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Can our neighbours help revive the economy?

May 29. 2017
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By The Nation

Thailand’s joint-development deal with Laos suffers as a result of our long, politically imposed absence from the spotlight

Deputy Prime Minister Somkid Jatusripitak and his team made the right move last week in striking an agreement with Laos on a five-year joint-development master plan as strategic partners, but the arrangement’s tardiness will make it more difficult to implement. 

The plan agreed upon in Vientiane promises to boost investment between the countries to US$10 billion (Bt344 billion) by 2021. It’s part of economic tsar Somkid’s grand ambition to jointly develop the fast-growing Mekong sub-region, what he calls the “CLMVT [Cambodia Laos Myanmar Vietnam Thailand] sub-regional strategy”. Somkid was in Myanmar in February promoting the “CLMVT partnership” and was due to take the idea to Cambodia last month, but domestic issues there intervened.

The CLMV label was first used by the Association of Southeast Asian Nations as a term for member-countries that joined the group in last part of the 20th century. Those four nations were economically trailing behind older members of the bloc and became the beneficiaries of development assistance so they could close the gap on Thailand, Malaysia and Singapore.

The economic picture has changed dramatically since then. The CLMV countries are performing well amid booming foreign direct investment, better than Thailand, in fact. They average 6-7 per cent growth in terms of gross domestic product compared to 3 per cent in Thailand, whose economy has been choked by political turmoil. Somkid, the military junta’s point man on the economy, wants to tap into our neighbours’ rapid growth, and that’s why there’s now a “T” tacked on to CLMV.

In financial terms, there is little that’s new to Somkid’s plan. Thailand has enjoyed solid links with the Mekong countries since the end of the Cold War in the late 1980s. Multiple joint-development schemes have been initiated in an effort to turn a war zone into a modern marketplace. They’ve included the Greater Mekong sub-region sponsored by the Asian Development Bank and the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy, a brainchild of Somkid’s former boss in government, Thaksin Shinawatra.

For years Thailand played a crucial role in moving these schemes forward, but it’s ceded leadership to other players as a result of domestic political upheavals that cripple its efforts to cope with the global economic slowdown. And as Thailand lost out, China moved aggressively, pouring investment into the Mekong region and forging trade deals. It is Chinese companies that are building the roads, railways, bridges, dams and other infrastructure in Cambodia, Laos, Myanmar and Vietnam, and Chinese clout leaves Thailand scant room to manoeuvre there.

In announcing that Thailand would give long-term support to Laos’ economic development under Prime Minister Prayut Chan-o-cha’s “Growth Together” plan, Somkid was ignoring Thailand’s long absence from the scene. Vientiane already has Chinese and Vietnamese investors competing to be its prime backer and the situation in Cambodia and Myanmar is no different. Vietnam has only a few Thais remaining in business there.

Cross-border efforts to ensure mutual growth are well and good, but Thailand badly needs a better strategy to engage these countries. Somkid must recognise that Thailand has also changed a lot since he was last in government. That was before the 2006 coup and the Thai economy was robust. Thanks to 

military meddling, it’s now the regional weakling.

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