World Economic Series: Thailand
By Public Policy Projects-
World Economic Series welcomed H.E. Mr. Pisanu Suvanajata, Ambassador of Thailand, Dr. Luxmon Attapich, Deputy Secretary-General of the Eastern Economic Corridor Office, and Mr. Burin Adulwattana, Chief Economist of the Bangkok Bank.
The second country-based session of the successful World Economic Series focused on Thailand. His Excellency Pisanu Suvanajata, the Thai Ambassador, was joined by Dr. Luxmon Attapich, Deputy Secretary-General of the Eastern Economic Corridor, and Burin Adulwattana, Chief Economist of the Bangkok Bank, co-sponsors of the webinar along with Diplomat Magazine and Public Policy Projects.
The Ambassador began by introducing Thailand’s strategy of the three Rs: response, readiness and resilience. Outlining Thailand’s successful response to the threat of Covid-19 with early attainment of a local transmission rate of zero, a benchmark which has been recognised worldwide, he noted that on the Global Covid-19 Index Thailand ranks number one out of 142 countries in both the Recovery and the Severity Index. This has been due to the country’s systematic testing and tracing programme as well as an effective healthcare system.
Local businesses have resumed trading and the feeling among the Thai people is back to ‘business as usual’ and that Covid-19 is waning from the society. Because local transmission has been null, the Government has taken a cautious approach towards reopening borders. New cases have been identified as originating outside the country and, as a result, travel restrictions have ensued as a precautionary approach to prevent the second wave that other nations are experiencing.
Aware of the economic impact of a second lockdown, the Government is working on strategies to facilitate business and resume travel. Each month there are up to three repatriation flights to enable British businessmen, British teachers at international schools and those who have family in Thailand to return to their former lives.
The Ambassador stressed that the Thai economy has been resilient around global and regional slowdown. Although the Covid-19 pandemic could see Thailand’s GDP contract between 5-6 per cent, Thailand’s GDP could rebound in line with other countries. Thanks to the country’s solid economic fundamentals and the strength of the financial sector, Thailand plans to focus on emerging sectors, especially food and healthcare, and reassert the country’s position in the global supply chain.
Despite the global recession and the real possibility of a second wave, there is still plenty of potential in Thailand, and businesses who want to seize the opportunity should engage sooner rather than later. He noted that countries need to take into account the China factor – the rise of China, the increasing US-China tensions and the targeted reduction of the dependence on Chinese imports. All these factors point to the emergence of South East Asia as a global supply chain hub.
From a Brexit standpoint, Thailand is looking forward to working with the UK to realise the Global Britain policy. He referenced the close historic ties between Britain and Thailand, based on shared values, mutual trust and mutual appreciation. Trade and investment, education, science, technology, innovation, defence and security are all areas where the UK and Thailand can build on their existing strategic partnerships, along with workforce exchanges.
Thailand is supportive of the UK’s application to be an ASEAN dialogue partner and participate actively in the regional development of South East Asia and East Asia. With Thailand’s aim to reboot its economy in the light of Covid-19 and its consequences, the UK is an important and trusted partner for the future.
The Eastern Economic Corridor
Dr. Luxmon Attapich, Deputy Secretary-General of the Eastern Economic Corridor, formerly a Senior Country Economist at the Asian Development Bank, began by observing that Covid-19 has demonstrated how fragile our modern economy and the global supply chain are. Thailand has taken the opportunity to re-evaluate its Eastern Economic Corridor or EEC, the government’s flagship project, and has concluded that it is even more relevant as the area is a key connectivity point.
The EEC corridor is essentially focused on upgrading transport infrastructure for greater connectivity to ASEAN, Asia and the rest of the world. The area will be linked to Bangkok through the international airport and then with the rest of the region by high-speed rail link and sea ports. The high-speed rail project is a PPP consortium of Thai, Chinese and European companies. The Map Ta Phut deep-sea port is a Thai-Chinese-Japanese project. The U-Tapao “airport city” power project has recently been signed. But there are still plenty of opportunities here for British companies.
Half of the promoted area in the EEC should be equipped with 5G internet by March 2021. Alongside this will be investment in research and development infrastructure in the shape of the EECiC or Eastern Economic Corridor of Innovation Centre.
As a result of the strategic location of the EEC, several key players in e-commerce and logistics, including Alibaba, are now investing in smart distribution hubs in the area. The EEC has worked with such firms and Thai customs departments to make changes to rules and regulations in the area to facilitate more than e-commerce logistics. In effect, the EEC is a policy lab and regulatory sandbox where changes in rules and regulation can be proposed quickly to fit the new business model and new technology.
Health and wellbeing is another key focus of the EEC area and investors can partner with companies to innovate and develop products in this sector. The Genomics Thailand project, modelled on the Genomics England project, will sequence 50,000 genomes along with a national bio bank for genomic data. In addition, Mahidol University is working with the University of Oxford on research around prevention of Covid-19, so the current healthcare partnerships between the UK and Thailand are already very strong.
The economic outlook
Burin Adulwattana, Chief Economist of the Bangkok Bank, gave his opinion that Thailand has been hit particularly hard by what he likes to call a perfect storm or a 3-D economy hit by disease, drought and delay to budget. So, as a result of the GDP forecast, this year could be down to minus 10 per cent.
Thailand has had low private investment for at least a decade. It is no longer a low labour-costs country but it has an ageing population. Nevertheless, as a result of the lessons learnt from the 1997 crisis, the banking system has been resilient and, accordingly, there is plenty of liquidity to support investment.
For the past 10 years, large corporates have been looking outside Thailand to invest in the region. However, investors should look at Thailand as part of a jigsaw in the regional economy. Covid-19 has clearly exposed the imbalances of the Thai economy which is over-reliant on tourism, accounting for about 20 per cent of GDP and the auto sector, which accounts for about 10 per cent of GDP.
Altogether, the tourism and automotive industry constituted about 30 per cent of the Thai GDP and has been heavily affected by Covid-19, so Thailand needs to have new investment to address the imbalanced structure of the Thai economy. In particular, there should be an upgrade in human resource capabilities, especially around education, training and English proficiency. Another area in which to help Thailand in a sustainable manner is farming and the agricultural sector – here, around 30 per cent of the Thai labour force works but it only produces about six to eight per cent of GDP. This is an area that would benefit enormously from the UK partnership.
Japanese counterparts who would like to invest more in Thailand have highlighted the lack of highly-skilled technical engineers and management staff, creating key roadblocks to further investment in Thailand. Again, this is another area for Thai-UK co-operation.
The Chief Economist concluded by reiterating that Thailand's economy has been resilient, but the structure of the economy needs to be rebalanced. There is a stable and sound banking system with plenty of liquidity to further support investment in Thailand and in the region, and the potentials of the ASEAN member countries remain largely untapped.
There was a lively debate following the speakers, kicked off by the British Ambassador to Thailand, Brian Davidson, who observed that the border restrictions still in place might deter British business people from seeking opportunities in the country. It was noted that there is a fine line between opening the borders and the need to prevent local transmission.
It was agreed that a travel bubble could be the answer. This would allow in international business people with good healthcare management, but there was concern that without skilled personnel, particularly in infrastructure, then such large projects may not go ahead at the necessary speed for the rebooting of the economy, even though in 12 months’ time the coronavirus situation may be different or improved. The U-Tapao international airport completion is projected for five years’ time, but there is hope that transportation will return to pre-Covid levels by 2022/23.
The session ended with the conclusion that there are plenty of opportunities for UK investors in Thailand, particularly in the EEC area. Thailand is a good location to establish a foothold in the ASEAN region and it is a high-potential market that the UK cannot overlook.
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