HUA
HIN - Oil price fluctuations notwithstanding, and with
Thailand expected to notch gross domestic product (GDP)
growth of between 6-7% for the year, Prime Minister
Thaksin Shinawatra has identified three areas to be
developed if Thailand is to improve its competitiveness.
These are fostering innovation, opening markets
and strengthening regional cooperation, Thaksin
explained in his keynote address at a symposium on
competitiveness in the capital Bangkok on Thursday.
"With the belief that Thailand and Asian
countries need to increasingly move toward becoming more
open economies, we have to make sure that our firms and
infrastructure are competitive so that we do not lose
our fundamental strengths while we try to acquire new
technologies and markets," Thaksin said.
The
International Institute of Management Development's
World Competitiveness Yearbook for 2004 ranks Thailand
29th in the world in terms of competitiveness, up from
31st in 2000. In Asia, after sliding from seventh place
in 2001 to 11th due to increased competition from China,
Thailand moved to 10th in last year's ranking among 30
countries surveyed, ahead of Japan, South Korea and
China.
Thaksin, who styles himself as a chief
executive officer-type of premier, added that Thailand
had already taken strides to reform the public sector
and encourage private companies to improve their
governance and performance.
Thaksin’s Thai Rak
Thai Party has been in power for over three years - it
faces general elections next year - and the premier
admits that "significant work" remains to be done in
areas such as the legal system, education, health care
and natural resources management.
Some would
agree. Dr Sansern Samalapa, a former World Bank
economist and an opposition Democrat member of
parliament and vice chairman of the House of
Representatives' Finance Committee, comments: "There is
no question that economic growth is the core target for
the current government's policy framework. From a
political standpoint, the government can make the claim
that it has engineered high growth during its tenure.
"Yet there is another side, the question whether
the growth is sustainable remains. Because these
policies do have another side, as the government's push
for high growth has been at a cost, without regard for
the consequences. The main evidence is income
distribution. Economic gains over the past three years
have been strongest in just two sectors -
telecommunications and automobiles. Both have gained
from the fact that since the government came to office,
domestic consumption was concentrated in these two
sectors only, not the agricultural sector, where most of
the population is working.
"What has the
government actually achieved in the past three years?
The answer is actually very little. There have not been
any improvements in the fundamentals of the economy.
Rather, what has been accomplished has been as a result
of shifting funds from one place to another," says
Sansern.
Nevertheless, Thaksinomics, as it is
popularly called, has seen the country shake off the
disastrous effects of the meltdown following the 1997
Asian financial crisis.
Opening new export
markets, restoring domestic and foreign investor
confidence and supporting private investments cannot be
argued against.
Export growth in 2003 was 18% at
US$78.4 billion, while the projection for 2004 is a
further increase of 21% to $95.3 billion, giving a trade
balance of $2.5 billion.
The foreign direct
investment inflow to Thailand in 2001 dropped to 185
billion baht ($4.5 billion) from 335 billion baht in
2000. But in 2002, the inflow picked up to 264.5 billion
baht and climbed to 319 billion baht last year. This is
expected to increase by 8% for 2004, prompting Peter van
Haren, chairman of the Joint Foreign Chambers of
Commerce to comment that the Thaksin administration had
moved to portray Thailand as a "desirable investment
environment".
New trade
destinations Since Thaksin took over in January
2001, Thailand has entered bilateral free-trade
agreement (FTA) talks with eight countries, compared
with none under previous governments. This includes
talks with the world's largest and second-largest
economies - the US and Japan - as well as with China and
India. Thailand is also in various stages of talks with
Australia, Bahrain, New Zealand and Peru.
In
addition, the government favors regional FTAs. As a
member of the 10-country Association of Southeast Asian
Countries (ASEAN), Thailand is among the active
components of the China-ASEAN FTA, with the aim to
establish a market embracing 1.7 billion people.
This has opened the government to charges that
it prefers bilateralism rather than multilateral trade
under the auspices of the World Trade Organization (the
head of which, incidentally, is former Thai commerce
minister and deputy prime minister Supachai
Panitchpakdi), but the government appears set on its
course.
Industry The revival of the
country's industrial sector has been arguably one of the
government's greatest success stories. Thaksin's "think
new, act new" policy platform for economic development
has placed a special emphasis on the development of
small- and medium-sized enterprises (SMEs) by injecting
huge amounts of cash into state-supporting projects.
This, coupled with the establishment of the Small and
Medium Enterprise Development Bank has revived
enthusiasm for the development of SMEs and has enhanced
growth potential for such enterprises.
Manufacturing growth in 2001, which stood at
5-6%, rose to 8% in 2002, 13% in 2003 and is expected to
reach 14.5% this year. Capacity utilization has edged up
slower, reaching 75.6% in the first quarter, up from
66.3% in 2003 and 53.5% in 2001.
A work in
progress For 2005, economic growth is projected
at 5.8% or lower, with inflation reaching no more than
2.2% and the current account surplus at $6.4 billion.
Obviously, Thailand's economic development over
the next several years will hinge on both internal and
external factors. Uncertainties surround market demand
for primary commodities, particularly agricultural
products and petroleum. And the United States could
affect the global business cycle, as could China, which
needs to adjust given its rapid capital accumulation.
Internally, structural bottlenecks still exist,
including poverty as a result of legal and income
inequalities, an industrial structure dependent on the
import of capital goods and raw materials, and a fragile
energy dependence.
As Dr Kitti Limskul, vice
minister for the Prime Minister’s Office says: "The
medium-term economic outlook will depend on how the
government pursues its policy on poverty eradication.
Programs to remedy income and wealth inequality will be
added to the agenda. More importantly, economic choices
and social participation will be expanded. This
represents the next chapter of the economic foundation
of Thaksinomics."
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