We have received this commentary on the events in Bangkok that took place last week from a distinguished ex-Merrill Lynch private banker who now lives in his up-country residence in Thailand.

He comments on how the military crackdown putting an end to the anti-government red-shirt movement may affect the business environment, before taking an in-depth analysis of the causes and events of last week, and possible diagnoses.

For obvious reasons he does not want to be identified by name. These are his own views being expressed, not those of AsianInvestor (and obviously not those of Bank of America Merrill Lynch either).

Thailand's red-shirt protest that came to a shuddering halt last week -- and the deeper underlying issues and causes behind it -- hardly inspire confidence among investors. Above all else, the events highlighted the political risk looming large for those buying assets in or related to the country. But it may be foolish to write Thailand off without taking a closer look at the underlying issues.

As investors and businessmen, our primary concerns are not such matters as the popular vote or the transparency of democratic institutions. Thailand is a significant manufacturer and exporter and has remained so throughout the political circus of the last decade. The country's current export performance is quite strong. Throughout the recent political crisis and the global financial crisis, the Thai baht has remained strong -- if anything, too strong.

But few investment decisions are made in a vacuum. Foreign direct investment can flow to China or Vietnam as easily as it can to Thailand. Portfolio investors can prefer other stock markets over the Thai bourse.

The foreign direct investor has two main reasons to be wary of Thailand in the short to medium term. One is political risk, which has most definitely increased. There has been no satisfactory resolution to the red-shirt crisis; quite the opposite. There is even talk of civil war in some quarters, but this seems alarmist. More likely is a low-grade campaign of civil insurrection, which, if it targets infrastructure and/or productive capacity, is clearly of concern to the foreign investor.

A militant, paramilitary group affiliated to the UDD, known as the 'black shirts', have made these threats. They owed their fealty to General Khattiya, aka 'Seh Daeng', and were enraged by his assassination. Many are said to be military special forces or ex-military. They are definitely a concern if they maintain their militancy. There is absolutely no indication that their ire is directed at foreign investors; the Sino-Thai business community probably has more grounds for concern.

The strength of the baht, baffling to many, must tell against Thailand too. China continues to cement its position as the 'world's factory', and Vietnam is coming on in leaps and bounds. All other factors being equal, Thailand can compete with neither on price. Malaysia has a relatively well-educated work force and a well established niche in high-tech manufacturing.

Corruption continues to be the norm, as it always was, and it is difficult to envisage real progress being made here given the fragile nature of the current government coalition, where the balance of power is held by 'self-serving' interests. This is unfortunate, because there are several in prime minister Abhisit Vejjajiva's Democrat Party that are serious about tackling corruption, yet unable to do anything tangible about it.

Of course, neither China nor Vietnam are noted for their transparency either, although the latter is said to be trying to tackle the issue. Longer term, Thailand is also lagging in education. This is one area in which the Thaksin administration had an enlightened policy, but unfortunately, since his ousting, many of these reforms were undone for fiscal reasons.

To meet the longer-term challenges of the 21st century, Thailand really needs to get its political house in order. Elections must come, the people must decide and the results must be respected.

A royal succession is also looming, which, along with Thaksin-phobia (or mania), seems to hang over everything in the country. Thailand is in limbo, deeply divided and with many feeling its democratic and political institutions have become discredited.

The portfolio investor, by contrast, has the benefit of liquidity. Shares in Thailand trade at reasonable multiples, no doubt reflecting the political uncertainty here. Dividend yields and price-earnings ratios are quite attractive, and civil war is in reality a remote possibility. I believe there are reasonable opportunities for the portfolio investor here.

So what are the deeper issues underlying the recent crisis?

The military establishment is at the very core of Thailand's long-term problems of nepotism, corruption and a lack of transparency and accountability. So a coup or an interim military government would be a backward step for Thailand in any meaningful sense beyond 'restoring order', which is of course the perpetual justification for military intervention.

Abhisit is the nominal or titular head of the government, but he lacks any real power.

Anything more than a cursory look at the functioning of the Thai parliament reveals that it is not Abhisit or even his Democrat Party that control the numbers. In fact, an alliance of convenience between several 'conservative' or 'self-serving' (a euphemism for corrupt) politicians holds sway, who are known to be closely associated with the military.

To see this in action, you only need see what happens when Abhisit tries to appoint a 'reform' (ie anti-corruption) candidate to a meaningful bureaucratic role -- it is just vetoed in parliament, and the old guard's preferred candidate installed instead.

The elite stands for the opposite of democracy. It is authoritarian, elitist, opaque and obviously corrupt. Until recently, parliament and the democratic vote only really existed to give the political process a veneer of legitimacy before the Thai people and the international community.

Thaksin irrevocably upset the status quo. He empowered the people (probably unwittingly) by showing that a government could actually both appeal to, and do something to improve the lot of, the common people, and that their vote could make a difference. It mattered, particularly in the long-neglected provinces.

This process has been aided by the contemporaneous developments of improving educational standards, as required to feed the increasing industrialisation of the Thai economy and of course information technology -- mobile phones and the internet in particular. The plain fact is that the modern 'peasant' is now much better informed, as well as 'democratically awakened'. That means he is both harder to fool and aware that his vote counts. He also wants it counted!

Wednesday 19 May will be remembered as a day of infamy. It marked the final military assault on the red-shirt compound in central Bangkok and subsequent capitulation by the UDD leaders, sparking a wave of arson and looting by enraged, militant UDD supporters or red shirts.

Hard to imagine that, when I originally penned my thoughts, the red-shirt protests were still peaceful- there had yet been no fatalities or property damage. Even harder to imagine that little more than a week ago, a peaceful resolution to the crisis seemed within reach. An opportunity was missed here, and the consequences were tragic.