Reform and investment in logistics along with the introduction of institutions to tackle the problems of corruption, economic inequality and the middle-income trap were the main topics of discussion for academics and economists at a Thammasat University-sponsored seminar yesterday.
Participants agreed that investment in logistics was crucial to increase the country’s competitiveness and preparation for the Asean Economic Community, which comes into force next year.
Pridiyathorn Devakula, a former Bank of Thailand governor, said that given the added incentives presented by the AEC, Thailand’s geographical location and a strong corporate sector, the next government should encourage an outward-looking momentum by Thai companies looking to outsource to lower production costs, improve product quality and expand their markets to neighbouring countries.
The government should do this as part of a development plan, because there are many successful manufacturers in Thailand that are already big enough to expand their business within Asean, he said.
“Thai manufacturers in industries such as sugar, canned tuna and pineapple, jewellery and eco-cars are all big enough to outsource and expand abroad, and the government should encourage this move because the country is currently experiencing a shortage of labour and a lack of land for investment,” Pridiyathorn said.
He added that the government could encourage and support firms by investing in a new port on the Andaman coast to open new markets in places such as the Middle East, as well as improving the interconnectivity of the Kingdom’s railways.
It could also provide incentives such as a tax-support policy, while the Board of Investment should increase support via regulatory reform for firms seeking to venture outside the country.
“Thailand is about to transform itself into a trading nation, and the government needs to encourage this transformation though the development of logistics and improved trading regulations to match the international standard,” said the ex-central bank chief.
“The simplest way to do that is to copy the blueprint of economies that have already had success in this transformation, such as Singapore and Hong Kong,” he added.
Thanawan Polwichai, director of the University of the Thai Chamber of Commerce’s Centre for Economic and Business Forecasting, said innovative thinking, creative marketing and logistics were all key to developing the country’s competitiveness, and the government should provide small and medium-sized enterprises with financial access and technological support in order for them to expand their businesses.
“I want to see double-deck trains and crossways for cargo shipping as part of our logistics development, which is needed to improve the country’s competitiveness in terms of production costs and reliability,” he said.
Nipon Poapongsakorn, a fellow at the Thailand Development Research Institute, said the problems of economic inequality and the middle-income development trap could be eased and eventually solved by the introduction of new institutions.
The first institution that needs to be created is one that oversees the improvement of product quality through technological advances and training that improve the skills of the workforce, he said, adding that the government should also increase its budget for research and development so it could provide innovation for the institution.
“The biggest failure of the government is the connection failure between its agencies and the private sector in regard to the development of business through technological advance and innovative ideas,” Nipon said.
Another institution is needed to tackle the problem of inequality by overseeing government policy and mega-projects that have an effect on people’s way of life, he suggested.
Nipon said many large government projects had failed in the past because of their negative results on people living in their path – eviction and forced foreclosure of local businesses, in particular.
“There should be an institution that makes sure that the lives of the people who face eviction because of government projects are not worse after they are forced out, and to ensure that they receive proper compensation for the loss of their way of life,” he stressed, adding, “The benefit from the project should be shared with the locals, as well.”
A third institution that needs to be created is one that controls the exploitation of government policy by the rich and powerful, he said.
First published: The Nation, February 22, 2014