Thaksin Shinawatra may be down, but he is not out yet. He may step aside, but his regime is alive and kicking.

After his audience with His Majesty the King on Tuesday, Thaksin surprised the country by announcing he would step aside and would not seek the post of prime minister in the next government. However, he would continue to serve as caretaker prime minister until a successor is found.

He assumed that Parliament, despite all the legal and constitutional problems, could open a session in order to nominate and vote for a new prime minister, which would be a top Thai Rak Thai Party member.

Thaksin also made it clear that he would not wash his hands of politics as he would serve as an MP and continue as leader of his party.

Thaksin's retreat may have failed to stabilise politics but it opened a small hole to let off some steam. Thaksin's successor will be widely looked upon as the former prime minister's nominee.

Former Democrat Party leader Chuan Leekpai said: "Thaksin's decision to step aside does not help the democratic process move on. Nobody is certain when Parliament will have all 500 MPs. Moreover, the Thaksin regime is still alive.

"We should not be alarmed or happy with his decision to step aside because we have to see whether his regime is still around or not. If he is gone, but the practices of Thaksin remain in place then the evils in our society will continue.

These include tax avoidance, budget allocation to constituencies that vote Thai Rak Thai and dominance over independent institutions. It will be dangerous to the country if the Thaksin regime fortifies its roots."

Sunday's election, which was boycotted by the opposition parties, turned out to be a referendum on Thaksin. The Thai Rak Thai garnered about 16 million votes, but there were 10 million voters who effectively abstained - casting a "no" vote against Thaksin and his party.

The number of spoiled ballots reached almost two million. This indicated that unlike the previous two elections, Thaksin failed to win a mandate.

Calls for Thaksin to resign unconditionally from politics began about three months ago, immediately after his family's tax-free sale of Shin Corporation to Temasek Holdings of Singapore for Bt73.3 billion. Thaksin's political fortunes have quickly tumbled.

The People's Alliance for Democracy (PAD) staged a series of rallies to expose the alleged corruption, nepotism and abuse of power permeating Thaksin's administration. Academics, students, the middle-class and entrepreneurs joined the anti-Thaksin rallies, forcing the former telecom tycoon to dissolve Parliament.

But this did not satisfy urban voters who demanded Thaksin leave the political scene completely. They made their voices heard at the polls on Sunday, stunning the Thai Rak Thai Party.

Still, Thaksin took comfort in the fact that his party won 16 million votes, compared with 19 million votes in the last election, which would still enable him to continue as prime minister.

But pressure on him continued, in part because he never fully or clearly explained the Shin Corp deal.

Thaksin has been making a series of tactical retreats, which culminated with Tuesday's announcement.

He told his Cabinet on Tuesday that he had to step aside temporarily, otherwise people would make such an issue of his presence it would be impossible to convene Parliament. This dilemma faces the entire country, not just Thaksin.

There are 39 constituencies that will have to hold by-elections on April 23. These were cases in which candidates who ran unopposed failed to get at least 20 per cent of the eligible votes.

If by-elections are to be held in the current form and with the old candidates, it would be impossible for them to produce MPs as there would still be an overwhelming number of protest votes.

The Election Commission is now doing everything it can to get as many MPs running as possible. It ruled that even political parties that did not field candidates in Sunday's election can do so in the by-elections. This ruling might violate electoral law.

The political deadlock will continue if 30 days after Sunday's election the number of MPs falls short of the 500 required to reconvene Parliament. The Constitution Court will have the final say if this occurs.

Still, Thaksin yesterday signalled another retreat by moving out of Government House and appointing Chidchai Vanasatidya, first deputy prime minister, to run the government during the transition period. He said he would like to take his time off.

PAD leader Sondhi Limthongkul indicated the protestors would give Thaksin one month to really step down otherwise they would start rallying again.

Now, Thaksin has backed off in order to make a comeback. During this time, according to a political source, he will rest and travel to find some fresh ideas. He can manage national policies from behind the scenes as he still controls Thai Rak Thai.

After the political reform process is completed, he can make a comeback. And then maybe he will write the second chapter of the Thaksin Era.