Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Thailand’s Structural Challenges and Outlook by Chalongphob Sussangkarn Thailand Development Research Institute Presented at the American Chamber of Commerce Luncheon 23 January 2002, JW Marriott Hotel, Bangkok. Sustained Development Success Prior to Crisis Satisfactory Development over Many Decades though not a Super Star • Real GDP Growth averaged 7.4% per annum between 1960-1990 • Real Per Capita GDP growth averaged 4.8% during same period • Proportion of Population under the Poverty Line declined from 60% in 1960 to about 20% in 1990 • Good Coverage of Basic Education and Primary Healthcare • Although many remaining problems, such as economic disparities, social and environmental problems, Overall Development considered Satisfactory Success Factors Prior to Crisis Stability • Macroeconomic Stability • Social Stability Quality • • • • Agricultural Resources Basic Education Women Economic Participation and Contributions Dynamism of Private Sector and Broad base of Entrepreneurship Success Factors Prior to Crisis (2) Efficiency • Continual Economic Restructuring • Open Development Strategy forcing Internal Efficiency Hospitability • Good External Relations at the National Level and at the Personal Level • Middle Path Society although somewhat Chaotic The Path to Crisis Over Confidence and Insufficient Awareness of Risks • Over confidence from the past Success, both within the country and from outside (East Asian Miracle) • Rapidly changing Comparative Advantages, and inadequate strategies to technologically upgrade the economic structure • Thought the country could be competitive in sectors without any real comparative advantage, eg. Regional Financial Center • Lack of risk management and financial discipline, whether at the macro or micro management levels The Path to Crisis (2) Stability became the Critical Problem • Failure in Macroeconomic Management; Inability to adapt to the rapidly changing global financial markets • Rapid build-up of Short-term External Debt to finance the Investment-Saving Gap • Lack of Information and Understanding of the risks from Short-term External Debt After the Crisis • Aggregate Recovery, though slowing down recently • Production Level still below pre-crisis peak putting a constraint on debt-restructuring and new investment • Many remaining problems, such as NPL, lack of liquidity for the real sector, and production restructuring • Large Fiscal Burden for the Public Sector with concerns for ballooning public debt • As a result of the exchange rate depreciation, the economy is now even more dependent on external trade • Large Impacts from the World Economic Slowdown, Electronic Down Cycle and Terrorist Crisis. However, diversity of the economy helps to cushion impacts a little Recent Adverse External Environment • Signs of adverse external impacts came very early in 2001, Jan and Feb export growth negative • Export growth even more negative in second half. For whole year negative growth of about 7.0% (in US$) • Further compounded by terrorist crisis • Export growth very important for the economy since the 1997 crisis, however impacts cushioned by depreciation of Baht in 2001 and diversified structure of Thai exports Ratio of Export of Goods and Services to GDP 80% 75% 01/Q1 00/Q1 99/Q1 98/Q1 97/Q1 96/Q1 95/Q1 94/Q1 40% 35% 30% 93/Q1 70% 65% 60% 55% 50% 45% Depreciation of Regional Currencies Against US$ in 2001 Indonesian Rupiah 17.8% Philippines Peso 13.3% Korean Won 12.2% Japanese Yen 11.3% Thai Baht 10.0% Taiwan Dollar 7.6% Singapore Dollar 3.8% Shares of Export by Sector 1997 Labor Intensive 22.2% Technological 38.4% IT Related 24.1% Other Technological 14.3% Food 20.3% Others 19.1% Total 100.0% 1998 21.7% 40.8% 27.0% 13.8% 18.7% 18.8% 100.0% 1999 21.2% 42.0% 27.4% 14.7% 17.4% 19.3% 100.0% 2000 2001(Jan-Nov) 19.7% 20.3% 44.0% 42.9% 28.3% 26.5% 15.8% 16.3% 15.1% 15.4% 21.2% 21.5% 100.0% 100.0% Further Constrains on Restructuring • Slower growth makes it more difficult to restructure • Production Level still below pre-crisis peak putting a constraint on debt-restructuring and new investment • Many remaining problems, such as NPL, lack of liquidity for the real sector, needed production restructuring and excess capacities • Very weak private investment • With declines in external demand, more pressures to rely on Fiscal Stimulus from the Public Sector • Constraints from ballooning public debt and effectiveness of fiscal stimulus due to low multipliers Real GDP (Million Baht: 1988 Prices) (Seasonally Adjusted) 800,000 750,000 700,000 650,000 600,000 550,000 94/Q1 95/Q1 96/Q1 97/Q1 98/Q1 99/Q1 00/Q1 01/Q1 Ratios of Non-Performing Loans (NPL) and Non-Performing Borrowing (NPB) 50 45 40 35 30 % 25 20 15 10 5 0 98/Q1 99/Q1 00/Q1 Note: NPB are ratio of loans that are non-performing even though they may be off financial institutions’ balance sheets, such as transferred to AMC. 01/Q1 NPL NPB Capacity Utilization: Excluding Liquor 80 70 60 50 40 30 20 10 0 95/Q1 96/Q1 97/Q1 98/Q1 99/Q1 00/Q1 01/Q1 Seasonally Adjusted Real Private Investment (Million Baht: 1988 Prices) 300,000 250,000 200,000 150,000 100,000 01/Q1 00/Q1 99/Q1 98/Q1 97/Q1 96/Q1 95/Q1 0 94/Q1 50,000 Fixed Price Multipliers from Expenditure Increases GDP Multiplier Public Sector Expenditure 0.91 Private Consumption 0.93 Private Investment 0.35 Merchandise Export 0.90 Tourism Income 1.08 Total Final Demand 0.88 Ratio of Export and Import to GDP (Goods and Services: Nominal Values) 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 93/Q1 94/Q1 95/Q1 96/Q1 Export 97/Q1 98/Q1 Import 99/Q1 00/Q1 01/Q1 Short-term Economic Outlook 2001 2002A 2002B 1.3 2.5 0.2 Agriculture 1.9 2.0 2.0 Industry 0.9 3.9 0.5 Services 1.6 1.3 -0.5 Inflation 1.6 2.0 0.8 Export Value (US$) Growth % -7.0 3.8 -1.8 Export Value (Baht) Growth % 3.1 4.0 -1.7 Import Value (US$) Growth % -1.6 4.9 1.7 Import Value (Baht) Growth % 8.5 5.1 1.5 Tourism Income Growth (Baht) % 1.8 2.3 -2.1 5.52 4.98 3.28 4.9 4.2 2.9 Real GDP Growth Current Account (Billion US$) (% of GDP) 2002A some export and tourism recovery, 2002B declining export and tourism income Critical Challenges • Greater competition while being sandwiched between the lower cost and the higher technology producers • Rapid emergence of the Information Economy, Lack of adequate education and knowledge for most of the population, and High investment cost to build up a knowledge based society • Low fundamental competitiveness in high technology sectors (weak education and R&D systems) leading to low competitiveness rankings Export Structure (Billion US$) 1988 1992 1996 2000 Food 6,432 9,114 12,449 10,547 Labor Intensive 4,693 9,425 11,762 13,774 Technological 2,439 8,827 20,821 30,753 Average Growth 1988-92 1992-96 1996-00 Food 9.1% 8.1% -4.1% Labor Intensive 19.0% 5.7% 4.0% Technological 37.9% 23.9% 10.2% Thailand’s Rankings IMD WEF Growth Competitiveness Current Competitiveness 2000 2001 35/47 38/49 (36/47) 30/58 33/75 (31/58) 40/58 38/75 (35/58) Weaknesses (IMD: Bottom 10 of 49) Government Efficiency Central government debt - real growth 49 The educational system appropriate for a competitive economy (Survey) 47 Secondary school enrollment 47 Qualified engineers are not sufficient (Survey) 42 Technology transfer between companies and universities (Survey) 48 Weaknesses (IMD: Bottom 10 of 49) Business Efficiency International competence of domestic managers (Survey) 49 Transparency of financial institutions (Survey) 43 Cash flows of companies (Survey) 45 Credit flow to businesses (Survey) 44 Overall productivity: GDP (PPP) per person employed 45 Risk from relocation of production (Survey) 44 Weaknesses (IMD: Bottom 10 of 49) Infrastructure Availability of qualified information technology employees (Survey) 49 Inadequate new information technology for business (Survey) 48 Development of e-commerce (Survey) 47 Number of main telephone lines per 1000 inhabitants 46 Interest in science & technology by youths (Survey) 46 Science is not adequately taught in schools (Survey) 46 Total expenditure on R&D Percentage of GDP 46 Strengths (IMD: Top 10 of 49) Economic Performance Rank Unemployment rate Percentage of labor force 4 Employment Percentage of population 5 Cost-of-living index 8 Consumer price inflation Average annual rate 10 Strengths (IMD: Top 10 of 49) Government Efficiency Effective personal income tax rate (% of GDP per capita) Employer’s social security contribution rate (% of GDP per capita) Collected total tax revenues (% of GDP) Collected capital and property taxes (% of GDP) Flexibility of Labor regulations (Survey) 6 6 8 9 10 Business Efficiency Working hours Average number of working hours per year 10 Infrastructure National culture is open to foreign influence (Survey) Discrimination does not pose a handicap in society (Survey) 4 8 Large Economic and Social Disparities • By Education • By Sector • By Income Gross Secondary Enrollment Ratio 80% 70% 60% 50% 40% 30% 20% 10% 0% 1965 1970 1980 1990 1999 Shares of Workforce by Education 1990 1995 2000 2005 2010 Primary and Below 83.8% 77.9% 68.0% 59.3% 50.5% Lower Secondary 5.9% 8.9% 12.8% 15.3% 15.9% Upper Secondary 4.7% 6.1% 8.7% 11.8% 15.5% Tertiary 5.4% 7.0% 10.5% 13.6% 18.1% Total 100.0% 100.0% 100.0% 100.0% 100.0% Shares of Agriculture in GDP and Employment GDP Employment Ratio GDP/Emp 1971 28.2% 78.9% 35.7% 1975 31.5% 73.0% 43.1% 1980 25.4% 71.0% 35.8% 1985 16.8% 68.4% 24.5% 1990 12.4% 63.5% 19.5% 1995 11.2% 52.0% 21.5% 1999 11.2% 48.6% 23.0% Income Shares by Quintiles 1962/3 1975/6 1981 1990 1999 Richest 20% 49.8 49.3 51.5 56.5 58.2 Next Richest 20% 21.6 21.0 20.6 20.1 19.4 Middle 20% 12.1 14.0 13.4 11.9 11.4 Next Poorest 20% 8.6 9.7 9.1 7.4 7.1 Poorest 20% 7.9 6.1 5.4 4.1 3.8 Ratio Top 20% to Bottom 20% 6.3 8.1 9.5 13.9 15.2 Future Directions • Take account of the country’s strengths and weaknesses and concentrate on activities with more permanent competitive advantages in shaping the country’s development • Competitive in Food Based Sectors, this also promotes broad-based development • Competitive in some Service Sectors, particularly Tourism, though management of tourism resources the key to sustainability • Competitive as a regional production location (geographic and social advantages), though need foreign partnerships and adequate supporting policy and infrastructures Future Directions (2) • Also need to forge various regional and global alliances to enhance competitiveness and manage risks and volatilities • Push for fairer and pro-poor rules for agricultural trade at the global level • ASEAN integration critical to avoid being marginalized in a world of big players, eg. EU, NAFTA or FTAA, China, India • East Asian integration in trade a long-term possibility, and greater East Asian monetary cooperation vital to lessen impacts of global financial volatilities Medium Term Outlook 2003 2004 2005 2006 Real GDP Growth 3.8 4.2 4.2 4.7 Inflation Rate 1.8 1.7 1.8 2.0 Total Investment Quantity (% Increase) 5.3 7.8 7.6 7.4 Merchandise Export Growth 4.0 4.0 4.3 5.1 Merchandise Import Growth 5.5 6.6 6.7 7.0 0.54 -1.19 -2.98 -4.58 0.4 -0.9 -2.1 -3.1 4.25 2.71 1.14 -0.11 3.4 2.1 0.8 -0.1 Trade Balance % of GDP Current Account Balance % of GDP