Worsening productivity is the main cause of Thailand's economic setbacks over the past decade, according to business leaders.
Speaking at a forum on the middle-income trap at Centara Grand CentralWorld yesterday, business leaders agreed that the country's economic growth, which averaged 5% a year after the 1997 financial crisis, had dropped to only 2-3% over the last 10 years as a result of lower productivity.
Banyong Pongpanich, chief executive of Kiatnakin Bank, said lower productivity was partly due to unwise investment over the past decade, as governments had spent huge budgets on some projects that gave poor returns.
Some large state enterprises gave returns on assets each year at an average of less than 3%, showing very poor returns on such huge investment.
Combined assets of all state enterprises have grown to 1.2 trillion baht from 470 billion baht over the past 10 years, showing that governments invested a lot in the assets of those enterprises, which gave pretty low returns.
Mr Banyong said it was because those enterprises were easily corrupted by politicians, who normally used the enterprises as political tools to gain votes.
Some enterprises have been suffering repeated losses and have had to suffer huge debts, showing they were not efficient firms.
"It's like a person who suffers obesity with huge, dangerous fat and sugar in the blood and who will become severely sick one day," said Mr Banyong.
Tevin Vongvanich, chief executive and president of PTT Exploration and Production Plc, said Thailand's global competitiveness ranking had been dropping gradually each year because the country lacked innovation and did not invest much in improving human resources.
"We have become stuck as a middle-income country without any improvement to be a higher-price goods exporter," said Mr Tevin.
To escape the middle-income trap and become a developed country, Thailand would need to double the country's income to more than US$12,500 per head per year from $5,000 last year.
Kan Trakulhoon, chief executive of Siam Cement Plc (SCG), the country's biggest industrial conglomerate, attributed low productivity and weak competitiveness to the country's poor research and development over the past decade.
He said Thailand had set aside very small budgets for research and development, which was equivalent to only around 1% of its GDP this year.
The central government should increase the annual budget for research and development to up to 120 billion baht, Mr Kan said.
He said SCG had allocated a budget for research and development of 4.9 billion baht in 2015, up from 2.7 billion last year. The budget will increase to 6.5 billion baht next year.
In the longer term, SGC plans to allocate about 1.5% of its revenue each year to research projects.
Prasert Prasarttong-Osoth, chief executive of Bangkok Dusit Medical Services Plc, said low productivity was caused by old-fashioned laws and regulations that failed to facilitate business.
He said many regulations, especially those related to logistics including land and marine transport and aviation, were crucial tools for business operations.
The National Legislative Assembly should revise laws and regulations shortly in order to modernise them to facilitate business and increase productivity, said Mr Prasert.