Time to rethink future growth channels
EXCLUSIVE INTERVIEW: Double whammy of Covid-19 impact and transition into an aged society requires a proactive investment policy and an overhaul of govt bureaucracy
The Thai economy faces a spate of challenges with the latest outbreak compounding the difficulty of recovery efforts.
Kla Party leader and former finance minister Korn Chatikavanij pointed out that a proactive investment policy to promote R&D, startups, community businesses, spending reduction and bureaucratic reform are the only ways to ensure survival in Thailand.
"The pandemic has provided a heavy blow, especially to the tourism sector which accounts for more than 12-13% of the country's GDP," said Mr Korn. "Thailand's current economic structure also relies largely on exports and as Thailand transitions into a 'super-aged' society, this will slow economic growth and lead to a smaller workforce."
Thailand is already considered an "ageing" society, meaning 10% of its population is aged 60 or above. The country has had this status since 2005 but it is now on the verge of becoming an "aged" society this year, which means people aged 60 or over will account for 20% of the population.
At the current trajectory, Thailand will become a "super-aged" society in 2031 when people aged 60 or over will make up 28% of the population.
According to Mr Korn, Thailand needs to rethink economic development and create an economic growth model based on a smaller workforce.
Kla Party leader and former Finance Minister Korn Chatikavanij. (Photos by Somchai Poomlard)
"The government needs to increase methods to generate income, focus on foreign investment, startups, and expenditure reduction by implementing reforms to scale down the bureaucratic system and increase efficiency by introducing technology in public services," he said.
Regarding investments, Mr Korn said it must come from both the public and private sector and that investments in securities through the Stock Exchange of Thailand remain relatively poor.
Foreign direct investment (FDI) to Thailand compared with other countries in Asean has also dropped over the last two decades. Thailand now accounts for only 10% of the FDI coming to the bloc, a frenetic fall from 44% before the financial crisis in 1997.
Private investment growth, which ranged between 15-16% per year before 1997, has also plunged to only 1-2% a year now.
"A lack of long-term investments has slowed the country's economic growth. Currently, Thailand's growth is almost the lowest in the Asean region," he said.
"Although the government has implemented a 20-year national strategy plan to help the Thai economy overcome the middle-income trap, it is not enough to tackle current problems and generate income in the long term."
One solution, he said, is a speedy investment in R&D to develop new industries and increase value in the farm sector.
Mr Korn has met several academic and foreign investors and noticed that they want the Thai government to take a more proactive role in R&D investment, especially in the farming sector.
He initiated two projects to promote farmers seven years ago to grow premium rice in Maha Sarakham in the Northeast, a move meant to help farmer repay debts.
Mr Korn, through the Kla Party, also supports villagers in Cha-uat -- the poorest district in Nakhon Si Thammarat in the South -- to produce handicrafts from krajood (saltmarsh bulrush).
They produce packaging from krajood and supply it to the organic grain community in Maha Sarakham.
"This is considered a good example of cooperation among community businesses. We should develop similar projects in other remote areas."
According to Mr Korn, the government should make the best use of existing information on its 50 billion baht-worth national e-payment system which covers around 20-40 million people.
The information can be developed as a data sandbox and startups should be promoted to develop and expand their business using this valuable information, he said.
Mr Korn has also proposed the government allow more foreign experts to work in Thailand as well as create an appropriate climate for work and investment. Obstacles regarding visas, work permits, immigration procedures should be solved quickly.
"The US is a good example of a country that allows experts from across the world to work in their country. Those foreign experts innovate and create technology which helps generate more income to the US," he said. "While the pandemic has taken a heavy toll on many countries, the government should announce a 'Work From Thailand' campaign."
Mr Korn has also urged the government to legalise gambling in Thailand, saying doing so will not only help contain the spread of Covid-19 in illegal gambling dens but also provide more tax revenue and boost investments.
Mr Korn said investment both from the public and private sector as well as investment in securities through the Stock Exchange of Thailand remains relatively poor.
"Many countries use this policy to generate income. At least 100 billion-baht worth of investments will flow into Thailand if the government allows casino investments, especially since Macao's contract will expire in two years. Hence, investors are now looking for new locations and Thailand has an advantage when it comes to investment climate and tourism spots. The government should make a quick decision regarding this policy."
According to Mr Korn, it was wrong for the government to make people stop gambling as a way to contain the spread of Covid-19.
The government should legalise gambling so the business can be regulated properly in terms of not only containing the virus' spread but also getting gamblers to spend their money in legal casinos in the country rather than in casinos elsewhere.
When legalised, casinos will pay taxes to the state which the government could use to fund its policy for public betterment.
In order to reduce expenditure, the government must also restructure bureaucracy because it costs the government in the long run.
"Expenditure in the Thai bureaucracy is quite high as the regular budget accounts for 70% of the fiscal budget. Compared to other nations in Asia, Thailand now ranks third after Qatar and the Maldives."
Mr Korn also said that amid the pandemic, many countries have introduced technology in their services. The Thai bureaucracy also needs to develop itself and upgrade in line with the global trend, citing how technology can help ensure transparency and reduce corruption.