English,Tajlandia

Thailand’s economic problems – Interview with Dr. Somchai Jitsuchon, Research Director in TDRI in Bangkok

W raporcie Azjatyckiego Banku Rozwoju pod tytułem „Azja 2050” eksperci tej instytucji przedstawiają wizję, w ramach której Azja w ciągu następnych 40 lat dogoni Europę i Amerykę Północną pod względem dochodów mieszkańców. Wśród dynamicznie rozwijających się gospodarek, brylują dwa gigantyczne kraje – Chiny i Indie. Inne błyskawicznie rozwijające się państwa azjatyckie ostatnimi czasy to: Indonezja, Malezja, Wietnam i Tajlandia. Ten ostatni kraj jednak nieznacznie odstaje – nie rozwija się bowiem tak dynamicznie jak pozostałe.

Tajlandia nie jest już krajem Trzeciego Świata – wyższe koszty pracy niż w Indonezji, Malezji, Wietnamie czy Chinach sprawiają, że inwestorzy już nie tak chętnie lokują tam swoje fabryki. Zdaniem analityków Azjatyckiego Banku Rozwoju m.in. Tajlandii grozi wpadnięcie w „pułapkę średniego dochodu”, co grozi zatrzymaniem rozwoju gospodarczego na określonym poziomie. Na dodatek, w Tajlandii istnieje szereg problemów politycznych, związanych z tym, że benefity rozwoju gospodarczego są rozłożone bardzo nierównomiernie. Rodzi to walkę polityczną pomiędzy dwoma stronnictwami – konserwatywno-rojalistyczną i populistyczno-społeczną, która dzieli obecnie Tajlandię. O problemach ekonomicznych tego kraju opowiada dr. Somchai Jitsuchon.

Sergiusz Prokurat (CSPA) is questioning Dr. Somchai Jitsuchon about Thailand socio-economic situation. Dr. Somchai Jitsuchon served as a Director of Government Savings Bank. He has Ph.D. in Economics from The University of British Columbia, Vancouver, British Columbia, Canada.  Currently  Dr. Somchai Jitsuchon is Research Director for Inclusive Development of the the Macroeconomic Policy Program in think-tank Thailand Development Research Institute (TDRI) in Bangkok.

According to a World Bank report Thai economy is growing at around 4% annually. This is impressive in comparison with Europe but not when taken into the Asian context. What is your view on the slowdown of Thailand in comparison with boom in the 1990s?

There are many reasons of the slower growth of Thailand. The most important reason is that in the past we have been growing because of the successful transition from agriculture to industry, coupled with export, which had been progressing quite well, giving us high growth in the past. But now, first of all, we don’t have cheap labour anymore, so it is increasingly difficult to rely on producing cheap products and selling them to the world market. The labour costs in Thailand have been steadily rising.  And let’s not forget about the financial crisis we had 15 years ago. Even though we recovered from the crisis, we still have some structural problems left over from the crisis, for example in term of investments. The investment level in GDP terms has never really recovered in Thailand, you can see it is substantially lower than before, which offers another important explanation as to why we’re growing slower than before. Basically nowadays we mostly rely on exports, which means that when there is crisis in the world, we will be affected. As you know for the last 5-6 years we have been experiencing a major global crisis which is another reason for why we’re doing worse than before.

You claim in one of your papers, published in June 2012, that Thailand is now in the middle-income trap. Could you explain the concept and why Thailand is falling into this trap?

The middle-income trap is basically a country, which used to grow quite fast and lifting itself from being a low-income country successfully. But then it is much more difficult for it to go from being a middle-income to high-income country, which is why the concept is called a trap – the country stays middle-income for a very long time. This situation not only applies to Thailand, also to Malaysia, Brazil and many other middle income countries. Usually the cause of the trap is structural, such as the factors mentioned by me earlier. It also can be caused by weak institutions. As you probably know Thailand has had a lot of political problems in the past 10 years and that is why we cannot advance as fast as we would like. For example, for a country to be moving out of the middle-income trap it needs to create a lot of innovation, spend much on research and development and usually it is the government which should lead in these fields, followed by the private sector. But in Thailand owing to so many political problems no one really thinks or talks about this and obviously there is no progress. So that is that – the public sector and the politicians are weak. Many other things are linked to weak institutions, such as education. Now education is very important to escape from the middle-income trap. We need a very good education system, which teaches the people to be productive, not only as workers, but also as entrepreneurs. In Thailand people do pretty well in running business, but this is not enough. In the modern world you have to be able to apply innovation into entrepreneurship and this is not happening yet in Thailand. So we really need strong institutions to make education much better than it is now.

How it’s possible to overcome these problems? I’m asking because here in Poland we’re less wealthy than the rest of Europe and we are also falling into the middle-income trap. Meanwhile a there is a great example of building pro-growth institutions in South Korea. Could you tell me how to change the economic system to be more adaptive and have more innovation growth?

First of all it is important to have active policies on innovation, which means leading and encouraging the private sector to invest on their own in research and development and innovate more. In South Korea, Singapore and as Japan in the past, they have very strong leadership from the government, which sometimes even select a company, as Samsung had been in Korea, which receives financial and innovation support from the government at the beginning. The company then uses this support to build up a business empire and expand. That is a very active policy. I’m not saying that this policy is good for every developing country. It is suitable for countries relatively free from corruption, meanwhile in corrupt countries politicians and businessmen will benefit from these policies without enriching the country. You need to make sure that the implementation of the policy must be relatively effective and free from corruption. The other way, more relevant in the modern world. Nowadays many countries are part of the so-called international production network. Many countries in Asia, especially ASEAN, take part in this. For example, many countries produced just parts of automobiles, then ship them to another country for assembly. Countries such as China and the Philippines do this. It is a fairly recent development in the world and the key issue is in what part of this chain are you in. Are you producing a very simple car part or something more complex and high value? It is important to make sure to move up the ladder of international production network. To do that you cannot only focus on sales but government has to attract international companies to move more complex production to a given country and so move it up the value chain.

It is a well-known fact that in China inequality is pushing growth forward. Many people migrate from the countryside to the cities, which supplies cheap labour and builds economic growth. Meanwhile in Thailand there are political problems , which also has economic implications. His followers want to lower inequalities through many policies, such as raising the minimum wage, one tablet for one child etc. What will be the outcomes of these policies?

The relationship between inequality and growth is quite complex. In the early stages of development you can expect higher growth to be associated with higher inequality, this is what happened in China or Vietnam. This also happened in the past in Thailand, about 50 years ago. Then moving forward, reaching higher income levels, strong inequality becomes a drag on growth. Why? Because if incomes are highly unequal many human resources go unused as many people are trapped in poverty and uneducated. In this case, the relationship between inequality and growth is opposite. In Thailand actually we need lower inequalities to foster growth and that would be good for the long-run. However, my criticism for the current government is that they implement policies which seem to reduce inequalities but in fact they do not. Many of their policies benefit the rich, not the poor, with the possible exception of raising the minimum wage. For example, the government is guaranteeing a certain, relatively high price of rice. This is, according to government, benefitting the poor farmer. However it is the rich farmers who gains most on this policy, as they have more rice stock. This policy also benefits the exporters, millers and politicians, in effect worsening, not alleviating, inequalities.

Thank you for your time!

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Thailand’s economic problems – Interview with Dr. Somchai Jitsuchon, Research Director in TDRI in Bangkok Reviewed by on 8 września 2012 .

W raporcie Azjatyckiego Banku Rozwoju pod tytułem „Azja 2050” eksperci tej instytucji przedstawiają wizję, w ramach której Azja w ciągu następnych 40 lat dogoni Europę i Amerykę Północną pod względem dochodów mieszkańców. Wśród dynamicznie rozwijających się gospodarek, brylują dwa gigantyczne kraje – Chiny i Indie. Inne błyskawicznie rozwijające się państwa azjatyckie ostatnimi czasy to: Indonezja,

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