The Destruction of Thailand's Global Brand

For years Thailand was synonymous with images of paradise: it was a thriving democracy with a 1997 Constitution that enshrined protections for human rights. It was an economic powerhouse that posted some of the world's highest growth rates in the 1980s and early 1990s, withstood the late '90s Asian financial crisis, and grew by 5.3 percent in 2002 and more than 7 percent the following year, as the rebound from the crisis took shape. Investors and tourists bought into the image of a tranquil kingdom of lush beaches and mountains, welcoming people, and stable politics—a "land of smiles" so alluring, it drew more than 13 million tourists per year. Thanks in part to the "Amazing Thailand" ad campaign—featuring glittering temples and stunning women—Bangkok ranked No. 1 in readers' polls of the best cities in Asia by Travel + Leisure and Condé Nast Traveler magazines.

And now? Brand Thailand is shattered. Over the past two months, clashes in Bangkok between the security forces and protesters clad in red have killed at least 80 people, gutted some of Bangkok's most important economic institutions, including the stock exchange and the largest shopping center, and destroyed the image of peace and tranquillity. The critical tourism industry, which accounts for as much as 8 percent of GDP, is gasping, at a time when regional competitors like Cambodia and Singapore are trying to steal Thailand's visitors. Of the nations once touted as the Asian tigers, or tiger cubs, including South Korea, Taiwan, Singapore, and Malaysia, only Thailand is disintegrating. Its once vibrant democracy is now widely viewed as an ungovernable and failing state. Prime Minister Abhisit Vejjajiva seems eager to postpone elections, and the last two elected governments were tossed out by undemocratic methods anyway. In its 2010 report, Freedom House scored Thailand as only "partly free" and ranked it among thuggish regimes like Burma for political rights. The U.S. State Department, which praised Thailand in 2000 for free elections and peaceful transfers of power, now chronicles its extrajudicial killings and its limits on freedom of speech and assembly.

In part, the recent upheavals are a result of longstanding political and economic grievances that have come to a head in urban riots, pitting largely rural supporters of exiled prime minister Thaksin Shinawatra against the generally Bangkok-based and wealthier backers of Abhisit. There are deep regional and class divides at work here, but that does not mean this collapse was inevitable. In the past decade Thai leaders, like the CEOs of companies losing ground to upstart competitors, made a series of poor decisions that left their country playing catch-up to neighbors like Vietnam, China, and even Indonesia, once a basket case.

One misstep was a failure of long-term thinking. During the good years, neither Abhisit's Democrat Party nor Thaksin's Thai Rak Thai Party, which first took power in 2001, invested enough in overhauling an archaic education system, which emphasizes basic literacy and rote memorization. Taiwan, Singapore, China, and India invested in university education, English-language instruction, and higher-value skills, and as a result managed to build innovative companies with a global outlook, and sizable English-language outsourcing industries. But Thailand's government and its major business groups remained wedded to lower-value manufacturing for foreign companies. Unlike China or Singapore, the government failed to create effective incentives to help Thai companies improve their workforces and expand globally. Large Thai conglomerates, historically protected by tight ties to government leaders, moved slowly to embrace real international competition, even as Thailand inked free-trade deals with China and other Southeast Asian states.

The failure was obvious. Thailand's scores on the TOEFL exam, the test of English skills for students heading to university, now consistently rank among the lowest in Asia. No Thai-owned companies have emerged that compare with the Taiwanese computer giant Acer or the Indian IT giant Infosys. And as China gobbles up more and more low-end manufacturing, high-tech firms ignore Thailand. Intel built a $1 billion chip-assembly plant in Vietnam, a country that in the 1980s and 1990s lagged far behind Thailand. Last year Taiwanese manufacturers pledged to invest billions in Vietnam, compared with just $200 million pledged in Thailand, according to the Associated Press. Because Thailand has been unable to move into higher-value industries, and has been incapable of using government spending to prop up the economy indefinitely in an era of global financial crisis, its growth rates over the past four years have tumbled badly, from 5.2 percent in 2006 to 4.9 percent in 2007 to 2.5 percent in 2008 and minus 2.3 percent last year.

Meanwhile, Thai leaders chose not to preserve the core of its appeal to tourists. Neighboring Singapore enacted strict environmental-protection laws, and even in heavily industrialized South Korea, former Seoul mayor and current president Lee Myung-bak oversaw the replanting of millions of trees around the capital city and the cleanup of the metropolis's major stream. Thailand let one natural wonder after the next become overdeveloped by resorts and condo complexes, undercutting an important element of the Thai brand. In a 2008 report, the Washington-based National Geographic Society looked at Phuket, historically Thailand's premier island resort, and found that its "original charm as an astonishingly beautiful, unspoiled, and culturally rich destination has been completely lost."

Over the past decade Thailand's leaders failed even more miserably to preserve the peace. Thai politicians once seemed to have a unique knack for compromise. After violent clashes between the Army and demonstrators roiled Bangkok in 1992, both sides retreated, allowing a caretaker government to be formed, democracy to be put back on track, and the economy to muddle through largely unaffected. Not anymore. After big wins in the elections of 2001 and 2005, Thaksin, an autocratic CEO before entering politics, started running Thailand like the ultimate boss. He gutted theoretically independent institutions like the courts, the civil service, and the Bank of Thailand, promoting his loyalists and using public speeches to demean these institutions, which had helped stabilize Thailand for years. The opposition's response further undermined Thai institutions. Rather than fight back at the polls, opposition leaders convened massive demonstrations that ultimately sparked a coup in 2006, forcing Thaksin into exile.

Thailand had seen many coups, but most had ended in compromise. Not this time. When a pro-Thaksin government was elected again, in 2007, anti-Thaksin yellow-shirt protesters shut down Bangkok; after Abhisit's government replaced a pro-Thaksin government in 2008, the red shirts poured out into the streets in an attempt to force Abhisit to step down. The result of this incessant brinkmanship is a furious Thai population ready to explode at any change in the political status quo, making compromise much harder.

While Thai leaders were trying to centralize power in their own hands, their Asian rivals were moving the opposite way. In Indonesia, the government has devolved more authority from Jakarta, in order to tamp down local grievances. Even authoritarian China has granted greater powers to local officials. In Thailand, after the 2006 coup, leaders replaced the progressive 1997 Constitution with one that provided an amnesty for the coup leaders, made the Senate less democratic, and tried to quiet unrest by strengthening central authority in Bangkok. These decisions backfired, first by a widening of an already-spiraling insurgency in Muslim-dominated southern Thailand, and then in the red-shirt protest movement, both of which resent the growing power of Bangkok. Yet Abhisit continues to bulk up the capital, and now uses an emergency decree to restrict civil liberties and allow the security forces to crack down harshly on protest.

As Thailand struggled, many had hoped that Thailand's most important leader, King Bhumibol Adulyadej, would intervene. A constitutional monarch who wields significant political power, he had long been perceived as a neutral party. But the pro-Thaksin red shirts apparently no longer trust him.

Can Thailand's brand be repaired? Other cities and countries have managed to restore even more seriously damaged images, though it took time. Belfast, once synonymous with IRA bombings, now has developed a reputation as an up-and-coming cultural destination. Bogotá is starting to be recognized as a model of urban planning, now that Colombia is getting control of its murderous drug cartels. But the key factor in Northern Ireland and Colombia—statesmanlike leadership—is currently absent in Thailand. Abhisit has offered to address some of the protesters' grievances, boosting government spending in the new budget by more than 20 percent and reassessing the Constitution, which might result in restoring elements of the 1997 Constitution. But his economic plan copies some of Thaksin's populist but divisive plans to redistribute wealth to the countryside. There is no serious plan to reform the education system, revive Thai competitiveness, or restore the environment. Abhisit also seems unable to do anything to reduce the power of the military, and after the current commander in chief of the Army retires in September, his likely replacement, Prayuth Chan-ocha, is known to be much harder-line. With the king ailing—he has been in the hospital for months—the revival of the monarch's role as mediator seems unlikely. And without a true statesman, the revival of brand Thailand seems far off.

Kurlantzick is fellow for Southeast Asia at the Council on Foreign Relations.