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POLITICAL STANDOFF
VICHAYA PITSUWAN
A World Bank economist views the current political upheaval as only a short-run concern for investors, saying they should take a longer view of the country's prospects.
''This political uncertainty is a short-term issue. When investors invest they look at the long run, and given the current situation, some investors are taking a wait-and-see approach,'' said Dr Kirida Bhaopichitr.
Investors, she said, were looking at two issues.
''They are waiting to see if the violence escalates, which is a short-term issue,'' said the country economist of the World Bank.
''It is more important to pay attention to whether political change will occur and if this will change policy.''
Dr Kirida doesn't expect to see the government's overall policies change even if political change occurs.
''The degree of support for some policies may change. For example, if we have a new administration, alternative fuel policies may shift,'' Dr Kirida noted. ''But because the overall economic and social factors remain similar to before the political woes, policymakers will be focusing on the same problems, resulting in familiar policies.''
She believes the investment climate will be improved by policy consistency, with a more stable and conducive regulatory framework.
The suggestions are also responses to the Productivity and Investment Climate Survey (PICS) conducted in 2007. Investor sentiment dropped significantly that year as the real private investment growth rate reduced from 16% in 2004 to 0.5% in 2007.
The World Bank survey found that certain regulations and procedures were constraints to business sector operations such as delays in tax refunds, multiple and cumbersome processes, labour regulations and price controls.
The drop in sentiment was partly based on fears of political instability as well as unstable regulatory policies.
''In the short term, business sentiment can be improved by increasing policy certainty, while reducing policy implementation delays'' said Dr Kirida, adding that public investment in infrastructure would help improve the sentiments of private investors.
In the area of regulatory procedures, government agencies should establish a single window in which services from several agencies and ministries will be provided at a single destination, she said.
Her suggestion was based on information received through the survey that revealed that obtaining factory permits in some sectors may take up to five months.
In addition, the private sector needs to play a larger role in protecting itself against macroeconomic uncertainties or other risks, Dr Kirida said.
She insisted that inability to protect against such volatility is mainly a consequence of lack of knowledge.
''Private firms will need to be proactive in seeking knowledge to improve their own productivity and hedging against risks such as exchange-rate volatility as businesses are unable to wait for someone to lend you a hand,'' she said.
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