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Postwar Economic and Political Problems

There was little opposition to Phibun among the Siamese. His foibles in changing cultural practices
seemed less important than his known ability to maintain a strong government. Many people felt that
the nation needed a strong man to cope with such problems as corruption and inflation, the two major
troubles besetting the nation. During the war the Siamese had become accustomed to indulging in
irregular practices to annoy the Japanese. They became skillful in creating hindrances to Japanese
supply trains. They mastered the techniques of featherbedding every job. These were virtues during
the war but became vices that hurt themselves after it was over. High officials indulged in scandalous
graft and public dishonesty, and enriched themselves at the expense of the nation. There is no
evidence to indicate that corruption lessened under Phibun in 1948. Several of his leading officials are
regarded as the most flagrant offenders.

Inflation continued in 1948 without abatement. The open market rate of exchange between the baht
and dollar was twenty to one, while before the war it was three to one. The country in 1948 was
actually moving back to normal conditions in the economic field, in spite of inflation.

Perhaps the major problem in Siam is political instability, as shown by the nine regimes that have
briefly held office since the war. Interestingly enough, however, all of the governments assumed the
policies and responsibilities of the preceding administrations, so there has been a sense of continuity.

One problem faced by Siam after 1945 was to reach an agreement with the British settling the state
of war. The British proposed to negotiate simultaneously with the Siamese at Kandy, Ceylon, a political
agreement of purely British interest and an agreement on military matters of Allied interest. The
purely military agreement was not difficult and was signed September 8, 1945. The political
agreement became a matter of discussion between the British and American governments, because
of United States interest in any settlement that might have implications in regard to United States-
Siam relations. American opposition to specific provisions was discussed at length, and on most points
the United Kingdom agreed to ease up.

On January 1, 1946 the agreement was signed, containing a provision in connection with rice to which
the United States objected. Under this provision the Siamese agreed to provide free of cost at Bangkok
a quantity of rice equal to the accumulated surplus then existing in Siam, not to exceed a maximum
of 1,500,000 tons. The United Kingdom then decided to modify its position; and in connection with a
Tripartite Rice Agreement, in which the United States participated and which was signed May 6, 1946,
the British made a side agreement with the Siamese that Siam would export a minimum of 1,200,000
tons during the succeeding twelve months, and that any shortage would be delivered at a later date
free of cost to the United Kingdom. The idea was to give Siam an incentive to speed up exports of rice.

Under the Tripartite Agreement a Combined Siam Rice Commission was set up at Bangkok to expedite
the export of rice, in accordance with International Emergency Food Commission allocations. Siam
failed to deliver rice as expected, so a new rice commitment was set on December 24, 1946 which
reduced the amount still to be delivered by August 31, 1947 to 600,000 tons. The full amount was not
delivered, but the penalty was not administered because it was felt that Siam was doing the best it
could under difficult circumstances.

Tin was another of Siam's major products that the world needed after the war. It was estimated that
the tin left on British and Australian properties in Siam on December 8, 1941 and the tin mined from
them after that date amounted to about one year's output, or roughly 15,000 tons. The owners sought
compensation for this metal from the Siamese government, and it seemed for a time that no tin would
be exported until a settlement was reached. Although almost all tin interests in Siam were British and
Australian, the United States was vitally interested. Consequently on December 7, 1946 a tin
agreement was signed by Siam, the United States, the United Kingdom, and Australia which aimed to
move the tin while providing for a settlement of British and Australian claims.

Siam agreed that the amount of tin involved was 15,992.7 tons; that it would deposit to United
Kingdom and Australian account an amount representing the prewar operating profit per ton in
sterling; that a tin commission would be set up to expedite tin shipments for a limited time, the actual
life being until September 30, 1947; that the price of tin would be on a fair level with the price in
Malaya; and that all tin concentrates were to be available in equal shares during the life of the tin
commission to the United States and United Kingdom if they desired to purchase them. The United
States actually bought most of the tin metal and its half of the concentrates. After the expiration date
of the agreement, it expanded its buying of concentrates as far as possible. This was a new
development in Siam-United States trade relations, and it was brought about by the desire of the
United States to make full use of the Texas smelter. Tin mines were very slow in getting under way
again, and by August 1948 it was estimated that the year's production for 1948 would not exceed
5,000 tons, or about a third of normal production.

Rubber regained its usual production figures more rapidly than other products. Under the British-
Siamese Agreement of January 1, 1946 Siam agreed to participate in international arrangements in
regard to rubber. The Combined Rubber Committee, set up to make international allocations, ceased
on December 31, 1946, so that since that time Siam has been selling rubber on a free market.
Production is about normal again, or about 50,000 tons a year.

Teak has been one of the slowest of Siam's products to recover because of the nature of the industry,
which requires about seven years to bring lumber from tree to mill. The British had heavy investments
in Siam's teak industry, so this product entered into the agreement of January 1, 1946 also. This
agreement provided that teak from British concessions be returned to the owners; that British leases
valid on December 8, 1941 be restored; and that payment be made for losses. There was no
international board for allocation. In its efforts to recover teak logs for the British, the Siamese
government virtually paralyzed the industry. There was little production during 1946 except by a
Siamese company on agreement with the British companies. In late 1947 the British companies began
to take over their properties and resume business. Teak exported at high prices during 1946 and at
the present time was chiefly produced before the war. Production is now getting under way, however.

A problem with economic implications facing Siam after the war was the settlement of Allied claims
for war damage loss. Article Three of the British-Siamese Agreement of January 1, 1946 provided that
the Siamese assume responsibility for safeguarding, maintaining, and restoring unimpaired British
property, rights, and interests of all kinds, and provided for payment of compensation for losses or
damage sustained. The United States felt that its citizens should receive most-favored-nation
treatment, and entered into negotiation with the Siamese and British governments with a view to
agreeing on categories within which claims would be considered favorably.

Toward the end of 1946 a draft of the terms of reference for claims was delivered to Siam and the
United Kingdom for consideration. It was not intended that other reasonable and equitable categories
which might arise would be excluded, but these were offered to expedite settlement. Wherever
possible, property should be returned; compensation should be paid for damage to such property;
interest should be paid at 4 per cent on the value of the claim until its settlement; and some types of
claims should be paid in dollars and others in baht, depending usually upon where the property was
obtained and the kind of currency originally paid. There were many other details in the agreement,
but in general the idea was to arrive at a fair value of the loss and a reasonable interest on it until the
day of settlement. Such intangibles as good will and anticipated profits were not held as valid items
to be subject to claim.

The British had much heavier interests in Siam than the United States, and consequently set up a
British-Siamese Claims Committee in Bangkok. The United States did not feel this necessary, as
American claims were few and generally small. Furthermore, the Siamese government expressed its
intention to make rapid and fair settlement. Most American personal property losses were settled by
the middle of 1948. There remained only several corporation claims, which in their very nature
required more preparation and consideration both by the claimants and by the Siamese government.
In general, personal claims were settled at about 70 per cent of the amount demanded. As such things
go, this represented very fair treatment. In August 1948 the British and Siamese were still working out
a settlement on the extensive British claims, which involved comparatively large investments.

French relations with Siam were cool after the war because of the loss of Indochinese areas to Siam
on May 9, 1941. The French and Siamese governments made use of the good offices of the American
government and negotiated a settlement of their differences at Washington. An agreement was
signed on November 17, 1946 that nullified the Tokyo convention of May 9, 1941 and provided for the
return of the disputed areas and for a conciliation commission to examine ethnic, geographic, and
economic arguments for confirming or revising the pre-1941 boundary line.

The conciliation commission met in May 1947 and made its recommendations at the end of June. It
did not support Siamese claims to the territory, but suggested that arrangements be made for
ensuring adequate supplies of fish to Siam from the Tonlé Sap. It also suggested that the two
governments should agree to establish at Bangkok an international consultative commission for the
study of technical questions of common interest to the countries of the Indochinese peninsula. As the
disputed areas had been peacefully returned to Indochina in December 1946 awaiting these findings,
there seemed to be no further action called for. France accepted the decisions immediately, but Siam
did not indicate her acquiescence until May 1948.

After settling its differences with the various Allied governments, the natural move for Siam was to
seek membership in the United Nations. One spur to the Siamese to return the areas in dispute to
Indochina was that France was prepared to veto Siam's application for United Nations membership
unless the territories were returned. France sponsored Siam's application as soon as their agreement
was signed. However, the Soviet government took the position that since Siam had a law forbidding
communism, and since Russia and Siam had no diplomatic relations, it would veto Siam's application.
It seemed for a time that Siam would fail to achieve membership at the General Assembly of 1947,
because the time was short. However, Siam pointed out that it had begun negotiations for the
establishment of diplomatic relations with Russia before the war and had renewed those negotiations
after hostilities ended. It also stated that it would annul its law against communism. Russia then
refrained from voting, and Siam became the fifty-fifth member of the United Nations.

It was not until May 4, 1948 that the Soviet minister presented his credentials at Bangkok. The Russians
established a legation with a staff of about twenty. In addition to these, there were about another
score who acted as guards, messengers, and performed lesser tasks. Such a staff attracted attention
because of the few Russians in Siam. There were many non-Russian Communists in Siam, however,
either Chinese or Viet Minh. The Siamese Communist party was very small and had little influence.
After the opening of the Soviet legation there was considerable speculation as to its relations with the
Chinese and Viet Minh Communists in Siam.
In August 1948, Siam seemed to be the only country in Southeast Asia not being actively troubled by
Communists. In Indochina the Communist-dominated Viet Minh regime of Ho Chi Minh was
succeeding in denying all but the major centers to French forces. In Burma the Socialist government
of Thakin Nu was being shaken by Communists, who were acquiring control of most of the nation and
arranging themselves into position to threaten Rangoon. The British in Singapore and the Federation
of Malaya, with its capital at Kuala Lumpur, were troubled by Chinese guerrilla bands, which the British
said were Communists attempting to set up a Communist state in Malaya. Both Chinese Kuomintang
and British persons were being murdered, and their property was being damaged or destroyed.

Because of the foregoing situation in neighboring countries, Siam was nervous and appeared to be
ready to take armed action when necessary. This nervousness was accented for the Phibun
government by the knowledge that Pridi Banomyong was planning to return to political power if
possible. It was feared that he might be willing and ready to use such alien armed forces as the Chinese
Communists and the Viet Minh. An additional cause for nervousness lay in the impending trials of
several Siamese for the murder of King Ananda. Pridi had been named as one who was involved in
some way in the case, and an order for his arrest had been issued. In August 1948 his whereabouts
were unknown, but his followers were believed to be ready to use the occasion of the trial for a coup

Phibun, however, seemed to be fairly secure in his control of the nation. Most of the military were
supporting him, and the majority of the Siamese did not object to him. He was conducting his
administration along lines that indicated his intention to continue his previous policies with some
modification to fit the times. He seemed able to overcome the occasional efforts made by some
military and civilian elements to unseat him. On October 2, 1948 he nipped a budding military revolt
by arresting a number of high officers, including three generals and a colonel. The army general staff
seemed to be seriously crippled by the arrests. On the civilian side, such notables as Thawi Bunyaket,
once prime minister, Direk Chayanam,

once foreign minister, and Thamrong Nawasawatfa, also prime minister at one time, were arrested,
perhaps as a precautionary measure since they did not seem to be identified with the military

Phibun renewed his plans to build Lopburi into a military city. He felt that the military forces would be
better cared for and more powerful if held outside of Bangkok. He revived his cultural program on a
mild scale in an effort to urge the country on toward modern ways. He renewed his emphasis on
controlled education and initiated a plan for establishing government secondary schools in every
province. It was not clear whether the quality of the government was becoming increasingly military
because Phibun was a militarist, or because the disturbed situation in other parts of Southeast Asia
led him to take military precautions.