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BANGKOK, Thailand (AP) -- The army commander who seized Thailand's government Wednesday in a quick, bloodless coup pledged to hold elections by October 2007, and received a ringing endorsement from the country's revered king.

"In order to create peace in the country, the king appoints Gen. Sonthi Boonyaratglin as head of the council of administrative reform," according to the announcement on state-run television.

"All people should remain peaceful and civil servants should listen to orders from Gen. Sonthi Boonyaratglin from now on." (Watch how soldiers keep close eye on Thai streets -- :27)

Sonthi led a precision takeover overnight without firing a shot, sending soldiers and tanks to guard major intersections and surround government buildings while the popularly elected Thaksin Shinawatra, accused of corruption and undermining democratic institutions, was abroad. (Watch how army took over without a shot -- 1:16)

Asked if there would be moves to confiscate Thaksin's vast assets, Sonthi said at a news conference that "those who have committed wrongdoings have to be prosecuted according to the law."

Sonthi did not elaborate. But an announcement later on state-run television said the newly formed Council of Administrative Reform had sacked the state audit commissioners and given additional powers to Auditor General Jaruvan Maintaka to investigative government corruption, which could lead to the confiscation of Thaksin's assets.

Thaksin arrived Wednesday in London, England, on a private visit. A chartered Thai Airways jet landed at Gatwick Airport at 5:35 p.m. London time, the airport's press office said.

A British government spokesman said Thaksin had no meetings scheduled with Prime Minister Tony Blair or other officials

Sonthi said he would act as prime minister for two weeks until a new leader is found, that an interim constitution would be drafted within that time, and that Thailand's foreign policy and international agreements will not change.

Thailand will hold a general election in October 2007, he said.

Sonthi said the coup, Thailand's first in 15 years, was necessary to heal mounting rifts in Thai society, and to end government corruption, insults to the revered King Bhumibol Adulyadej, and what the general called Thaksin's attempts to destroy democratic institutions. (Read how king works behind the scenes)

Bangkok mostly quiet; coup gets support
Most residents and tourists in Bangkok, a city of more than 10 million, were calm and unfazed Wednesday.

About 500 people gathered outside army headquarters Wednesday afternoon lending moral support to the military and chanting "Thaksin Get Out!"

But in the first sign of anti-coup sentiment, Thaksin supporters faced off with rival groups celebrating the coup at two separate gatherings in Bangkok. Soldiers intervened, narrowly averting clashes.

The newly created Council of Administrative Reform put Thailand under martial law and declared a provisional authority loyal to the king, seizing television and radio stations and ordering government offices, banks, schools and the stock market to close for the day.

Nearly 20 tanks -- their gun barrels festooned with ribbons in the monarch's color, yellow -- had blocked off the Royal Palace, Royal Plaza, army headquarters and Thaksin's office at Government House.

Tanks began shifting from their downtown Bangkok positions Wednesday evening, but it was unclear if they were withdrawing.

The overthrow was needed "to resolve the conflict and bring back normalcy and harmony among people," Sonthi said on nationwide TV.

"We would like to reaffirm that we don't have any intention to rule the country and will return power to the Thai people as soon as possible," he said, flanked by the three armed forces chiefs and the national police chief.

A statement from coup leaders urged workers and farmers -- Thaksin's key constituents -- to remain calm, and said unauthorized gatherings of more than five people were punishable by six months in prison under martial law.

Report: Government officials arrested
The Nation newspaper in Bangkok said several senior government officials and others close to Thaksin had been arrested, their fates unknown.

It said they included Deputy Prime Minister Chitchai Wannasathit and Supreme Military Commander Gen. Ruengroj Maharsaranond.

Agriculture Minister Sudarat Keyuraphan, one of Thaksin's closest political associates, fled to Paris with her family, it said.

Reacting to rumors that he would be appointed interim prime minister, central bank head Pridiyathorn Devakula said, "I haven't been approached, and I don't know whether I am a candidate."

He said that the public has accepted the coup, so it was unlikely to have much impact on foreign confidence in the country, and that the Thai baht currency had recovered from its overnight low with no intervention.

In New York, a Thai business executive who said he was speaking on behalf of Thaksin said the toppled leader was not resigned to his fate.

"The prime minister has not given up his power," said Tom Kruesopon, chief executive officer of Boon Rawd Trading International Co., who said he was traveling with Thaksin.

But Thaksin's official government spokesman, Surapong Suebwonglee, also traveling with him, was gloomier. "We have to accept what happened," he said. "We are not coming back soon."

Some Thais welcomed the coup as a necessary climax to months of demands for Thaksin's resignation amid allegations of corruption and electoral skullduggery, and a worsening Muslim insurgency in south Thailand.

Nations call for restoration of democracy
The U.S. State Department said it was uneasy about the takeover and hopes "the Thai people will resolve their political differences in accord with democratic principles and the rule of law."

Australia said it was concerned to see democracy "destroyed," and New Zealand Prime Minister Helen Clark said her country "condemns" the coup.

Japan called for efforts to quickly restore democracy in Thailand, where many leading Japanese businesses have factories and affiliates.

Sonthi, 59, known to be close to Thailand's constitutional monarch, is a Muslim in a Buddhist-dominated nation. (Read profile of Sonthi)

He was selected last year to head the army, partly because it was felt he could better deal with the Muslim insurgency in the south, where 1,700 people have been killed since 2004. He has urged negotiations with the separatists, in contrast to Thaksin's hard-line approach.

Thaksin, a telecommunications tycoon before entering politics, handily won three general elections after coming to power in 2001 and garnered great support among the rural poor for his populist policies.

But he alienated the urban middle class, intellectuals and pro-democracy activists. They began mass street demonstrations late last year, charging him with abuse of power, corruption and emasculation of the country's democratic institutions, including media that were once among Asia's freest.

Shin Corp sale's four grave secrets still in the dark

Prime Minister Thaksin Shinawatra has completely lost his legitimacy. You can trace his troubles back to January 23, 2006 when he sold Shin Corp to Temasek Holdings of Singapore for Bt73.3 billion without paying any taxes.

Even now, not many people have fully digested the impact of this deal, because all the attention has been focused on whether Thaksin should step down or how he will try to survive his political crisis.

Thaksin could not have imagined the adverse consequences of his sell-off. Nor could Ho Ching, the chief executive of Temasek, nor the top people at the Siam Commercial Bank and SCB Securities Co.

There are four aspects of the Shin Corp debacle that will be subjected to further scrutiny.

First, following the sell-off, Shin Corp now effectively has become a "state enterprise" of Singapore. Temasek is an investment arm of Singapore, with a portfolio investment of more than S$103 billion (Bt2.5 trillion) as of March 2005. It was originally a super holding company for Singapore's state enterprises.

After privatisation, the proceeds went into Singapore's national coffers and also to Temasek. With a growing war chest, Temasek has, since its inception in 1974, been able to expand its investment portfolio and offer shareholders returns of 18 per cent compounded annually.

Its holdings in Singaporean companies now include Singapore Airlines, Singapore Telecom, DBS Bank and Neptune Orient Lines. Other industrial stalwarts it has a share in are Singapore Technologies Engineering, PSA International, Singapore Power, Keppel Corporation and SembCorp Industries.

Temasek's international investments in India include ICICI Bank, Mahindra & Mahindra, and Apollo Hospital Group; China Construction Bank, and China COSCO Holdings in China; Bank Danamon and Bank Internasional Indonesia in Indonesia; Quintiles Transnational Corp in the United States and Hana Bank in South Korea. In its first term, the Thaksin government floated the idea of setting up a super holding company in the style of Temasek to facilitate the privatisation of state enterprises. But this idea was never implemented.

Much worse, the Thaksin government's privatisation campaign has been nothing more than a transfer of public sector assets into the pocket books of political cronies, without creating competition or a strong regulatory body to ensure a level playing field.

If Thaksin had set up a holding company, with a long-term view of keeping national assets inside Thailand, he would not have faced such strong opposition to his privatisation programme. As it turned out, his political cronies made big money from the privatisation of PTT Plc. So civic and pro-democracy groups as well as academics have come out to block the privatisation of Egat, fearing it would become another big pie sliced up by the politicians.

The charges that Thaksin sold out Thailand to Singapore have a strong grounding. For Temasek gained control of Thai mobile phone, satellite, aviation and TV concessions in one fell swoop. Temasek must reason that at Bt49.25 a share, totalling Bt73.3 billion, the deal is cheap, for it has taken into account Shin Corp's market capitalisation of Bt150 billion.

The prime minister's family and pro-market forces argue that there is nothing wrong with Temasek's buy-out of Shin Corp because Temasek only operates the concessions, which still belong to the Thai government. Yet in reality, the concessions can be renewed. Temasek will have dominance in the Thai market in all of these sectors. Singapore, a more open economy than Thailand, would not allow this kind of deal to happen.

The pro-market forces have also tried to paint those who are opposing the Shin Corp deal as creating a bad sentiment for foreign investment. In fact, foreign investment is good for Thailand in so far as foreign companies invest in green-field plants, or factories or companies that will create jobs. This results in fresh capital injections and transfers of technology.

But we should be very cautious about foreign investors buying into Thai companies through mergers and acquisitions with the goal of dominating a market. This is the name of the game in the Shin Corp sale.

Second, Thaksin, the prime minister himself, has been seen as the executor of the Shin Corp deal, which has been branded as a big sell-off of Thailand. The Thai public cannot understand how Thaksin could have done a business deal that turned over several national concessions to Singapore in one big chunk!

Third, the public suspects that there could be an Asset Concealment Episode II, which would involve Ample Rich Investment Ltd. Ample Rich is incorporated in the tax haven of the British Virgin Islands. The stock and financial transactions between Thaksin and his children have been very complicated dating back to 1999.

In the first place, how could Thaksin transfer 10 per cent of Shin Corp stocks from the local board to the foreign board at par value in 1999 without having to report any financial transactions? Doing so would require him to conform with foreign exchange regulations under the oversight of the banking authorities.

If there is nothing wrong with this strange transaction, then other investors can follow suit by setting up paper companies in Singapore and then transferring their stocks from the local board to the foreign board. Once the stocks are moved to the foreign board, they can conveniently take money out of the country in dollars.

Fourth, the Shin Corp deal has created a public uproar because the Shinawatra and Damapong families did not pay any tax at all. Thaksin likes to claim that the deal was done on the stock market, where the capital gains tax exemption applies.

But he has failed to explain the complicated transactions of the Shin Corp stocks before the sell-off. Banapot Damapong should have paid tax when he received Shin Corp stocks worth almost Bt1 billion from Khunying Pojaman Shinawatra. In that case the revenue officials did not tax Banapot, because he was given the shares as a "gift". And besides, he did not realise any gains from the stocks at that point. When he did sell them, he did so through the stock market and benefited from the tax exemption.

Another case involves Ample Rich and Panthongtae and Pinthongta Shinawatra. On January 20, Ample Rich sold Shin Corp stocks at Bt1 a share to Panthongtae and Pinthongta, who sold the stocks to Temasek at Bt49.25 on the following January 23. Panthongtae and Pinthongta should have paid tax on the capital gains they made as a result of receiving the shares at the incredible value of Bt1 before selling them for big profits at Bt49.25 per share.

These four key elements of the Shin Corp deal have brought about a complete loss of confidence in Thaksin's leadership. Once the political crisis has subsided, there will be more scrutiny of this deal. You'll know the outcome then.

Thanong Khanthong