Boost in Thai competitiveness needed to capture opportunities

Three trends driving future growth in Asean are capturing a greater share of global flows, riding the urbanisation wave, and deploying disruptive technologies, the local unit of the global company told a forum.
Tomas Koch, senior partner at McKinsey & Company Thailand, said at the first “McKinsey Thailand Forum on Enhancing Thailand’s Competitiveness” that from the opportunity point of view, Asean is connecting to the global trade flow, urbanisation and new technologies.
The opportunity in Asean is enormous, but there are challenges if Thailand is to be ready to capture its full share of what will be on offer, he said.
However, Thailand’s readiness is not good, he said, adding that in terms of digitisation, digital penetration in Thailand was still relatively low.
Meanwhile, organisational effectiveness is not good, and nor are manufacturing efficiency and productivity.
“We look at this in three different perspectives: as to readiness in the digital area, Thailand is not yet ready because of the low penetration of broadband Internet and smart phones; as to organisational effectiveness, they [Thailand] are on path, but not better; as to manufacturing efficiency, Thailand was productive but it was lost because of the demographic shift affect in the workforce,” said Koch.
Urbanisation could unleash tremendous value in Thailand, as higher urbanisation leads to higher wealth creation, said the partner.
By 2030, the share of the Thai population living in cities is forecast to be 49 per cent, or 20 million households, with Bangkok remaining the main growth driver.
To serve urbanisation, the Asean region needs an estimated US$7 trillion (Bt229 trillion) in new infrastructure – including residential and commercial real estate, telecoms, water, power and transportation – through 2030, Koch told the forum.
Digitalisation will revolutionise the world, and disruptive technologies will have an enormous economic impact. These disruptive technologies include the mobile Internet, cloud technology, the Internet of Things, automation of knowledge work, advanced robotics, and next-generation genomics.
In terms of digitisation, Koch said most companies in Thailand were unprepared, unlike many other countries in the region.
Digital penetration in Thailand is still low. For example, smart-phone penetration last year was only around 30 per cent, while Malaysia was over 50 per cent and Singapore surpassed 100 per cent.
Thailand’s competitiveness is at risk, McKinsey believes.
He said the country’s competitiveness was driven by two main factors – productivity and the labour force – with the Kingdom’s real gross-domestic-product growth coming from these.
However, Thailand is currently still low in both factors when compared to other Asean countries, he stressed. Koch said that to enhance |the country’s competitiveness, companies needed to improve themselves.
 On the industrial side, the government should not play the big role, as it was for companies to do so.
 The government could play a better role by improving education, knowledge and learning, but should not subsidise industrial sectors because companies would not in any case be able to survive in non-competitive sectors, he said.
“The role of the government is to help lay down infrastructure. The private sector should be competitive without government interference. The government can set up frameworks and conditions like an economic development zone for a bio hub, or for other things that Thailand is known for. It needs to provide support, but the rest should be left to the private sector,” said Koch.
Deputy Prime Minister Yongyuth Yutthawong told the forum that a competitive economy was about having a knowledge- and innovation-based economy that emphasised increasing quality and where technology and innovation were priorities, while labour and capital played less of a role.
 Thailand spends much less than it should on research and development, he said.
 R&D spending is around 0.3 per cent of gross domestic product, while other countries spend around 1 per cent. In Thailand, R&D spending by the private sector has been surpassed by government spending, but in the future, the goal is for the ratio to be 70:30 in favour of the business sector, he added.
 Meanwhile, the government aims to double its R&D spending, the deputy PM added.
 “Private R&D spending should be encouraged. Recently, the Cabinet approved an incentive whereby private firms that invest in R&D will get a 300-per-cent tax reduction,” he said.
Surviving and prospering in a borderless Asean requires the three key elements of competitiveness, sufficiency and partnership, he told the audience.
“Basic for sufficiency and competitiveness are knowledge and knowledge management. Both sufficiency and competitiveness are two sides of the same coin,” said Yongyuth.