Calls mount for govt steps to kick-start trade
THE government should launch an integrated investment stimulus package including temporary tax incentives and accelerated depreciation allowances to snap the "wait and see" lethargy of businesses, economists suggested yesterday.
“Temporary investment tax incentives are one |of the leftover bullets that we can use,” Sethaput Suthiwart-Narueput, executive chairman of the Thailand Future Foundation, told a forum arranged by ThaiPublica.
“But its introduction alone won’t be enough since it has to be incorporated with other measures for it to be effective in lifting investment confidence in some parts of the private sector, such as the construction and energy industries, which are waiting for more tangibility and clarity on the government’s infrastructure projects and tax reform,” he said.
To overcome the lack of business confidence, they also recommended scrapping the Foreign Business Act and the privileges enjoyed by state-owned enterprises. That would level the playing field and promote healthy and fair market competition.
The tax incentive measure was successfully implemented in Thailand after the major floods in 2011 and could be adjusted to fit the current situation. It should be given a time limit of one year.
Each industry should be looked at individually so that the measure and other incentives could be better targeted to ensure greater effectiveness.
“Tax incentives is a short-term measure that could be implemented almost immediately. The expected increase in investment would provide short-term stimulation and long-term benefits from the increase in competitiveness,” he added.
Former finance minister Korn Chatikavanij said the caps on foreign ownership should be “completely eliminated” to encourage investment since they are an outdated form of protection that only benefits some industries. It also lulls protected operators into not trying to better themselves.
“The limitation on foreign ownership has existed for decades in order to protect Thai operators and industries that are not ready for truly free competition.
“But how many 10 years do we have to wait for them to be ready? It the end, is it a measure for the protection of a few operators or the protection of the people? I believe that the people would only benefit if there is truly free competition similar to the development of our telecommunications industry that was bettered through the increase in market competition,” he said.
Somprawin Manprasert, deputy dean of economics at Chulalongkorn University, and Pipat Luengnaruemitchai, assistant managing director of Phatra Securities, agreed that state enterprises require major reform since their ineffectiveness is bleeding the budget dry.
State enterprises’ budgets in 2015 total around Bt5 trillion while the government budget this year is around Bt2.75 trillion.
Pipat said the agency that needs immediate surgery is the State Railway of Thailand since improving its investment efficiency would lead to rapid development along rail routes because this sector has a long supply chain.
Somprawin said the advantages that state enterprises enjoy did not give them the motivation to improve.
“I believe that once the privileges have been axed, the state enterprises will run out of a fall-back position and they will have to try and better themselves in order to survive.
“They already have the resources and know-how to compete, but there is no push,” he added.
