ASEAN KEY DESTINATIONS
Inflows may boost Thai competitiveness
Tarisa Watanagase, the central bank governor, said the country risked falling into a middle-income trap and lagging the region if it failed to raise its efficiency.
The planned Asean market integration in 2015 and the expected surge in demand should create tremendous opportunities for investment and trade. The government should explore incentives to push for more private investment, especially in high-technology areas, she said at the opening of the central bank's annual symposium, entitled "Moving Thailand Towards the Next Decade".
"There is an urgent need for investment in infrastructure, R&D and human resources. The country has so far lagged behind the region and has not fully recovered from the 1997 economic crisis. We should unlock investment and set our sights on the long term," Dr Tarisa said.
The central bank would ensure an efficient and strong banking system as well as foreign exchange to accommodate development, but the government should collect higher tax revenue to fund future spending and social needs, she said.
In any case, she said, the central bank would not delay increasing its policy interest rate, now at 1.75 percent, just to satisfy critics who say higher rates would draw even more foreign capital inflows and push up the strong baht.
Central bank economist Thammarak Moenjak said emerging Asean economies would likely become the global economy's key engine in the coming decade, as their middle class and needs for basic infrastructure expand. The economies of the United States, Europe and Japan would remain hamstrung by public debt and financial doldrums, driving investment flows to the region.
"Thailand is at risk of being marginalised by the trend if we still act as a product assembler rather than adding value to goods," he said. "We may lose out to new competitors who have an advantage in terms of operating cost or efficiency. Multinational companies are ready to relocate to other countries that have better prospects. We have a challenge in improving our labour skills."
Economist Manop Udomkerdmongkol said the country's investment per GDP during the past three years was the lowest in the region, save for the Philippines.
The central bank found the public sector has a more prominent role than foreign investors in luring local firms to expand investment, but politics have weighed down the public sector's contribution. Private investment remains far below the levels of 1996.
The local banking system has relatively higher costs than Singapore and Malaysia, but lower than the Philippines and Indonesia, she said.
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