THURSDAY, March 28, 2024
nationthailand

Dangers lurk on rocky road from crisis

Dangers lurk on rocky road from crisis

 POLITICAL upheaval and sluggish economic growth have marked Thailand’s faltering steps since it emerged from the grip of the Asian financial crisis. 

A glance at its neighbours makes for uncomfortable comparisons, with the likes of Malaysia and Indonesia – and farther afield, South Korea - outperforming the Kingdom on both the economic and political fronts over the past 20 years.
Thailand’s seeming inability to shake off its economic malaise has prompted talk of a new type of crisis lurking in the shadows.
Teerana Bhongmakapat, professor of economics at Chulalongkorn University, notes that the economy has been expanding at slightly over 3 per cent over the past four to five years, even as many neighbouring countries are posting growth rates of at least double that.
“Most Thai people have a sound understanding that the past financial crisis resulted from a bubble economy bursting and that caused the economy to collapse,” Teerana said. 
“However, they are not aware that there is a new kind of crisis that shows itself in slower growth over a sustained period of time.”
Thailand is unlikely to experience a boom and bust cycle again, the academic said, but bubbles may emerge in some sectors of the economy.
Teerana's view is shared by former finance minister Korn Chatikavanij, who has expressed concerns for a potential scenario of zero economic growth.
Both men agree that Thailand’s competitiveness is being eroded, pointing to the country’s failure to advance in political and economic reforms. 
They note that past elected governments had pursued populist policies at the expense of long-term development. 
Teerana said that past and current governments had failed to make the public sector lean and efficient; instead, it has become even larger. A bloated public sector has become a burden on the state’s budget, he said.
Likewise, reform of state enterprises under the current government has seen little progress. The junta government has been criticised for filling board seats at state enterprises with generals. 
Critics have also taken the government to task for allowing the State Railway of Thailand to handle the proposed Sino-Thai high-speed rail project, resulting in a lack of transparency. In terms of private investment opportunities, Thailand is less attractive than it used to be due to the rising costs of manufacturing in the country. Emerging countries such as Vietnam, Cambodia, Laos and Myanmar have become more appealing to investors.
Alongside the difficulties faced by some manufacturers, observers note that bubbles are appearing in the car-making sector and in the property market. Piengjai Kaewsuwan, president of the Thai Automotive Industry Association, said the industry could produce three million vehicles a year but actual production is running at about two million – a clear sign of over-investment. New investment should come only in emerging segments such as electric cars, she said.
Amonthep Chawla, head of research at CIMB Thai Bank, is also concerned about the pattern of slower economic growth, saying that the Kingdom could experience annual expansion of around 3.5 per cent for many years to come.
Meanwhile, former central bank governor Prasarn Trairatvorakul has voiced his concern over the possibility of a bubble in the property sector, citing an oversupply of condominiums and community malls. Developers have too much cash on their hands and don’t know where else to put it except in the property sector, he said.
On the political front, Thailand has experienced two coups d’etat since the 1997 financial crisis, the last in 2014. The junta government has promised reform and a return to democracy, but critics say the government has instead sought to destroy democracy, |while sowing the seeds for a future conflict.
Political scientist Seksan Prasertkul argues that the state elite have been pushing the country deeper along a conservative path, creating the conditions for the new round of political conflict that many fear.
Teerana said, given that the global economy is yet to fully recover from 2008 financial crisis, the Thai economy could expect only limited external support. In contrast with the years after 1997, the global economy was much stronger and better able to contribute to the country’s recovery.
 

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