By Philippe Le Houerou
Special to The Nation
Skyscrapers in Bangkok don’t hold the title of the country’s tallest building for long. Completed in 2016, King Power MahaNakhon held the record for a while, only to be replaced by the 70-floor Magnolias Waterfront Residences, which now stands the tallest. It’s a monument to Thailand’s rise from a low-income country to upper-middle-income economy in less than a generation.
Thailand is one of the great development success stories. Due to smart economic policies it has made remarkable progress. The country’s export-driven growth has raised incomes, lifted millions out of poverty, and enabled much-needed investments in infrastructure and education over the past three decades.
Between 1986 and 2015, extreme poverty fell in Thailand from more than 14 per cent of the population to a negligible level. Moreover, social welfare gains have been impressive. Children are staying in school longer, virtually everyone is now covered by health insurance, and other forms of social security have expanded.
Nevertheless, there are challenges on the horizon. Growth has slowed this year amid weaker demand for the nation’s exports. Thailand also faces a number of long-term issues, including a rapidly ageing population, ongoing calls for more equality, and heightened vulnerability to the effects of climate change.
No longer can Thailand rely on low-skilled jobs to drive growth. Instead, the country is working to improve its competitive edge across all industries and grow its services sector, which will require major investments and policy reforms. Importantly, the government has shown the willingness to tackle these challenges, with its 20-year National Strategy at the centre of its development efforts.
IFC, as a global leader in private sector development in emerging markets, stands ready to support Thailand with investments and policy advice in such sectors as microfinance, insurance, manufacturing and services, rural infrastructure, and renewable energy. We are also ready to support Thai corporations to expand regionally and globally.
IFC believes that Thailand’s continued growth depends on embedding sustainability in every aspect of the country’s economic agenda. Already, Thailand has made admirable strides in this area, led by its banking sector. Under a Bank of Thailand initiative, 15 Thai banks have committed to pursue responsible lending by integrating environmental, social, and governance (ESG) factors into their loan approval decisions.
With its deep financial markets and dynamic banking sector, Thailand is well positioned to become a regional leader in promoting ESG standards, especially as it exports capital and expertise to neighbouring markets like Cambodia, Lao People’s Democratic Republic, Myanmar, and Vietnam.
IFC is helping Thailand seize this opportunity. Last year, IFC was the sole investor in a $60 million green bond issued by TMB, one of the country’s leading banks. This was the first green bond issued by a financial institution in Thailand and there are signs that the ESG market could be ready to take off. Last October, Kasikornbank issued a sustainability bond valued at $200 million. And then in December, B Grimm Power issued the first certified climate bond in the country.
Putting an emphasis on sustainability aligns with Thailand’s efforts to protect its natural resources, reduce energy intensity, and curb the effects of climate change. The government has set an ambitious target of cutting energy intensity by 25 per cent by 2030 from 2005 levels.
Thailand has also pledged to cut carbon emissions by at least 20 per cent from 2005 levels by 2030. That is a welcome target given the threat that climate change poses to the country. According to the Global Climate Risk Index, Thailand was the 10th most affected country by the impacts of weather-related events in 2017. Mobilising capital to invest in green projects will help the nation’s climate adaptation and mitigation efforts.
Building a more inclusive society will also help Thailand meet its development goals. While Thailand has made progress in terms of gender equality, wage gaps persist between men and women, and women are under-represented in high-paying and managerial positions. Thailand ranked 73rd among 149 countries at addressing the gender gap in 2018, according to the World Economic Forum. Unlocking the full potential of Thai women would give a major boost to the economy.
IFC looks forward to working with Thai policymakers, investors, and entrepreneurs as the country writes the next chapter in its development story. Thailand’s macroeconomic fundamentals remain strong, and we have faith in the private sector’s ability to innovate and adapt.
Building a resilient 21st-century economy takes persistence and innovation. As Bangkok developers know, it takes a sound blueprint and a solid foundation to build something that will stand the test of time and benefit the community as a whole. But if we work together, Thailand can scale new heights in a sustainable and more inclusive way.
Philippe Le Houérou is chief executive of the International Finance Corporation.