Govt must gird for digital economy impact
The Prayut Chan-o-cha government's Thailand 4.0 and digital transformation agendas have made for a good campaign. But this administration does little to explain how it will handle the unpleasant sides of this new economic trend.
Based on creativity, innovation, new technology and high-quality services, Thailand 4.0 is a new economic model adopted at a time when the country is increasingly embracing the digital economy.
Unavoidably, with the increasing use of robots, automation and digital platforms, some jobs and firms will be at risk.
Certain types of workers stand to lose their jobs to automation while local businesses will be at risk of losing their competitive edge to big foreign e-commerce players.
Srisamorn Phoosuphanusorn is Business Editor, Bangkok Post.
Is the government well-equipped to handle this scenario? Not really, I think (and sigh).
The current administration does not seem to be aware of these challenges, and nor has it prepared ways for these groups to deal with them.
Instead, it mainly looks at the bright side of this economic model: Its own expectation of a reasonable return on the 200 billion baht to be invested under its seven-year plan.
In particular, the Prayut administration has also made an inordinate number of promises which have unrealistically transformed its digital economy narrative into an expectation of unadulterated success.
Intending to promote growth, this economic model fails to address how growth will be balanced and just. Meanwhile, the digital economy itself will claim a fair share of victims, and it is high time the government started finding ways to cushion the blow.
The state aggressively promotes the notion of a "cashless society". In the initial stage, mobile banking and e-commerce are the main forces pulling the country towards the new internet-based economy.
Under its Thailand 4.0 policy, the government has implemented or announced a slew of tax incentives and special privileges aimed at promoting local and foreign investments into what the government called the five "new S-curve industries"-- industries of the future that can help the economy achieve "leap growth", as Industry Minister Atchaka Sibunruang puts it.
On top of existing tax incentives, the Revenue Department has offered a five-year corporate tax exemption to startups in 10 targeted industries comprising those in the first S-curve and the new S-curve categories, including next-generation cars, smart electronics, robotics, bio-chemicals and medicine.
A bill to waive capital gains and corporate income taxes for venture capital firms and angel investors (individuals providing capital for startups) is also under way, in the hope the incentives will spur interest among local startups and help them compete internationally.
The proposed tax incentives for startups are aimed at dissuading local, high-growth startups from registering their businesses abroad, and attracting venture capital to the country.
With the government's supportive policies, automation will gain a stronger foothold in Thai industries. The state is planning to establish a national research and development (R&D) office to supervise and promote private sector R&D spending.
Additional tax incentives have been approved for companies that group together in clusters to invest in R&D in robotics, aviation and logistics, digital business, biofuels and biochemicals.
The government recently approved a robotics development plan to accommodate its projection that half the jobs in the manufacturing and services sectors will employ robots and switch to automation within the next five years, up from the current 30%.
Its efforts to transform the country into a creative economy have borne fruit. Recently, representatives of almost 600 Japanese companies visited Thailand, highlighting the importance of investment from Japan which remains a vital source of funding and knowledge for Thailand's industries.
The government forecasts these Japanese firms will bring about at least 1.5 trillion baht of investment into the Eastern Economic Corridor (EEC) over the next five years.
A recent partnership between Chinese e-commerce giant JD.com and Thailand's Central Group can be seen as another digitalisation success story, which can in part be attributed to the government's sustained efforts to attract the leading new economy players.
For the country, the influx of foreign investors into the manufacturing and service sectors is an opportunity. But for local companies and traditional operators, it is alarming.
As the expansion of JD.com and another Chinese e-commerce giant, Alibaba, into the Thai online retail sector looms large, local and international players are bracing for a prolonged war for market share.
Local e-commerce providers will have to find a niche to remain competitive or start deriving a larger share of their revenue from abroad if they are to survive.
The Chinese giants pose an existential threat to nearly every consumer product in the country, not only to e-commerce providers, as their platforms would serve to channel cheap Chinese goods into the country.
It should be noted the government's effort to promote a digital ecosystem through the planned creation of digital innovation and research centres still falls short of truly supportive measures. For example, the gap between demand and supply for soft loans, especially for small and medium-sized enterprises (SMEs), is still high.
The state and private financial institutions must shore up their lending for SMEs to support innovative local champions.
Funding and business know-how are desperately needed to lift their production and operational effectiveness.
While the government has focused on production and, more recently, on demand in the targeted industries, it has turned a blind eye to the potential that certain groups of workers will lose their jobs to automation.
Thais should be better prepared for such an unpleasant scenario as the digital economy creeps into every industry.
The government should figure out how it will address the pressing skills gap in our workforce to ensure that workers will stay competitive in the new era.
Some job losses are perhaps inevitable, but the government should focus on developing a digitally skilled workforce able to compete for the high-paying positions created by business disruption.
The government must act before it's too late, and the clock is ticking. We can't afford to lose out.