THURSDAY, March 28, 2024
nationthailand

TDRI urges liberalisation of Thai services sector

TDRI urges liberalisation of Thai services sector

Although Thailand has benefited greatly from Asean free-trade developments, leading to a large number of firms investing in the region, the country needs to liberalise the services sector in order to take advantage of upcoming deeper economic integration,

There have been more Thai companies investing in the region in recent years than Asean companies investing in the Kingdom, Thailand Development Research Institute (TDRI) president Somkiat Tangkitvanit said at the body’s annual seminar, entitled “Asean Economic Community: Myths, Reality, Potentials and Challenges”.
 Thai companies engaged in energy, utilities, construction materials, petrochemicals and chemicals have invested in Indonesia, Singapore, the Philippines, Malaysia, Cambodia, Laos, Myanmar and Vietnam – listed in order of investment size. Parent firms listed on the Thai stock market had set up 216 ventures in these countries as of last year, he said.
 Thai companies have successfully exploited the larger regional market, and will continue to do so in regard to the upcoming Asean Economic Community (AEC), he said.
 As Asean will integrate the regional economy with the economies of China, Japan, South Korea, India, Australia and New Zealand under the bloc’s agreements with these countries, the Kingdom stands to gain from a 48-times larger market than the domestic market, he added.
 However, the country needs to reform its logistics system and customs procedures in order to cut costs, said Somkiat.
 So far, Singapore is the largest intra-Asean investor, even though Thai investment in the region has increased over the past few years, according to the TDRI.
 Deunden Nikomborirak, research director at the institute, told the seminar that while Thailand was the second-largest economy in Asean, the country had received only 13.83 per cent of foreign direct investment flowing into Asean between 2006 and 2010, while Singapore had a 42.8-per-cent share despite its much smaller economy.
 The new trend for FDI heading to Asean is in the service sector, but Singapore has grabbed most of this investment as the city-state has already liberalised its services, she said.
 
 Least open service sector
 Across Asean, Thailand has the least open service sector, besides which the country does not plan to liberalise much of the sector and allow skilled-labour migration in services under the AEC road map, she said.
 Deunden added that the country’s lagging service sector not only adversely affected the welfare of Thai consumers, but also negatively affected other businesses that use services.
 Crucial services that should be liberalised are land transportation for goods, other land logistics services, financial services and insurance, she said.
 Moreover, the country needs to open up the trading of oil and gas, which is monopolised by PTT Group, said the research director. Electricity production and distribution, currently monopolised by the Electricity Generating Authority of Thailand, should also be liberalised.
 She also cited fixed-line telecommunication, which is under a True Corp and TOT duopoly, and satellite communication, currently controlled by Thaicom.
 As well, there is a lack of competition in mobile-phone services, which results in high-cost services when compared with those in Singapore, Indonesia, Vietnam, Laos and Malaysia.
 She also criticised the Bank of Thailand for heavily regulating financial service charges, leading to low competition and high costs for users.
 Some 45 per cent of the country’s labour force is in the services sector, while only 14 per cent is in the industrial sector. However, the government still heavily supports the latter, she added.
 Meanwhile, labour productivity in services is lagging that in some other Asean member states. Singapore is ranked first, followed by Malaysia and then Thailand.
 This is mainly caused by low FDI in services, resulting in a lack of technology transfer, she argued.
 “If the country wants to achieve high economic growth of 7-8 per cent, we have to support and liberalise the services sector,” said Deunden.

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