Thailand must focus on core industries for the long-term: EIC
THE SCB Economic Intelligence Centre (EIC) says Thailand has to sharpen its focus on some industries to sustain foreign direct investment, as the focus industries will help ease the problem of lower number of working-age people and lower productivity.
Amid the bright outlook for the Thai economy next year, the EIC predicted that gross domestic product in 2015 could expand by 4.8 per cent against the 1.6 per cent assumed by the EIC. Public investment will be the key driver of the Thai economy next year, which in the view of the EIC will represent 1 per cent of GDP in 2015.
Sutapa Amornvivat, chief economist and first executive vice president, said that infrastructure investment worth Bt2.4 trillion is the right way but this investment needs 7-8 years to become tangible.
FDI used to be one of key drivers of Thai GDP in the past decade when Thailand attracted 40 per cent of FDI that came into Asean, while Indonesia and Vietnam attracted only 20 per cent each.
Today, the situation has reversed with Thailand attracting only 20 per cent of the FDI and Indonesia and Vietnam doubling to 40 per cent.
Sutapa cautioned that FDI was not a long-term solution for Thailand, as the country does not have a magnet to lure new investment because of the outdated products and lower supply of working-age people.
The number of working-age people in Thailand is expected to shrink in 2018, while Indonesia will face a drop in working-age people in the next 20 years.
The median working age of Thai people was 34, and the productivity of Thai labour is one product per head per day, considerably lower than in Japan and Singapore where productivity averages 5 products per head per day.
Japan is also witnessing an ageing society while Singapore has a small population.
When the number of working-age people is unlikely to support the FDI, and the productivity of Thai labour is low, Thailand will not be an attractive destination for foreign investors.
“FDI is a need but the country must sharpen its industries focus. High value products and high-growth products are the key, which the government could help in terms of tax incentives and research and development budget,” she said.
She said that the EIC would raise these issues for discussion at its conference on October 2, as the EIC hopes the government would heed the suggestions of the private sector in its economic policymaking.
“Thailand is in a time of changing economic structure. The country’s development in the past was made for the short term but now we are talking about long-term economic structure, which needs to be speedily resolved,” she said.
