalism among

police, prosecutors, and judiciary. Thailand has

traditionally been one of the top source countries for

extradition of criminals to the U.S., though success in this

area cannot be taken for granted and requires constant

attention. Thailand cooperates well with the USG on

counter-terrorism issues, but needs considerably more

capacity in that area.

3. (C) This cable is one in an occasional series on key

elements of U.S.-Thai relations that are crucial to U.S.

interests in the region and beyond. These components of the

bilateral relationship do not often get headlines. One such

addressed MIL-MIL relations (reftel), while others describe

intelligence cooperation, refugee issues, and cooperation in

health programming and disease research (see reftel). End

Summary.

4. (C) Comment: Post\’s large LEWG, positioned to help build

capacity in the Thai Criminal Justice System, sees a real

opportunity in recent RTG requests for American assistance in

effecting reforms to its CJS. We intend to approach this in

a systematic way through the LEWG, building upon existing

relationships and seeking new ones. We regard this kind of

institution-building as an effective way to assist an ally in

a politically troubled time by bolstering a crucial but

flawed public institution. We also regard it as the kind of

assistance most likely to be esteemed by the Thai public,

regardless of their political affiliation. While improving

RTG capacities is important in and of itself, more important

is the increased Thai capability to support U.S. LE and

policy objectives in the region. End Comment.

A Strong Foundation

—————–

5. (C) The U.S. started investing in Thai law enforcement

agencies in the 1950s as part of the effort to contain

communism. The Border Patrol Police, Special Branch Police,

and the Office of the Narcotics Control Board (ONCB), among

other units, were established with U.S. funding to serve as

regional partners. For four decades starting in 1963, when

DEA\’s predecessor organization began operations in Thailand,

the main thrust of USG-RTG LE cooperation was in counter-

narcotics. It focused chiefly on fighting the Golden

Triangle heroin trade both through heroin interdiction and

opium eradication, with attendant crop substitution efforts.

DEA now maintains offices in several parts of the country,

enjoying remarkable freedom of action in-country and high

levels of cooperation (including the right to carry weapons

and freely conduct investigations, with the RTP making the

final arrests). This special relationship has benefited

American LE greatly, and the Thai clearly feel that they have

had the benefit of a large, well-trained and effective

organization as a partner. This is the high road to

successful capacity building in Thailand, and should be the

model for other LE development efforts. The U.S. sought to

expand this type of bilateral success throughout the region

by the launching of the International Law Enforcement Academy

(ILEA) in Bankok in 1998.

6. (C) This investment in relatioships and institutions

over decades has yielded he American official community

preferential treament in security-related matters by the

Royal Thai Police (RTP) – in intelligence sharing, in

protction of American installations and personnel, andin

overall operational leeway in-country. The U-Thai jointly

sponsored ILEA, with its regional andate to improve LE

capacity and coordination, and the transformation by INL

Bureau of the formerNarcotics Affairs Section (NAS) into a

regional ransnational Crime Affairs Section (TCAS), make

hailand a logical and welcoming focal point for mutilateral

efforts to improve international crime-fighting capacity

across the region.

7. (SBU) The leading areas of current LE cooperation are:

extradition and mutual legal assistance (Thailand s the

third largest worldwide source of wanted ciminals extradited

to the US, with pedophiles a frequent target);

counter-narcotics, counter-terrorism, trafficking in persons

(TIP), intellectual property (IP) protection,

money-laundering, cyber- and other white-collar crime, and

refugee issues. The USG\’s numerous parallel bilateral

efforts are aimed not just at eliciting and sustaining the LE

cooperation we want, but also at bolstering the Thai criminal

justice system (CJS) as a whole with the long-term goal of

making of it a strong and respectable public institution. As

global priorities shift and budgets for Thai-related

programming diminish, the challenge is to keep nurturing a

relationship that has proven so productive over the years.

Dangers Old and New

————–

8. (C) The Thai CJS as a whole stands in need of

comprehensive development, streamlining, and reform. While

better than what often pertains in other countries in the

region, Thai LE is still very weak by Western standards and

the police are at the heart of the problem. Their

professional skills remain quite low (the exceptions being

SWAT and special units trained for counter-narcotics

operations), yet they face a whole new set of challenges

given new developments in the international crime situation

(especially new patterns in narcotics trafficking and

international terrorism) and Thailand\’s current turbulent

domestic political situation. For all their shortcomings,

the RTP are helpful to the USG, so it is clearly in our

interests to improve their performance.

9. (C) Thailand\’s borders are long and extremely porous and

the country is therefore vulnerable to international criminal

elements of all kinds, many of them equipped with tools and

skills the country\’s LE agencies do not yet have. The courts

lack most of the accoutrements of a modern justice system and

the police, prosecutors, and judiciary do not interact

effectively. Instead they represent jealous fiefdoms, and

the whole system relies upon confessions rather than

adjudicated evidence. In addition to international organized

crime, terrorism and institutional shortcomings, the RTP and

the CJS at large currently face two serious domestic crises

for which they are not adequately prepared: they lack the

proper tools to respond to the political unrest in Bangkok,

and they are not effective in their approach to the

Malay-Muslim ethno-nationalist insurgency in the deep south

of the country.

10. (C) Apart from a distinct regional identity based on the

historical Kingdom of Pattani, the southern insurgency is

fueled by a communal sense of grievance based on an overall

lack of justice. The police and judiciary have historically

been part of the problem in the deep south. Corrupt and

abusive police units coupled with a weak and opaque judicial

system have inflamed the long-standing animosity of majority

Malay-Muslim population towards the central government. As

these institutions have exacerbated the problems in the

South, their reform is crucial to any RTG effort end the

violence.

Help Wanted

———

11. (SBU) All the shortcomings of Thai LE notwithstanding,

some well-placed elements within the Thai CJS, including

high-ranking police and judiciary, are trying to make the

system turn a corner. They need help with such a large job

and are turning to U.S. counterparts for assistance in

reforming and up-grading both the curricula for education and

in-service police training across the board. Thai

prosecutors and judiciary have welcomed offers of exchanges

and opportunities for consultation with American

counterparts. With Embassy Bangkok\’s large inter-agency

LEWG, the Mission is well-positioned to respond to this

request for capacity-building and we regard this as an

opportunity to effect profound changes over the medium term.

An example: The RTP request for help includes

institutionalizing training in human rights and community

policing – areas in which the police in Thailand have been

wholly wanting in the past.

12. (U) The paragraphs below describe the relationships

between the RTG and the main parts of the American security

and LE community in Thailand, encompassing a wide range of

official contacts.

US Department of Justice Attach

—————————

13. (SBU) USDOJ is represented by five offices in the

Embassy. The DOJ Attache is an experienced federal prosecutor

assigned to the DOJ\’s Office of International Affairs, and

represents DOJ in all criminal matters in Thailand and other

countries in Southeast Asia. In particular, the DOJ Attache

works closely with U.S. and foreign LE agencies to facilitate

prosecutions, extradition, and mutual legal assistance for

operational matters. He also provides the RTG with advice on

criminal justice issues generally. Two treaties, one on

extradition and one on mutual legal assistance, allow and

support these cooperative efforts. On extradition, the DOJ

Attache cooperates directly with the Attorney General of

Thailand, the Ministry of Justice, the Ministry of Foreign

Affairs, and the RTP. Despite a history of general

cooperation, it is in the operations of this office that the

shortcomings of the Thai criminal justice system become clear

in cases of interest to the USG.

14. (SBU) Over the past 30 years 135 defendants have been

extradited to the U.S. There have also been dozens of direct

deportations to the U.S. The defendants have been prosecuted

for offenses ranging from murder and other violent crimes,

including child molestation, through narcotics trafficking

fraud and money laundering, to IP violations, cyber-crime,

and corruption. The DOJ Attache is the representative of the

\”Central Authority\” for the USG under the Mutual Legal

Assistance Treaty, which permits requests for evidentiary and

other assistance in criminal cases, such as those for

records, interviews, and assets forfeiture. The Attache

works directly with US and Thai LE Agencies to ensure the

execution of American legal requests in Thailand. The

Attache also routinely provides expert legal advice to USG

Agencies in the Mission.

15. (C) While overall numbers of extraditions from Thailand

are high and a positive point in the bilateral relationship,

there can be glitches, and some significant high profile

cases require intensive high-level USG involvement. At

present, the extradition case of Russian arms trafficker

Viktor Bout, wanted in New York on charges of conspiring to

provide arms to terrorists, is an example. Bout was arrested

a year ago by the RTP with DEA assistance, and the case

continues to slowly work its way through the Thai legal

system. Then-President Bush mentioned the importance of the

case the then-PM Samak in August 2008, during a visit to

Bangkok, and there have been several telephone exchanges

regarding Bout between the American and Thai Attorneys

General. The Ambassador and other Mission officials raise

the case frequently at all levels of the RTG. This has been

especially important in the wake of recent suggestions that

efforts may be afoot by Bout\’s associates to influence the

judicial process. Such influence has a precedent in the case

of Iranian national Jamshid Ghassemi, whose extradition to

the U.S. for arms export violations was denied by the Thai

courts last year, following intense pressure from Iranian

authorities. The Bout extradition case represents a

difficult test of the rule of law in Thailand, and we are

determined that the outcome of the Ghassemi will not be

repeated.

Regional Security Office (RSO)

————————-

16. (SBU) The RSO\’s main mission is protection of the

Embassy, other American facilities, and the American

community. To that end RSO maintains an active relationship

with the RTP, particularly through the Diplomatic Security

Anti-Terrorist Training (ATA). The RSO brings ATA

instructors to Thailand about 12 times annually to conduct

training in intelligence, VIP protection, canine operations,

small arms, and similar subjects. For its part the RTP

Commissioner has stated that the RTP are prepared to offer

the US Embassy whatever level of force is required for

effective protection. In fact a police SWAT unit has been

detailed for additional Embassy protection for almost two

decades (since the first Gulf War), and this detail is always

greatly augmented in advance of any possible demonstration or

perceived threat.

17. (SBU) Two recent incidents illustrate how easily Thai LE

can be brought into play by an American request. In the

first, an AMCIT being held against her will in a hotel by a

third-country national managed to get a cell phone call to

her family in the US, who notified the Embassy. The ARSO

simply exited the Embassy, borrowed one of the SWAT officers

from the protection detail at the front gate, and went

directly to the hotel in time to free the woman. In the

second, after the Embassy received information that a felon

wanted in the U.S. for particularly horrific sex crimes was

in Thailand, the RTP\’s Special Branch put a ten-person

surveillance team on the streets to work with the RSO until

the man was apprehended, two-and-a-half months later.

Drug Enforcement Administration (DEA)

—————————-

18. (U) For DEA, the main mission has always been narcotics

and narcotics-related intelligence (to a lesser extent money

laundering and other satellite narco-crimes). DEA has

uniquely fruitful working relationships with 13 RTG agencies

and offices whose operations have some bearing upon narcotics

issues.

19. (SBU) The main target drug in Thailand for a generation

was opium and its heroin derivative. Opium cultivation

within Thailand was at last suppressed to the vanishing point

during the 1990s, chiefly because RTP Sensitive

Investigations Units (SIUs), modeled on American units, were

trained to a keen operational edge and deployed effectively,

at times even against narcotics operations in neighboring

ungoverned spaces. Those units can now serve as a model as

the USG seeks to improve the professional standing of other

elements of the RTP. However, a new drug threat,

methamphetamine, has emerged over the past decade, presenting

a new set of enforcement challenges. DEA also works with the

RTG\’s Money Laundering Office (AMLO), identifying illicit

assets for seizure, and has launched capacity-building

programs intended to improve the RTG\’s access to

international narcotics and other crime intelligence sources.

The organized crime aspects of the narcotics trade has

compelled a regional approach, and DEA has accordingly

deployed in several neighboring countries.

20. (SBU) In 45 years of productive LE cooperation DEA and

their Thai counterparts have worked together on many

thousands of individual cases. In 2008 alone there were 84

case investigations resulting in 1,150 arrests. Nearly 8

metric tons of marijuana, 800 kilograms of methamphetamine,

several hundred kilograms of heroin and large amounts of

precursor chemicals were seized, with a total value of $13.7

million. Several priority target organizations were

effectively dismantled by LE work during 2008, the

highest-profile case being that of the arms smuggler Viktor

Bout (para. 15, above).

Transnational Crime Affairs (TCAS)

————————-

21. (SBU) The Narcotics Affairs Section of the Embassy, the

INL Bureau\’s presence at Post, traditionally supported the

narcotics enforcement efforts of DEA with funding for

capacity building. In July 2008 the NAS became the

Transnational Crimes Affairs Section (TCAS), with a regional

role and an expanded mandate to target all aspects of

transnational crime. In addition to narcotics the section

now encompasses more capacity-building, addressing a range of

issues of high importance to the USG, such as terrorism,

trafficking in persons, intellectual property rights

protection, cyber-crime, money laundering, false travel

documents, organized crime, and sex crimes against minors.

Employing the skills of USDOJ experts from the Offices of

Overseas Prosecutorial Development and Training (OPDAT) and

International Criminal Investigative Training Assistance

Program (ICITAP), TCAS is preparing Thai criminal justice

agencies and organizations to play more effective and

civic-friendly roles domestically as Thailand moves through

an era of political tumult, as well as for new international

criminal challenges.

22. (SBU) At RTG request, TCAS is mounting a large-scale

training program for police and consultation programs for

Thai legal sector entities. The first goal is to reform and

improve education and in-service training curricula for

approximately 170,000 Thai police officers and NCOs. This

will be pursued by inserting not only a new range of

investigatory skills, but also through sustained exposure to

human rights, humane crowd control, and community policing.

These things are new to the training of Thai police, but the

RTP hierarchy, desirous of improving their public standing,

has thus far welcomed new suggestions. The ICITAP Law

Enforcement Policy Advisor focuses on police capacity in such

areas as crime scene management, intelligence management,

criminal investigations, humane interrogation, instructor

development, and crisis management. A parallel forensics

program seeks to build reliance upon scientific evidence in

accordance with international standards.

23. (SBU) The OPDAT Regional Legal Advisors concentrate on

Thai court procedures and prosecutorial capacity. The Thai

judiciary and Attorney General\’s Office have also welcomed

the participation of American legal experts, including

ranking American judiciary, for discussions of problems and

logjams in the Thai court system. Another dimension of the

LE capacity-building is helping Thailand to improve

coordination with its ASEAN neighbors, especially those with

which it shares borders. TCAS seeks to have the Thai involve

their neighbors in training programs funded by INL as the

most effective means of achieving better coordination. This

leads naturally to the following topic; the International Law

Enforcement Academy.

The International Law Enforcement Academy (ILEA)

————————————-

24. (SBU) Founded in 1998-99, ILEA has been offering law

enforcement training to 10 Southeast Asian countries for a

decade. The ILEA model worldwide has shown the value of

bringing police and other LE personnel from many countries

together for a common learning experience, and in having that

curriculum decided largely by the USG. American law

enforcement thereby gains an opportunity to project itself in

the region, and the police officers of countries otherwise

not always particularly cooperative can build professional

relationships while learning new skills. ILEA certificates

and diplomas have become coveted professional credentials in

police departments across the region. As of the beginning of

2009, ILEA has trained some 9,000 LE officers in a range of

skills essential to good police work. By making community

policing and human rights an inherent part of many course

offerings, ILEA materially advances the USG\’s human rights

agenda in East and Southeast Asia.

The Legal Attach (LEGATT)

———————

25. (SBU) The Embassy\’s FBI representative, or LEGATT, like

the DOJ Attach, has an active operational interface with

Thai LE counterparts, including all the branches of the RTP.

The LEGATT\’s Office is in charge of requests for LE

assistance to the RTP from the U.S. Federal Bureau of

Investigation, with particular emphasis on terrorism, federal

fugitives and cyber-crime. The LEGATT has built a

particularly close relationship with the Thai Department of

Special Investigations, supposedly an organization modeled on

the FBI, but as yet unable to function to the level of its

mandate, and in need of considerable capacity-building and

mentoring.

Economic Section, Foreign Commercial Service, and USPTO

———————————-

26. (C) The Economic Section (ECON), The Foreign Commercial

Service, and the Regional IPR Officer from the U.S. Patent

and Trade Office (USPTO) all play a role in facilitating law

enforcement on economic issues. Since Thailand is a nation

with which the US has a business and investment treaty giving

special status to American business interests, the

functioning of the Thai civil court system is of particular

interest to the USG, and to an active and vocal American

Chamber of Commerce. The Thai have frequently been receptive

to our suggestions (for example, creating an Intellectual

Property Rights Court at USG behest). The Economic Section

of the Embassy has the lead on TIP issues. ECON produces the

annual Trafficking In Persons report in addition to regular

reporting throughout the year. Thailand, a middle-income

economy surrounded by much less developed countries, and

having long and porous borders, faces a large and diffuse TIP

problem. The RTG has taken many steps to address TIP issues

over the years, particularly in the areas of legislation,

care for victims, public awareness, and investigation of

labor abuses. Nonetheless, its ability to push forward and

track TIP-related investigations, prosecutions, and

convictions is limited by a lack of resources. Post believes

that with additional staff (police officers and prosecutors)

dedicated to TIP cases, more streamlined and dedicated

bureaucratic procedures, and improved case tracking systems,

the Thai could achieve greater prosecutorial success. The

Economic Section also monitors the operations of Thai

Customs, the IPR police and courts, labor issues, and Thai

performance in the protection of the environment and

endangered species.

27. (SBU) The Regional IPR Officer, representing USPTO,

provides expertise for USG IPR efforts throughout the region.

There have been episodic improvements in Thai IPR

enforcement in recent years, but the continuing political

uncertainty has made sustained enforcement, and engagement on

key IPR issues, a serious challenge. The Mission continues

to support a robust IPR training and assistance regime, with

the support of several USG agencies (ECON, the LEGATT,

Customs and Border Protection (CBP), and USAID), and engages

both the RTG and business leaders to gain traction on the

issue. The Commercial Section chairs the IPR Working Group

wherein the Regional IPR Officer has put forward a work plan

to engage Thai LE and administrative officials on IP. Most

training and technical assistance on IP emerges from USPTO.

Department of Homeland Security, Immigration and Customs

Enforcement (ICE)

——————————————— ——-

28. (U) The Immigration and Customs Enforcement (ICE)

division of DHS investigates labor law violations,

immigration scams, financial crimes, trafficking in weapons

and persons, and the activities of pedophiles. The office

works closely with Thai law enforcement and NGOs to assist

victims of child sex tourism, with the goal of successful

prosecutions. Since 2003, when the office opened, ICE

investigators have pursued more than 500 cases in cooperation

with Thai authorities.

JOHN

“93736”,”1/24/2007 9:18″,”07BANGKOK499″,”Embassy Bangkok”,”UNCLASSIFIED//FOR OFFICIAL USE ONLY”,”07BANGKOK261″,”VZCZCXRO6559

PP RUEHCHI RUEHDT RUEHHM RUEHNH

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TO RUEHC/SECSTATE WASHDC PRIORITY 4325

INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY

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RUEHBY/AMEMBASSY CANBERRA PRIORITY 6581

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SIPDIS

SENSITIVE

SIPDIS

STATE FOR EAP/MLS AND EB

TREAURY FOR OASIA

COMMERCE FOR EAP/MAC/OKSA

PASS TO FEDERAL RESERVE SAN FRANCISCO FOR DAN FINEMAN

PASS TO FEDERAL RESERVE NEW YORK FOR MATT HILDEBRANDT

PASS TO USTR FOR WEISEL

SINGAPORE FOR SUSAN BAKER

E.O. 12958: N/A

TAGS: ECON, EFIN, PREL, PGOV, TH

SUBJECT: RECENT THAI ECONOMIC POLICY – WHY?

REF: A. BANGKOK 261

B. BANGKOK 152

C. 06 BANGKOK 7650

D. 06 BANGKOK 7504

E. 06 BANGKOK 7484

F. 06 BANGKOK 7435

BANGKOK 00000499 001.2 OF 005

1. (SBU) Summary. Investor confidence in Thailand has

suffered a series of shocks over the past 40 days. The

introduction of more stringent capital controls effectively

limiting new investment, a series of bombs in Bangkok on New

Year\’s Eve, and proposed amendments to the Foreign Business

Act (FBA), all have combined to shake both foreign and

domestic confidence in the economic management capability of

the current government. This has been exacerbated by the

regime\’s failure to consult with stakeholders, rapid

policy-shifts and apparent lack of concern about the

short-term impact of their decisions. Despite this, most

economists continue to forecast Thailand\’s GDP for 2007 to

come in at about the same rate of growth as was achieved in

2006; 4-5 percent. Despite the benefits of a decline in oil

prices and continued strength in Thailand\’s export markets,

the perception that the current government is economically

and politically inept will likley cause Thailand\’s economy to

underperform, especially in comparison to its regional

competitors. End Summary.

2. (U) On January 17 the Monetary Policy Committee (MPC) of

the Bank of Thailand (BoT) announced a 19 basis point

reduction in the central bank\’s interest policy rate to 4.75

percent (the 1-day repurchase agreement rate which replaced

the previous policy benchmark based on the 14 day repo). The

reason given by the MPC for their action was \”Latest economic

indicators point towards a slowdown in domestic demand. In

particular, consumption and investment…showed a continued

moderation. On the other hand inflationary pressures are

expected to moderate…\”

3. (SBU) As we have reported (reftels), economists have been

predicting for over a year that domestic demand and private

investment would grow only modestly in 2006, and they were

proven correct with these indicators growing at about 3

percent and 2.9 percent respectively. The only driver to the

economy was the export sector which grew about 16 percent in

US$ terms. With the 14 percent appreciation in the baht last

year, however, the effective contribution of exports to

economic growth was much less but still was sufficient to

achieve a 4.6 percent increase in GDP for the year.

Confidence Lagging

————————

4. (SBU) The reasons for the poor consumer and investor

confidence in 2006 were a combination of the political

turmoil in the run-up to the September coup, concerns about

an economic slowdown in Thailand\’s major export markets, and

the high price of oil in an economy that imports all its

crude oil and is highly energy inefficient. The coup

initially provided a lift to sentiment since it was seen as

resolving the political unrest and providing a clear path to

new elections along with a technocratic government that would

formulate economic policy untainted by political and

corruption-related factors.

5. (SBU) In fact, the economic mood in Thailand is now quite

negative. Offsetting the good news of the recent moderation

of oil prices has been a series of policy decisions, along

with the New Year\’s Eve bombings, that are widely seen to

have been either badly managed, politically motivated, or

both. The military-installed government is under growing

criticism for not yet bringing any corruption charges against

former PM Thaksin, for heavy-handed efforts to intimidate the

media, and a general air of ineptitude.

Capital Controls – Why so \”Draconian\”?

—————————————-

BANGKOK 00000499 002.2 OF 005

6. (SBU) There is little doubt that Thai exporters\’ margins

were under severe pressure from the appreciating baht before

new capital controls were implemented on December 19. Even

those who supported the measures at the time now seem to be

having second thoughts about the magnitude of the BoT

response to the problem, terming the measures \”draconian\” and

\”using a sledge hammer to kill a fly\”. Financial market

participants with whom we have spoken, including Stock

Exchange of Thailand management, bemoan the \”clear lack of

understanding of how markets work\” within the BoT and the

failure to consult with market participants beforehand. An

SET senior official told us \”we are officials charged with

running the stock market, yet they (BoT) never bothered to

ask us what might happen when they put in their measures

because they don\’t trust us. Actually, they don\’t trust

markets.\” Similar criticisms were directed at Deputy PM (and

former BoT Governor) Pridiyathorn. The CEO of a major stock

broker said \”what sort of policy do you expect from a

regulator\”? Pridiyathorn did not help his case when he

announced that the market\’s steep decline in the wake of the

capital controls announcement was \”illogical.\”

7. (SBU) Senior officials at the BoT continue to insist that

they had no choice but to act as they did; arguing that they

could not segregate capital flows and so had to apply the

reserve requirement to all incoming capital (a policy quickly

reversed for equities and that has been slowly and quietly

liberalized on a continuing basis. Many believe that the

controls will be mostly lifted within another month). Deputy

Governor Atchana, when asked why the BoT did not try and use

interest rate reductions as a first step to reduce baht

appreciation replied that the Bank was concerned about the

Ministry of Commerce lifting price controls on about 100

controlled items and what such an action might do to

inflation. She also argued that more severe action was needed

to drive out the speculators considered to be the cause of

the rapid baht appreciation and cutting rates \”was just what

the speculators want us to do. Why should we reward them.\”

Several observers told us that Pridiyathorn\’s philosophy is

that speculators only respond to \”severe punishment\” and that

over time, markets always revert to their underlying value

regardless of short-term shocks.

8. (U) The SET was the worst performing stock market in Asia

in 2006, down about 4.8 percent for the year. Even before the

capital controls were put in place, the market still

underperformed its regional competitors, up only 3.5 percent

through the end of November on the back of foreign investors

buying over net US$2 billion (Thais were net sellers

throughout the year). Over the past month, the SET has

declined 9 percent while Asia ex Japan has appreciated 3

percent. In spite of recent polices, foreigners have sold

only a net US$700 million of their Thai equity holdings.

Reasons given for this are 1) long-term funds are content to

maintain their exposure to Thailand to be in line with the

MSCI global index benchmark, 2) with limited liquidity in the

market, funds were concerned about moving the market further

if they attempted to sell too quickly and 3),hedge funds have

come back into the market over the past week expecting a

bounce-back because the market is seen as being unusually

cheap. As an indication of the lack of trading volume,

year-to-date foreigners were net buyers of US$206.3 million

in equities and contributed 42.1 percent of total market

turnover.

No Keeping the Baht Down

————————–

9. (SBU) Some local observers believe that the BoT analysis

of the causes of the baht\’s appreciation was both overly

simplistic in blaming the problem on \”speculators\” and not

simplistic enough given the increasing current account

surpluses in the last half of the year. Some note that,

despite BoT rules requiring exporters to remit all their

export earnings and convert them to baht within 14 days of

payment, many kept US$ accounts overseas funded (contrary to

BoT regulations requiring all export earnings to be remitted

BANGKOK 00000499 003.2 OF 005

and converted into baht within 14 days) by a portion of their

earnings. With the accelerating decline of the dollar, there

was a rush in the last quarter of 2006 for Thais to stem the

depreciation of these holdings and convert to baht. Several

bankers have told us that their exporter clients had an

insatiable demand for baht every time the US$ had even a

small rebound and that this accelerated the baht\’s rise.

10. (SBU) Further exacerbating the baht\’s strength was the

practice of some multinationals (especially Japanese) to

undercapitalize their Thai operations and then fund them

through intra-company loans. By doing so, the local operation

would remit interest payments to the parent with only a 15

percent withholding tax and no problems from the BoT for the

remittance (as opposed to occasional problems receiving BoT

approval for remitting surplus capital). This practice also

reduces the Thai operation\’s profitability, and therefore the

amount due the Thai taxman under the 30 percent corporate tax

rate. Many of these companies also participated in the

Japanese carry trade; borrowing at about 30 basis points in

Japan to fund their Thai operation, plus some extra to invest

in RTG short-term debt to earn 5 percent which would then be

sent back to the parent as part of their debt repayment. This

prompted the BoT to include intra-company loans under their

new reserve regulations with the effect that now many local

operations of multinationals must either prove to the BoT

that the loans really are for operating purposes (a

cumbersome process) or borrow from local banks at

considerably higher interest rates.

11. (SBU) In any case, the result has been the baht

stabilizing at around 36/1USD but has caused the cost of

capital to increase by about 30 basis points and liquidity on

the capital markets to decrease. Bankers here tell us that a

significant amount of baht trading now takes place in

Singapore and that there is a wide spread (about 1 baht)

between offshore and onshore baht/US$ exchange rates. Bank

liquidity, while more than adequate for the larger banks,

will be impinged by the application of International

Accounting Standard 39 by the BoT. This rule requires Thai

banks to set aside more collateral for non-performing loans,

a rule that some of the less-well capitalized Thai banks will

have to stretch to comply with. All this has acted as a

further brake on Thai business\’ impetus to invest more in

their operations. Exacerbating that reluctance has been the

proposed amendments to the Foreign Business Act.

Foreign Business Act – So Many Questions…

——————————————–

12. (SBU) As has been reported (reftels), there remains

considerable uncertainty about the final form of the proposed

FBA amendments and how they will be implemented. We have been

told by several sources that the amendments as drafted by the

Ministry of Commerce would have opened several service

sectors to unlimited foreign ownership but that, after

considerable cabinet debate, the amendments focused on

extending the definition of an alien corporation to include

as a measure voting rights (as well as share ownership)

controlled by non-Thais, to increasing penalties for

non-compliance, and to offer the possibility of receiving a

license to continue operating and shareholder structures for

some existing businesses that in future will not be

permitted.

13. (SBU) At a time when private investment is moribund and

FDI is down by more than half from 2005, less than one month

after investor sentiment was why wounded by the promulgation

of the capital control regulations and only weeks after the

New Year\’s Eve bombings, why would the RTG choose this time

to propose new laws restricting new foreign investment and

threatening some existing investors with the retroactive

aspects of the proposed amendments? If we take at face value

the RTG\’s claim that they are simply \”closing loopholes to

the existing law\”, the questions arise of why they 1) didn\’t

first charge and try companies with violating the FBA under

existing law and 2) why they didn\’t consult with the foreign

BANGKOK 00000499 004.2 OF 005

business community before making the changes?

14. (SBU) It is privately acknowledged by the Deputy PM and

widely understood in Thai society that the real reason for

the amendments is that there is a political imperative to

find the Shin Corp-Temasek transaction illegal. Despite the

fact that former PM Thaksin has already received US$1.9

billion for the shares he and his family sold in the

transaction (now mostly residing in accounts at Siam

Commercial Bank and Krung Thai Bank where they are closely

monitored to ensure no funds are transferred abroad) and

there are no Thai laws that make the seller of an asset

responsible for ensuring the buyer complies with FBA

regulations, the current government is anxious to show that

this transaction was illegal in order to \”prove\” the corrupt

nature of the former PM but are apparently unable to do so

under the present FBA. However, if this is the only reason to

amend the FBA, the government could have amended the National

Telecommunications Act, the law which governs all aspects of

that sector including limits on foreign equity participation,

rather than the more general FBA.

…And So Many Answers

——————————

15. (SBU) The answer to this question as provided by DPM

Pridyathorn was that, because the current FBA (and Telecom

Act) lack an effective definition of the term \”nominee\”, and

it was through the use of nominees holding shares on behalf

of Temasek that the Singapore company worked around the 49

percent limit on foreign ownership of Thai telecom companies,

it would be up to a court to provide a definition of the

term. Rather than \”the nightmare\” of leaving such a

definition to the court and then having it apply to all

nominee structures in Thailand, Pridiyathorn argues that his

government has taken the initiative to better define legal

and illegal structures and to offer a way forward for most

existing companies that might fall afoul of the amendments.

He has said that by providing a better law, foreigners in the

future will know what they can or can not do in Thailand and,

as a result, Thailand will attract more FDI. Unfortunately,

the fact that the term \”nominee\” remains undefined means

there remains considerable scope for imaginative lawyers to

find ways around the new restrictions. It also means that

companies will not necessarily know if they are violating the

new law or not. We believe that one reason \”nominee\” is left

ill-defined is because many Thai companies and families get

around non-FBA restrictions on ownership (especially laws

limiting a person to 5 percent shareholding in a commercial

bank or cross-holdings between banks and non-financial

companies) through the use of nominees.

16. (SBU) As is often the case in Thailand, there are various

stories to explain that which is difficult to understand. We

have been told, for instance, that a major Thai conglomerate

with interests in telecom and retail has sought the FBA

restrictions as a way to further their current market

position and limit future competition. The quid pro quo will

be that the group will help finance a marketing campaign for

a positive vote on the referendum required for approval of

the constitution currently being drafted. This is a response

to the RTG concern that Thaksin will use his funds to finance

a \”no\” vote campaign against the new constitution.

17. (SBU) While there may be some truth to the story, we find

it more likely that the recent moves of the interim

government directed at foreign interests are primarily moves

by the traditional Thai elite reasserting control over the

Thai economy. Following the Asian financial crisis and

Thaksin\’s policies that had the potential to significantly

liberalize the services sector, these recent laws and

regulations are a reaction to the perceived further potential

loss of Thai-elite control over critical aspects of the Thai

economy. It probably is a safe bet that the current

government would never have negotiated the 1994 GATS

agreement, with its phased liberalization of the retailing

and telecoms sectors, and is looking for a way to duck its

BANGKOK 00000499 005.2 OF 005

GATS commitments or at least minimize their practical impact.

The moves are also part of the general roll-back of all

things Thaksin-related. In the minds of the elite, these

actions are not considered anti-foreign. They are considered

as protection against the vagaries of foreign capital and the

assurance that such critical sectors as telecom, banking and

transport remain under Thai control and, therefore, are

managed for the long-run good of Thailand (as opposed to the

\”short-term interests of foreigners who tend to focus on

quarter-quarter financial results\”). There may have been a

desire to liberalize less critical sectors; architectural

services, advertising or restaurants, for example. But the

political capital needed to liberalize some and not other

sectors would cost more than the government was willing to

pay.

What Next?

————–

18. (SBU) Most foreign businesses that are here will stay

here despite the increased policy uncertainty. Many note that

the BoT has already considerably softened its capital control

rules and expect that there will simply be a new series of

loopholes when the FBA is promulgated. New investment will

also continue for sectors in which Thailand is most

competitive, especially automotive and tourism. But in other

sectors where Thailand is growing increasingly uncompetitive

or if there is less reliance on existing investment, new

investment is increasingly going to go elsewhere. An example

of this thinking is a US technology company with factories in

Thailand, Malaysia and Taiwan in addition to the US. A new

plant was destined for Thailand but, following the coup and

then the capital controls, the decision was made to put the

investment into Malaysia. As the regional manager told us,

\”even though the capital controls and FBA won\’t affect us,

why should we put additional money into Thailand when we

can\’t see what the political system is going to be a year

down the road and the current government seems uninterested

in what the foreign community thinks.\”

19. (SBU) Most economists here predict 4-5 percent GDP growth

for 2007. When asked to explain how that can be when domestic

consumption, private investment and exports are all forecast

to grow at a lower rate than in 2006 when 4.6 percent growth

was achieved, they point to anticipated increase in

government spending. Given the fact that increased

disbursements are unlikely until Q3 this year, the impact of

government spending on GDP growth for the year as a whole

will be marginal. The confidence in continued 4-5 percent

economic growth is based on faith that this is the nation\’s

\”natural\” rate of expansion. And no matter how poor

government policy may be, as long as private companies have

the financial flexibility to operate and the exchange rate

remains competitive to that of Thailand\’s competitors, the

country will grow at its \”natural\” rate, regardless of what

most long-term foreign investors do. We agree that the Thai

economy has underlying strengths that probably will prevent

2007 GDP growth from falling much below 3 percent. If the

stock market is a forecaster of future economic events, it is

projecting a weak performance for Thailand this year.

BOYCE

One Response to “WikiLeaks Thailand #4: Thailand fails on refugees, police cooperation and extradition, the economy and Shincorp”


  1. […] WikiLeaks Thailand #4: « FACT – Freedom Against Censorship Thailand By facthai [FACT comments: More than 3500 US diplomatic cables posted to WikiLeaks relate to Thailand. We are posting these latest Thai releases exactly as received in cooperation with other Thai free speech media. This is what America thinks of … https://facthai.wordpress.com/2011/06/14/wikileaks-thailand-4/ […]


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