(Bloomberg) -- Thailand’s pro-democracy parties omitted an amendment to a law forbidding royal insults in a common platform to form a government after winning the election. While the move sought to bolster support for Pita Limjaroenrat to become premier, uncertainty continued to grip markets.
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The eight parties in his coalition adopted a unified stance on issues including charter amendments and reinstating cannabis in the list of narcotics, according to a joint statement read on Monday during a briefing. The 23-point pact didn’t include a campaign pledge from Pita’s Move Forward party to revise the lese majeste law criminalizing royal defamation, as not all members of the coalition endorse the move.
“Our objective is to improve the relationship between the monarchy and the people,” the 42-year-old, Harvard-educated Pita told reporters during a coalition briefing Monday in Bangkok.
While the pact signals Pita’s willingness to set aside a key plank of Move Forward’s campaign promise at least until his government can come into power, it wasn’t enough to calm investors worried over who will lead Thailand — something that has kept markets on edge.
“Since there’s no visibility on the wheeling and dealing going on in the background, it is possible there is a political vacuum all the way to mid-July,” said Alan Richardson, a portfolio manager at Samsung Asset Management HK Ltd. “I am not prepared to commit to country allocation until there is clarity to the political situation.”
Foreign investors have sold millions of dollars worth of the nation’s stocks and bonds since the May 14 vote. The main stock index fell as much as 0.7% on Tuesday while the baht slumped to a two-month low after losing more than 2% since the post-election rally a week ago.
“Investors are waiting for clarity about formation of the new government and the prime minister voting,” said Therdsak Thaveeteeratham, an analyst at Asia Plus Group Holdings Pcl. Volatility will remain high until the Election Commission certifies the results and a new government is formed, according to Chak Reungsinpinya, head of research at Maybank Securities in Thailand.
The Commission has up to 60 days after the vote to release official election results and certify 95% of the lower house seats. The first session of the new parliament must then take place within 15 days. That brings the timeline of government formation to late July or even early August.
Move Forward’s coalition has 313 seats, a clear majority in the 500-member House of Representatives. But as things stand, that’s still short of the 376 needed for Pita to become prime minister. He will require broader support from the military-appointed Senate, whose 250 members also vote on who gets the top job.
While Pita said on Monday that his party is leading talks with senators on government formation and remains optimistic of his chances, he also admitted that “several roadblocks” still exist. He added that Move Forward would push to relax the lese majeste law in parliament regardless of which parties back it.
“We’ve been very consistent before and after the election that the law amendment will be continued but it won’t be a pressure for our coalition parties,” Pita said. The law, also referred to as Article 112, punishes criticisms against the king and other members of the royal family, and can put offenders behind bars for as many as 15 years if they’re convicted.
Pita’s alliance also agreed on several other initiatives, including making military enlistment voluntary except during times of war, and a push for a marriage equality bill. The eight parties also pledged to take steps to revitalize the economy, decentralize the budget and dismantle monopolies especially in the liquor industry.
The signing of the coalition agreement came hours after a lawyer asked the Election Commission to seek a ruling from the Constitutional Court on whether Move Forward’s call to amend the lese majeste law undermines the monarchy. Pita said he isn’t worried about this latest complaint or an earlier allegation that he violated election rules by holding shares in a defunct media company.
Move Forward’s push to amend Article 112 draws opposition not only from members of the Senate, which is stacked with allies of the pro-military establishment of caretaker Prime Minister Prayuth Chan-Ocha, but also from other conservative parties.
The Bhumjaithai party, the group that championed the liberalization of cannabis and finished third in the election with 70 seats, ruled out support for Pita as prime minister, saying it won’t back a candidate from a party planning to make changes to lese majeste.
The conservative Democrat Party hasn’t begun a discussion on its stance on Pita’s bid to become prime minister but it disagrees with amending the law against royal insults, party spokesman Ramate Rattanachaweng said Monday.
The coalition said the deal forged Monday is also a move to restore full democracy in Thailand. A new government under Pita’s leadership would mark the end of nearly a decade of military-backed rule that began exactly nine years earlier with Prayuth’s coup in 2014, said Cholnan Srikaew, leader of Pheu Thai party.
“We’re declaring today, on the anniversary of the 2014 military takeover, that we’re ending the cycle of coups,” he said.
--With assistance from Philip J. Heijmans, Anuchit Nguyen, Ishika Mookerjee and Hooyeon Kim.
(Updates with market reaction in lead and sixth paragraph. An earlier version corrects to say coalition seeks to make military enlistment voluntary instead of mandatory.)
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