Switch from politics to economy, govt told

More investment, not rewriting of the charter, is what Thailand badly needs to prevent severe flooding and upgrade infrastructure, education and public health so more well-paid jobs can be created, the CEO Forum heard yesterday.

“Observing the country over the past five to six years, I was worried, since our attention had been paid too much to political issues but economic development was largely ignored,” Virabongsa Ramangkura, a noted economist, told the annual event hosted by the Board of Investment of Thailand. 

Virabongsa was selected to chair the Strategic Committee for Reconstruction and Future Development, which was set up by the government after last year’s devastating flood.

To finance public investment, the selling of government stakes in energy giant PTT and national carrier Thai Airways International is a key option, forum speakers said.

Virabongsa cited the political turbulence, starting with street protests against the Thaksin Shinawatra government, the military coup in 2006 and persistent political conflicts, mainly between those who oppose Thaksin and his supporters.

The country needs huge investment not only to prevent flooding but also to upgrade railroads, roads, ports, airports, education and public health, he said.

The government could finance such mega-projects because it has run a current-account surplus for 15 years, which built up the country’s international reserves to about US$180 billion (Bt5.7 trillion). 

The current government has recently succeeded in asking the Bank of Thailand to pay off the Bt1.14-trillion debt of the Financial Institutions Development Fund (FIDF) left over from the 1997 financial crisis. Next the government should privatise PTT to offload its debt of Bt700 billion from the public debt account, Virabongsa said. 

“I will ask Deputy Prime Minister Kittiratt Na-Ranong to sell 2 per cent of PTT to the Vayupak Fund,” he said.

A sale of the government’s stake would convert PTT from a state enterprise into a private firm and its public debt into private debt. 

The government’s holding in THAI should also be sold to investors as the flag carrier has debt worth Bt200 billion, Virabongsa said. Lowering public debt would leave much more room for the government to borrow for investment projects. 

Thailand should not only promote its own economy but also assist neighbouring countries to develop their economies. Factories here will face higher labour costs, so companies need to relocate part of their production facilities to Laos, Cambodia and Burma. Then parts or semi-finished materials would be sent back to be assembled in Thailand and re-exported, he said. 

Supachai Panitchpakdi, secretary-general of the United Nations Conference on Trade and Development, said democracy in Thailand had progressed quite far and there was no need to pay too much attention to amending the Constitution.

“Rewriting the charter will not create jobs. Foreign observers view that we engage too much in politics. Instead we need to make our economy grow,” he said. 

The country is facing challenges in attracting foreign direct investment (FDI) as traditional investors from developed economies are not in the mood to expand not only in Thailand but also on a global scale. Now global investment comes from emerging countries such as China, India and Brazil. FDI also comes from governments or sovereign wealth funds, he said.

However, Europe’s debt crisis opens up opportunities for Thai banks.

“The euro will be cheaper and Thai banks should look at buying assets in Europe, as banks there will sell part of their assets,” he said. 

Buying assets in Europe could serve as a channel for technology transfer, particularly in areas such as green and renewable-energy technologies in which Germany and France are well advanced. 

The government should work closely with the Asian Development Bank for financing investment projects as well as to drawing firms to participate in public-private partnership projects, Supachai said. 

Asean secretary-general Surin Pitsuwan said that to continue drawing investment after the flood disaster, the country must promote the whole region as a strategy to draw FDI and restore confidence.

To this end, Surin said Thailand should increase flexibility on service liberalisation. He is confident that FDI will create huge benefits for the country if the government can balance how those benefits are shared with investors.

He said that since more than 70 per cent of the FDI to Asean comes to the service sector, Thailand should urgently open the sector to promote development of such areas as education and healthcare. 

Inflows to Asean are expected to grow continuously as foreign investors eye it for their regional headquarters. 

Thailand should urgently grasp this opportunity to draw more investment as an efficient tool to promote the country’s economic growth, he said.

FDI to Asean doubled from $38 billion in 2009 to $78 billion in 2010.

Surin added that Asean should also promote intra-region trade as another tool to promote stronger growth of the region.