Thailand’s large informal sector is obstructing employees’ social safety and public services, says the World Bank, which suggests a formalisation process as a solution.
A worker at a site on Phloenchit Road, where a number of new projects are under construction. The World Bank said Thailand’s economy could grow by less than 3%. SEKSAN ROJJANAMETAKUN
Norman Loayza, a World Bank economist and lead author of the bank’s "World Development Report 2014", said Thailand was hampered by a large informal sector, in which small enterprises had more than 50% of their workforce identified as self-employed.
The process of integrating these informal employees into the formal sector is vital because this would enhance the regulatory framework for social safety, public services and innovation, he said.
Thailand might want to consider establishing a National Risk Board (NRB) to integrate risk management and consider synergies, trade-offs and priorities in addressing different risks in different contexts, said Mr Loayza.
He said the NRB should combine advisory and implementation roles and be composed of policymakers and independent experts.
Singapore has its NRB within its government, while in Britain and the Netherlands the organisation operates as an independent agency.
On the positive side, risk management in Thailand can be an example to other countries on health-related risks, national health insurance schemes and macroprudential financial policies undertaken after the 1997 Asian financial crisis, he said.
Thailand Development Research Institute research director Somchai Jitsuchon said Thailand is facing a political risk over leadership as the country’s leaders lack the vision to implement development measures, while the ongoing political crisis has dented the country’s competitiveness, threatening the the country with the middle income trap.
This year’s economic growth could come below 3% due to an absence of a functioning government hindering next year’s fiscal budget disbursement and public investment plans.
Exports are seen as a beacon for growth, but this remains doubtful as Thailand is reaping fewer benefits of the global economic recovery than its neighbours, said Mr Somchai.
Gross domestic product (GDP) growth could dip below 3% if a functioning government is not installed this year and overdue payments of the rice-pledging scheme are delayed further than the final quarter, said Kirida Bhaopichitr, the World Bank’s senior economist for Thailand.
Ms Kirida expects a one-percentage-point rise in the bank’s full-year economic growth forecast associated with the rice-pledging scheme payment by the final quarter.
The World Bank will revise Thailand’s economic growth forecast in October.
A delay in the instalment of a functioning government is another reason for cutting this year’s growth forecast since this would affect public expenditure, she said, adding that public expenditure has not been too high in recent years and it cannot be compared to the effect rice scheme payments could have on driving up GDP growth.