Govt must give top priority to infrastructure investment, say experts

Speaking at a recent event held by Krungthep Thurakij newspaper, Kobsak Pootrakool, executive vice president at Bangkok Bank, pointed out that an investment cycle was coming to Asia. If the US economy remained stagnant and Europe remained mired in the debt crisis, investors would likely relocate their bases to Asia, he said. 

“This is a great opportunity for Thailand, as investors will be looking for destinations to invest. It would be a pity if we missed this chance,” Kobsak said.

Experts at the seminar emphasised that the government should improve the country’s infrastructure, particularly in logistics because of the high costs, while screening investment projects to boost competitiveness.

Asean countries, particularly Thailand, remain attractive for investment with solid balance sheets, good macroeconomic conditions, an upward economic cycle and the AEC. 

When the AEC materialises in 2015 and “if we don’t adjust ourselves by then, we will be overcome”, warned Chainoi Puankosoom, vice chairman at the Federation of Thai Industries. Currently, mostly public investment has been poured into the country to boost demand after the flood crisis in the last quarter of 2011, not to achieve long-term competitiveness.

Many companies have been asking about the government’s plan for water-resources management, which is required to boost investor confidence. “Industries need clarity and certainty in policies to guide business direction and investment,” Chainoi said.

There will be risks to private investment if the natural-disaster management plan does not take shape soon, said Songtum Pinto, director at the Macroeconomic Analysis Office of the Bank of Thailand.

There should be an efficient water-resources management plan to boost business confidence, echoed Phongsak Assakul, chairman of the Thai Chamber of Commerce. In addition, the private sector needs to show innovation in products and management to boost long-term competitiveness.

Many foreign investors have not relocated their production bases mainly because of Thailand’s strong supply chain. However, if the water-resources management system is not efficient, new investment could go to other countries. 

“It is time for the government to turn the crisis into an opportunity,” Songtum said. 

The country’s fiscal condition enables the government to go for borrowings through the issue of bonds. If more public debt will be necessary for investment to boost confidence, “we are ready to support this”, Songtum said. Currently, Thailand’s public debt stands at Bt4 trillion or 40 per cent of gross domestic product. 

Thailand would need to borrow another Bt2 trillion to break the 60-per-cent debt ceiling, said Boonchai Charassangsomboon, director of the Fiscal Policy Office’s Macroeconomic Policy Bureau.

The government may need to speed up its spending for investment. Budget disbursement is expected to start next month after getting Parliament’s approval. “There will likely be eight months for [disbursement of the] investment budget,” Boonchai said. Thailand’s fiscal year runs from October 1 to September 30.

Thailand has received relatively low investment since the 1997 Asian financial crisis as the government has a large amount of committed expenses such as rising public welfare, he said, calling it the lost decade of investment, which is now below the pre-1997-crisis level.

Before the 1997 crisis, Thailand’s public investment accounted for 11.5 per cent of GDP, but had declined to 5 per cent by 2010.

According to the Fiscal Policy Office, Thailand’s average investment is about 21 per cent of GDP while the country’s 11th economic and social development plan targets investment at 22 per cent. Average investment in Asean countries is about 25 per cent of GDP.

If public investment is directed towards infrastructure, especially logistics, that could offset the disadvantage of higher wages, which critics say have been eroding the nation’s competitiveness.