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Experts call for liberalisation in services sector

Dec 11. 2018
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THE SERVICES industry is the key to Thailand’s future economic growth but to succeed, it will need to liberalise regulations on trade in services, according to experts from the World Bank and the Thailand Development Research Institute (TDRI).

“The Asia Pacific region has seen growth in trade of goods in the past few decades. However, since the global financial crisis, global growth in goods trade, which is fuelled by manufacturing industry, has been slowing, and the Asia Pacific region is by no means immune to this trend,” Andy Mason, lead economist for East Asia and Pacific Region of the World Bank, said yesterday at the TDRI-hosted seminar “A Resurgent East Asia: Navigating a Changing World”. 

“Thailand’s manufacturing industry has been running out of steam in the past few years. This is seen by the fact that the industry has not been absorbing the additional work force,” said Deunden Nikomborirak, research director in economic governance at TDRI.

Furthermore, though Thailand is responsible for about 18 per cent of the total Asean GDP, it attracts less than 3 per cent of total foreign investment in the region. 

To address this problem, Thailand will need to increase the productivity of its services sector as well as promote more trade in services, Mason suggested. 

While it is necessary to increase trade in services, the key factor limiting services trade has been government regulation, Deunden said. 

“Foreign equity participation in all services is limited to 49 per cent except in banking and insurance, which is limited to only 25 per cent. Furthermore, in Thailand, skilled and unskilled labour are treated with the same regulations, leading to various unnecessary restrictions on labour movement in and out of the country,” she said.

“Meanwhile, companies in Thailand are required to maintain a 1:4 ratio of foreign-to-Thai workers and can hire only one foreign worker for every Bt3 million of registered capital. This means small and medium-sized businesses [SMEs] cannot afford to hire foreign skilled labour, limiting their growth in the country,” she continued. “Foreigners in Thailand also have to report themselves every 90 days even if they have a work permit in the country. The extremely cumbersome work permit and immigration process discourages foreign workers from looking for work in the country,” she said. 

“Thailand should enter multilateral trade deals and force itself to commit to liberalising trade in services,” said Sudhir Shetty, chief economist for the East Asia and Pacific Region at the World Bank. 

Deunden suggested that Thailand start by liberalising services regulations in specific regions of the country, complementing the government’s plan to develop the Eastern Economic Corridor (EEC). 

“In the Asean region, up to 90 per cent of total foreign investment goes to the services sector. However, Thailand’s policies still lean heavily towards manufacturing, neglecting the services sector. Moreover, Thailand contributes up to 18 per cent of total Asean GDP, but only attracts 2.9 per cent of the total foreign investment in the Asean region,” she said. “Therefore, Thailand is heavily underperforming and the development of the EEC can adequately address this problem over time.”


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