TDRI chief warns the country faces a debt disaster


Bangkok Post

Dr Somkiat Tangkitvanich says the ‘marshmallow theory’ proves Thais don’t understand the concept of restraint for long-term reward

‘The traditional model of development has reached a dead end. Thailand cannot grow further based on the old model as it can go only so far. If a solution is not found, the country will suffer greatly,” warned Somkiat Tangkitvanich, the new Thailand Development Research Institute (TDRI) president.

Somkiat Tangkitvanich, the new president of the Thailand Development Research Institute, sounds a dire warning that Thailand must rethink its concepts of development, or suffer greatly.

In an interview with Post Today, Dr Somkiat noted that since it was founded 28 years ago, the TDRI has produced lots of research to shed light on the country’s development. But now that he has assumed the leadership of TDRI, he will put the research into practice.

He likened the previous TDRI research as producing goods, but from now on the institute will do more to sell its goods and this can happen when society agrees to take up its research recommendations.

On the future of the country’s development direction, Dr Somkiat noted that there are four issues that need answers.

First, the traditional model of development has reached a dead end. Up till now, Thailand has relied on three pillars to develop the country: industrialisation (but not research and development), exports and cheap labour.

This model is no longer applicable as the global market is shrinking. Thailand can no longer rely on exports to push growth forward.

Second, the quality of education overall is regressing. If more and more children from poor backgrounds perform badly in school it will be hard for them to rise to the middle-class level. If there is no socio-economic mobility for a long time, tensions in society will increase and be long-lasting.

Third, corruption is endemic and this makes it hard to come up with correct policy decisions to develop the country over the long run.

“Corruption is most worrying, especially when any opinion poll always points to the same conclusion that most Thai people accept corruption as long as they benefit from it.

“I have heard that under-the-table payments are getting larger and larger every year. There is no concrete evidence but if you ask around, they accept that it is true and some can even cite anecdotes.

“It has gone deep into the people’s subconscious that it is acceptable.”

Dr Somkiat noted that the three issues will not plunge Thailand into crisis but the country will gradually decline.

However, the fourth issue – insurmountable public debt – will.

If public debt in relation to the country’s GDP is seen by investors as insurmountable, the country will face an immediate crisis such as is the case with several countries in the eurozone right now.

These four issues are important and TDRI has studied some aspects, but this time it would like to turn its resources to studying them in depth as the situation is getting more and more serious.

“Within the next two years, the country will not face a crisis as public debt is just above 40% of GDP, which is still not that high when compared with several other countries.

“However, the trend is most worrying as politics now dictates that any political party wishing to win an election must adopt populist policies from which the electorate can benefit immediately.

“The cost burden will surface in the long run. This is the problem.”

And the obstacles hindering development? Dr Somkiat says these are all four issues, especially short-term vision in politics encouraging instant gratification so much that people are no longer tolerate waiting a few years for results.

If any country adopts a political system that encourages people to look for short-term gains, that country has no long-term future.

“The government’s term is four years and most don’t even last that long. Ministers last even shorter times – six months to one year as there is a need to reward all the faithful. Who is going to tackle long-term problems?”

Dr Somkiat pointed to influential research – the marshmallow theory – that illustrates the benefit of restraint for long-term reward. In an experiment, five-year-old children were told to wait for 20 minutes before they could eat a delicious marshmallow.

If they waited, they would be rewarded with two marshmallows. If they did not, they could have only one. When the psychologist left the room, most children immediately ate the marshmallow in front of them. Only a few could restrain themselves and wait for 20 minutes.

A long-term study followed the progress of these children. Those who could not resist instant gratification faced a lot of problems as adults, while those who resisted short-term temptation finished university, found good jobs and a happy family life.

Dr Somkiat believes this research can be applied to people in general as well as the country. If any country’s politicians want to win in the short term without caring about the long term, the country’s prosperity will be hurt.

Is it possible to push politicians to tackle the four issues under the current polarised atmosphere? Dr Somkiat says the four issues are not about colour-coded politics but about the model for the country’s development.

Dr Somkiat still has hopes Thai society will develop the strength needed to undergo change even though it is a highly divisive time right now.

He does not place any hopes on the political sector as politicians increasingly have less and less vision and political conflicts have been intensifying for the past several years.

He also does not see any hope in career bureaucrats as they are much weaker than in the past and are no more than servants to their political masters. This is the main reason many good people resign from the service.

Dr Somkiat says Thailand’s situation is like the Titanic. But unlike the Titanic we can see the iceberg ahead. If the ship of state does not change tack and keeps to its present course, it will hit the iceberg.

There is no doubt that it will happen. The only question is when.
3G saga goes on

The recent 3G 2.1Ghz bandwidth auction is still being widely debated as allegations refuse to die of collusion among the bidders and the claimed low reserve price for each bandwidth slot, noted Nha-kran Laohavilai, Post Today editor.

It is true that all sides want the country to have 3G deployed as soon as possible but the public would like to see justice being served as well.

The mobile telecom business generates huge profits. This was the main reason overseas investors who took control of mobile telecom businesses in Thailand were able to recoup their investments in a few years.

Nha-kran did not place much faith in the National Broadcasting and Telecommunications Commission’s (NBTC) reason for setting such low floor prices – that the winners have to fork out a lot of money to get their 3G networks going – because the business also generates huge profits.

It is true that investing in a business to make profits is normal and acceptable. However, it is also true that radio frequencies belong to the nation as a whole. Thus anyone who is granted the right to make use of precious national resources must spread the benefits to the public as well.

When the NBTC announced that the reserve price for each 5Mhz slot was 4.5 billion baht, critics immediately cast suspicion on it because the consultant’s recommendation for the reserve price was 4.5 to 6.44 billion baht. Why did the NBTC prescribe the lowest figure in the range?

The NBTC has found it difficult to explain why it allocated nine licences and that each bidder could have a maximum of three when it was obvious that only the three existing mobile operators would participate in the auction as they already have a huge installed base.

When the TDRI came out to claim that because of the low bid price all the bidders would recoup their costs within one year, a lot of people could not accept that the auction was carried out in a fair manner.

Nha-kran then pointed to the previous attempt by the National Telecommunications Commission to hold a 3G auction in September 2010 before it was halted by the Administrative Court which ruled that the NTC did not have the authority because the NBTC was in the process of being formed.

At that time, the NTC wanted to use the N-1 bid method which meant the number of winners must be one less than the number of bidders. For example, if there were three bidders, only two would be granted licences. This method promotes competition.

Meanwhile, the public must continue to watch and monitor their behaviour and employ every means including legal and social pressure to make sure the public is not exploited.