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Asia finds its own way: The Thai
roadmap
By Pansak Vinyaratn
 In the past few years the
Thai government has tried to develop new strategies to
face the process of globalization and the related risks
amidst the changing global situation.
Certainly,
the international political and economic scene was
shaken by the massive impact of the events of September
11, 2001. But even prior to September 11, the global
economy had been facing a downturn, prompted by a number
of unfavorable factors.
First and foremost, the
stagnant economic situation in Japan, the second-largest
economy in the world - and, to a lesser extent, the
recession in the United States - impacted heavily on the
global economy as a whole.
In terms of
production, the world has been facing a problem of
overcapacity in the supply of various goods, both
industrial and agricultural, coupled with dampened
consumer demand. As far as industrial products were
concerned, the problem of similarity and duplication of
products - which competed with one another - arose. With
regard to agricultural production, recent advances in
genetic engineering have further exacerbated the problem
for agriculture-based developing countries.
On
the investment side, many countries have faced problems
due to an unfavorable economic environment. Increasingly
large sums of money need to be injected into modern
investments on a continual basis in order to adapt
production in line with the frequent global
technological and demand shifts. Companies that have not
been able to keep up with the rapid changes have found
it difficult to survive.
Companies have also
faced the problem of adjusting and adapting their
production structure to keep up with the rapid changes
in consumption patterns and lifestyle shifts of the 21st
century. This entails not only alertness and flexibility
on the part of the companies, but also appropriate
infusions of capital.
Developing countries in
particular have found it extremely difficult to cope
with the adverse effects of fast capital flows, and no
easy solution is in sight. Countries have kept their
reserves in the financial institutions of Western
countries, which then reinvest such capital in the
countries where the funds originated. As the financial
crisis of 1997 demonstrated, however, developing
countries find themselves powerless to do anything when
such capital is rapidly withdrawn by the financial
institutions, due to a lack of confidence in the
countries' economies.
Last but not least, we
have the impact of China's entry into the World Trade
Organization. This presents opportunities for greater
collaboration in trade, as well as threats to industries
that themselves are slow to adapt.
Such was the
situation prior to the tragic events of September 11,
which threw the world into great uncertainty and
increased the downside risks for global growth
prospects. One area that was severely affected was
global trade and transportation. The shipment of goods
overseas, whether by air or by sea, and passenger air
travel, were both greatly affected by delays caused by
heightened security checks. New stringent security
requirements were set on air and sea freight, both in
the ports of origin and arrival, causing companies to
lose millions of dollars in revenues.
To make
matters worse, insurance rates for international freight
and for airlines escalated to an astronomical figure.
Coupled with declining air travel, this drove many
airlines to the brink of bankruptcy. At the same time,
the United States' military action against al-Qaeda in
Afghanistan and the threat of retaliation by the
terrorist groups by unconventional means could
potentially bring international trade to a halt.
The Thai model
In view of this
less-than-rosy global situation, the Thai government has
found it necessary to take stock and devise a strategy
of development best suited to the country and the
international environment. The problem we are having in
Thailand and probably the rest of Asia as described
above is in fact only a surface phenomenon.
The
real problem is:
1) We are duplicating an economic
model and production paradigm of the West.
2) We
merely follow the definition of "lifestyle" of the West.
We do this while ignoring our own strength and
the potential ability of our culture and resources to
produce an "Asian lifestyle", in which the world will
have an opportunity to choose and mix.
The word
"competitiveness" has many dimensions. But the word
itself implies one fundamental flaw. It presumes that
you will "compete" to produce the same products and
services. The word "competitiveness" becomes very
dangerous when your country has no or insufficient
intellectual and capital resources to compete in the
framework defined by somebody else. This is the reason
why the control of capital management is the most
strategic issue of the world today.
In examining
the country's economic structure, we found many problems
that needed to be remedied.
In the first place,
the Thai economy was heavily dependent on
export-oriented growth, with Thai exports accounting for
as much as 55 percent of gross domestic product (GDP).
This caused the Thai economy to be highly susceptible to
the fluctuations of the global economy.
Second,
Thailand's main exports were greatly dependent on only a
few major importing countries. Without a diversified
customer base, the country's exports were at the mercy
of rapid changes in demand and supply by the handful of
major importers.
Third, Thailand's domestic
economic structure was still relatively weak, both in
terms of diversity and quality of products.
Fourth, the country's human-resource development
still left much to be desired. In order to be
competitive, Thailand's human-resource development
efforts would have to create an adequate supply of
quality workers to support the new economic structure
crafted by the government.
Fifth, Thailand's
industrial structure was based on cheap labor and
semi-industrial skills. As a result, the country's
workforce could have little hope of enjoying a more
prosperous future since they were continually subjected
to so-called labor-cost pricing.
Last, the
country's economic growth depended too heavily on
external influences, making the country too vulnerable
to volatility of the global market place and other
forces beyond its control.
After evaluating the
country's problems, the government then proceeded to
examine our strengths and identify the opportunities
that were available to us. The first that came to mind
is our diversified experience in industrial and
agricultural production. Even though we may not possess
the component of production that is intellectual
property rights, we nevertheless possess an abundance of
skills as well as local ingenuity and wisdom that will
enable us to input the appropriate knowledge and
technology together to achieve desirable results.
We also have the originality of our rich natural
assets waiting to be combined with proper management and
technology to produce new products for new life styles.
Geographically speaking, Thailand enjoys an excellent
geo-strategic position at the center of Southeast Asia.
In addition, Thailand has a social structure
that is very accommodating and receptive to diversity
and creativity. The nurturing of creativity within the
society should in turn lead to our own intellectual
property rights that are both "high-touch" and
"high-tech", creating greater income for the nation as a
whole.
We believe that many opportunities have
opened up for Thailand due to the shift in consumption
patterns and lifestyle in today's world. Such
opportunities lie in our applying modern technology to
produce "high-touch" products of high quality for the
global marketplace. These goods include both food and
other consumer products.
On the basis of this
overall approach, educational reforms have been
undertaken by the government to ensure that we have the
human resources to drive the economy forward. Financial
reforms have been carried out so those new entrepreneurs
will have easier access to capital. Emphasis is placed
on providing opportunities to people in local
communities so that they can turn their dreams into
reality.
The issue of unequal opportunity among
different groups of people in any society is the subject
of heated debate for any political party. We made the
decision that the masses should have an opportunity to
utilize capital to improve their life without the
support of straight subsidies. This is the reason why we
have created People Bank (a micro credit facility) and
the 1 million baht (about US$24,000) village fund. For
the first time in the history of Thailand, we have moved
capital closer to the people. The people themselves will
have to create their own financial discipline and their
committees to manage this fund, while the government
role is to facilitate and to audit.
A
cornerstone of the government's policies is the support
provided to small- and medium-sized enterprises (SMEs)
around the country to encourage product diversification
and flexibility of production. This will enable SMEs to
adjust their production - based on local skill,
resources, unique biodiversity and appropriate
technology - in order to cater for domestic and global
demand and to the shifting tastes of consumers.
The government has also taken concerted action
to transform Thailand's tourism industry into a
high-tech industry as rapidly as possible in order to
create higher value-added. The tourism industry is seen
as a major source of revenue and foreign exchange for
the country. It should be noted that a country such as
France is scientifically advanced and at the cutting
edge of high technology, and yet the country's main
source of income lies in the tourism industry rather
than high-tech products.
Smart
blending
I have alluded to the blending of
high-touch and high-tech elements to produce new goods
for present-day life styles. Let me provide you with a
few examples from Thailand.
In the northern
province of Lampang, the Thai Design Co has produced
world-class quality ceramics of high design for sale
throughout the world. The company uses high-tech kilns
with computerized control to ensure the high quality of
its products.
In the area of food production,
the CP Rice Mill Co is producing pollutant-free,
fragrant jasmine rice in Buriram province in the
northeast, using the world's most advanced technology in
its mills. Such technology selects only rice grains of
the highest quality for production and sale.
A
Thai leather tanning factory is also an outstanding
example of high-touch, high-tech production facilities.
It employs high-touch skills in leather tanning with
high-tech equipment to manufacture and test leather
products of the highest quality.
In the field of
services, the concept of blending high touch and high
tech also applies. The services provided by super-deluxe
hotels in Samui Island and Phuket in the south include
health spas offering treatment with Thai herbs. They
also include ornate Thai restaurants offering delicious
and nutritious cuisine. Such extra facilities have
earned the hotels the distinction of being six-star
hotels.
The basic data and Thailand's
prospects
In Thailand, we have gone through a
major debate on our economy. One traditional school of
economists feels that we must reflate the economy
through government infrastructure spending. Another
school believes that we must get rid of our overcapacity
by using public money to sustain the bank books of the
major businesses regardless whether there really is
effective demand for the company's products or not.
From the government point of view, we wish both
views were right. But we know both are wrong. We are
carrying a public debt of 65 percent of GDP, or 16
percent of the annual budget. We are carrying US$67
billion foreign-currency debt; out of that amount $27
billion is government debt. Any government spending
which will increase our domestic and foreign debt
profile, will have to be able to create income fast
enough not to make our debt profile worsen. As I pointed
out earlier, in Asia we have overcapacity of a limited
range of products, and our problem is to find new
capacity for new demand. In short we need new investment
for new demand.
Our solution is to create
appropriate management policy and tax incentive for new
private sector investment. Thus, we "stimulate" private
sector investment.
Traditional macro-economists
believe that appropriate financial and monetary input
will yield the intended economic output. In the modern
world, however, input does not necessary result in the
intended output because societies have changed and
outside influences are involved that affect the
decision-making of the actors in the economy and the
global marketplace.
If we read Robert
Samuelson's article in the Davos edition of Newsweek
magazine, we find that the writer himself admits that
any macro-economic analysis must take into account
various political and social factors. In other words,
the macro-economists are at a loss to clearly explain
many of the economic phenomena currently taking place in
the world today.
I would also like to address
the misconception that the present administration is
closing the country to outsiders. This is a myth. The
government has never closed its doors and never will.
As a matter of fact, if one examines the history
of Thailand's economic development in comparison with
that of Western countries, one will find that Thailand
has maintained a more open-door policy than most Western
nations at the same level of economic development.
The Thai government has, in fact, employed a
dual-track policy that emphasizes strengthening the
domestic economy and the grassroots of the country,
while continuing to welcome foreign investment. It is
generally agreed that such policy is a wise and prudent
one. Leading members of the US private sector in New
York, upon hearing the government's explanation of the
policy, welcomed the strategy and said that they were
also using a similar strategy themselves.
The
adjustments that Thailand is currently making to ensure
our domestic strength will inevitably prove being
beneficial not only to our country but also to our
trading partners.
One book that I find
particularly interesting is The Spirit of
Capitalism by a Boston University professor named
Liah Greenfield which was published in 2001. The
subtitle of the book is Nationalism and Economic
Growth. It is a fascinating study of the growth of
capitalism in England, France, Japan, the United States,
and Germany, with a spirit of nationalism as the driving
force of such growth.
Where exactly are we
currently standing on the evolving path of the future
world economy?
We in Asia should not replicate
the West in our economic model, which does not mean that
we should reject historical and scientific facts. We
should rather provide an alternative model of
development, and an appropriate time frame to achieve
our objective. The world will be richer if there is more
than one model of development.
The path of
technological development is one with exponential steps.
The pace of change is too rapid for humans to keep up
with since we are all slaves to our beliefs and emotions
that continue to plod ahead at analog pace. Sometimes,
we even take a step backward, since the violence of
change may be too harsh for us to bear.
We
should strive to be a society that draws upon the assets
of our rich history and natural resources to provide
cash flows for our peoples, combining our assets with
modern technology. Such ways of production will enable
us to trade and enter into economic and social
relationships with both analog and digital societies.
In the final analysis, we must combine the best
of the past with the best of the future on our own
terms.
Pansak Vinyaratn is chief
policy advisor to Thai Prime Minister Thaksin
Shinawatra. This article is adapted from a lecture given
at the Central Party School of the Communist Party of
China. Vinyaratn was only the fourth foreigner ever
invited to the School.
(Copyright Heartland.
This version has been edited by Asia Times Online.)
To subscribe to Heartland, please e-mail cassanpress@sina.com
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