Download Economic problems and Solutions

SSC 260 : Introduction to Social
Sciences : Economic Section
Jaruwan Chontanawat
Topic 3: Economic force in Daily life (III) :
Economic problems and Solutions
23/09/2008
Outlines:





Past – Bubble economy, inflation,
Unemployment, exchange rate, etc.
Solution: Fiscal and Monetary policies,
International policy – FTA, AFTA
Fact: Existence of various problems
Old solution
One alternative solution : sufficiency
economy
Acknowledgement

Aj. Panalert Siriwong
Bubble Economy
 Thailand had $90,000 million
foreign dept (more than ½ of
GDP)
 Most of them were used out of
the economic system (ex. stock
market)


Result in high the percentage of
economic growth
But, in fact, it had low level of
development on economic
structures.
The Bubble Burst


In 1996, Thai export growth rate
was at 0% due to the lack of
competitive advantages.
Thai Baht was depended on USD.



US economic was in the way up,
Thai was not.
Investor sold Baht back to the
market.
Baht was sold back to market…


End of the Bubble


Bank of Thailand try to buy Baht from the market until
the reserved fund was run out.
Baht was floated, IMF loan.
Changing in Exchange Rate

Shift from
25 Baht/ 1 USD
40 Baht/ 1 USD
Inflation Solution

Cost push

Fiscal Policy

Demand pull

Monetary Policy
Fiscal Policy


Used by = Government
Tools = Government revenue (Taxes) and expenses

Objectives:




Efficiently resources management
Encourage income distribution.
Stimulate economic growth
Balance economic stability
Fiscal Policy as Economic Solution

Expansionary fiscal policy (combat deflation)


 government expenses  taxes
Contractionary fiscal policy (combat inflation)

 government expenses  taxes
Thai activities on fiscal policy

Expansionary fiscal policy

Encourage economic growth and balance economic
stability

In 1961-1976



 Government spending  Taxes
Invest in economic infrastructure, public utility.
Reduce import taxes of some capital goods or
production materials to reduce production costs.
Monetary Policy
 Used by = Central bank
 Tools = money flow and loans
 Objectives:





Balance economic stability,
Encourage higher rate of employment,
Stimulate economic growth,
Control trade balance,
Encourage income distribution.
Fiscal Policy as Economic Solution

Contractionary monetary policy (combat inflation)
 Bank of Thailand sell stock
 Increase reserved fund = Decrease personal loan
 Raise saving interest rates = People save

Expansionary monetary policy (combat deflation)




Bank of Thailand buy stock
Decrease reserved fund = release more personal loan
Reduce interest rates on bank loan = New business = Jobs
Reduce saving interest rates
Thai activities on monetary
policy

Balance financial stability


Strengthen financial institution stability
 Sell stock to private sector
 Control loan pay out to private sector
Support economic and social development

Encourage commercial bank to increase loan to agricultural
sector.

Provide financial support to agriculture and co-op bank.
International Economy

Different economic system



Free-market economic (Capitalism)
Command economic (Communism)
Mixed economic
Capitalism

Free decision making by individuals

People have rights to owned business and on profit
they made

People can consume whatever they want

The price mechanism

Marketing as a key success

Government not involve on economic activity

Only monitor and control situation
Communism

Contrast to capitalism

Government occupy resources and all production factors

Private sector has no rights on production factors


Government control over all production processes and resources
allocation
All business units and households produce and consume
whatever government required.
Mixed economy



Combination of Capitalism and Communism
Government and private sector cooperate to solve
basis economic problem
Production factor come from both government
and private sector
Mixed economy


Capitalism ingredients

Private sector has rights on some assets and
freedom to product or consume

Competitive oriented, price mechanism
Communism ingredients

Government operate on business unit that has high
influence to majority of population i.e. Electric and
water supply, and transportation
Baht Value

Internal Influence



Influenced by rate of inflation
Rate of inflation Baht Value 
External Influence

Rate of exchange to other national currency (How much of
Baht can buy 1 unit of other currency)
EEF (Exchange Equalization Fund) which is a subdivision of the
Bank of Thailand is responsible for Thai currency adjustment.
Thai’s currency adjustment methods




Fixed exchange rate method
 Tied with U.S.Dollar fixed in a period of time.
Daily exchange rate method
 Discuss with member from commercial bank and EEF
concern Demand and Supply of U.S.Dollar
Exchange rate adjust by EEF
 EEF adjust rate of exchange by moritoring Demand and
Supply of U.S.Dollar
Money basket
 Adjust by monitoring group of currency which are trading
alliance of Thailand
Free Trade Area (FTA)

Thai’s current economic strategy

Trading agreement between 2 countries

WTO wasn’t benefit Thai trading agreement
 Because too many member (145 countries)
Free Trade Area (FTA)



Thai’s main customer is U.S., Japan, and E.U.
reached peak point = Thai tried to expand market
to other region.
Thai open FTA to Bahrain = Open middle east
market
Thai’s FTA with China encourage import value
from $20m to $200m (10 times)
Free Trade Area (FTA)
Current: Thai is negotiating for increasing
FTA activities with…







China
India
Mexico
U.S.
Australia
E.U.
South Africa
AFTA: Asian Free Trade Area

An agreement by the
Association of Southeast
Asian Nations, of local
manufacturing in all
ASEAN countries.

consists of 10 members;
 Brunei
 Indonesia
 Malaysia
 Philippines
 Singapore





Thailand
Vietnam
Laos
Myanmar
Cambodia
Primary Goals


Increase Asian's competitive edge as a production base in the
world market
 The elimination of tariffs and non-tariff barriers
Attract more foreign direct investment to Asian
AFTA and Thai Economy

Expand Thai’s International Trade
 Free trade among Asian encourage increasing in trading
circulation
 Exchange in production factors (raw material)
 Lower cost for business
 Create competitive advantage in east of Asia region
 More investment from Japan and U.S.
AFTA and Thai Economy

High trading expansion between Thailand and other
members in AFTA (1993-2003)

Thai export value



In 2003 = $80,049 Million
In 1993 = $37,325 Million
Thai import value

In 2003 = $75,015 Million

In 1993 = $46,163 Million
AFTA and Thai Economy

Export



Asian became Thai’s no.1 export market replacing
U.S.
Important export goods: Computer and equipments,
automobile, chemical products, steels, and rubber.
Import


Asian became the 2nd market follow Japan market
for Thailand import market.
Important export goods: Chemical products, electrical
circuit, computer and equipments, raw gasoline, and
natural gas.
China Economic
Development


Mega-Projects Investment
Changing to capitalism
Current statistics



Economic growth
Inflation
Trade balance
Economic forecast for 2007
Inflation
Gas price decrease
GDP 2006 = 4.5%
2007 = 4.0-5.0%
Raw gasoline 2006 = $65/Barrel
2007 = $60/Barrel
Government’s fiscal policy
Trade balance +4,526 million Baht
New market were Eastern Europe with 94% increase,
India, Africa, and South Korea at 22%
Export goods had been increasing in all types of goods
including agricultural and industrial agricultural
products with 28.8% increase
Major agricultural and industrial agricultural products
most had been increasing including; rice, cassava, food
products (frozen, transform food; shrimp, chicken, fruit,
and vegetable) and sugar
‘Fact’
‘Basis of Thai economy
is agricultural sector’
Thai major economic obstacles

Our prior main focus was to increase
revenue and economic growth of “the
country”
Result from the prior focus

National income was continuously increasing





SED-Plan 1-3 = 7-8% per year
SED-Plan 4 = 5-6% per year
SED-Plan 5 = 4-5% per year
A decade before economic crisis (SED-Plan 67) was a period that NI increased
tremendously (8-9% per year and more than
10% in some year)
Refer as one of the countries that had dramatically
high growth rate
้
ข้อมู ลพืนฐานเศรษฐกิ
จไทย
Result from the prior focus

Problems of majority of population (most are poor in urban and
country side)
 Still not independent and weak, lack of opportunity to
migrate for better living in the city
 Poor, or sufficient only to lives day by day
 Unemployed, or done illegal work i.e. prostitute, drug
dealer
 Gap between rich and poor getting wider
Result from the prior focus

Other problems…





National resources deficiency
Environmental problems
National and personal debts
Lack of competitiveness
Depend on export markets
Question: Where did the NI go?


It went to a few Thai millionaire + Foreigner who was
the capital holder (owned foreign technology, product,
and services)
The consequence was that those people became richer
and the gab also wider
Same old solution

Most of solution done through fiscal and monetary
policy

Heavily stimulate economic by previous
governments

Money input to economic system
 Fiscal policy
 Monetary policy
 To stimulate government spending, private
consumption, investment, and supporting
export spending
Same old solution

Money input to economic system through fiscal and monetary
policy was doing well to stimulate consumption, but…
 Non-competitive producer still survived in the market
 Highly supported SMEs and OTOP but lacked of
products that were competitive and profitable
 Many policy aimed at stimulating export market no
matter that product were competitive or profitable
 High value of export but still depended on import
production factors
Same old solution


Same old solution was to use money as the solution to
economic problem
But never fixed problem in the supply side (production)
which was the basis of the economy. And the main reasons
might be either it was difficult to do so, or too difficult for
the government and private sectors which resulted in
many hidden agendas.
Problems in the Country Side

Populist project

Many poverty project

Eer-Ar-Torn projects

Help poor people? Or for short-term political benefits?
Problems in the City




Higher credit card debts due to easily
card issued
Credit offerings for consumer were
everywhere
Fully stimulate property investment to
enlighten the business
Money flow from internal and external
came into stock market due to low saving
interest rate
Problems in the Nation

Prices of lands, houses and properties, and stocks were increasing

Consumerism

High purchasing of foreign luxury products, effected trade balance

Bubbles were created from many forces of market to stimulate high
purchasing activities from all sectors of economic stakeholders



Stocks price went up but not the stock in the
production sector which was the basis of the
economy
Those were commercial bank, energy,
communication, property, and entertainment
business
But in production unit still remain the problem of
the ability to be “profitability” and “productivity”



Basic wage was not increased
New graduates still out of job
Majority of people had not benefited from the
recent economic growth
Living with debt ?



Average debt/household is
134,190 Baht per household
84% of population had higher
expense than income earning
due to the increasing of …
(Average 20,000 Baht

price of goods
increasing/household)

interest

Formal debt 73.9%

gas price

Informal debt 26.1%
Research found that 55.2% of
the samples had debt payout
problem

What did they do?

Sell personal stuffs

Create debt (lend from their
relatives)

Withdraw their saving
ผลสำรวจกลุ่มตัวอย่ำง 1,187 ทัว่ ประเทศของ ศูนย์พยำกรณ์เศรษฐกิจและธุรกิจ มหำวิทยำลัยหอกำรค้ำไทย
Southern tourism ?

From the violation in 3 provinces in the Southern of
Thailand:
 Song-Kla had number of travelers decrease by
22.7% Rate of hotel reservation in Hat-Yai
reduced by 20%

Economist projected that the 2007 economic in
Pattani, Yala, and Narativas would increase only by
1% or 0% from 2006
 Account for 100,000 million baht economic
damages
What was a HERO
for the South of Thailand economy ?





One thing create tremendous demand, high
influence which stimulate Thai southern
market
Marketer views as a “Product of the decade”
Quantity demand for over 60 million, create
money flow more than 50,000 million baht or
nearly 1% of Thai GDP
Stimulate Thai southern market particularly
Nakornsri-dhummaracha
Result in increasing air flight on BangkokNakornsri-dhummaracha to serve high
demand of travelers
High gas price ?

Gas price push up to 30 baht/litters
since May 19th 2007 may result in;
 price of goods
 energy costs
 public transportation
=  price
= Slow economic growth
Fuel price effect

 costs of production

 price of goods

 Inflation

 demand

 production

 unemployment
Fuel price effect

Price of goods raise continuously

People change their consuming behavior

People became more concern on their expenses
 Effects many businesses

Advantage for

Instant/ fresh food
House brand
Public transportation
Natural gas station
Public hospital

Disadvantage for








Restaurants
Luxury clothing/ accessory, expensive products; automobile,
luxury watch
Tourism business, related business
Movie theatre, entertainment complex, concert
Politic ?




Coup d'etat
Bombs
Party dissolution
Corruption



Tourism
Political instability
Investment
Consumptionalism?

Unlimited wants



Cell phone
Motorcycle
Asian trend




J-pop fashion
De Jung Kuim travel
Rain’s concert
F4 series
Thais don’t travel Thai, go abroad
In 2006, 55,000 million Baht moved aboard
Other problems

Natural disaster

Devastations and flooding

Tsunami-Earthquake

Epidemic

Bird flu

International trade

Trade Barrier

Strengthen of Baht value
Bank Interest Rate
Lower than inflation rate
Interest rate
 Saving deposit
 3 month period time deposit
 6 month period time deposit
 12 month period time deposit
 24 month period time deposit
Inflation rate
=
=
=
=
=
0.75%
2.25%
2.25%
2.25%
2.25%
Types of investment
Types of investment
1. Bank Saving
Liquidity
Return
Risk
High
Low
2. Treasury Note
Moderate
Low
Moderate
3. Bond/Equity
Moderate
Moderate
Moderate
4. Gold
Moderate
Unstable
Moderate-High
5. Currency Exchanges
Low
Unstable
Moderate-High
6. Assets
Low
Unstable
Moderate-High
Low-High
Unstable
Moderate-High
7. SET, MAI
Low
Why did price of gold raise ?

 gas price ?

 costs of goods

 inflation

 Baht value

 Baht value reliability

 Switch to keep gold

 Demand of gold

 price of gold!!!
Solution?

Focus to economic activities or investment that
either have

possibility to be sold

competitive, and profitable
or

crate income distribution,

money saving in the economy

income from foreign country.
Cannot be sold
 No market
 Debt of production

 Marketing analysis dismiss
 Non-Marketing knowledge
 Creativity
 Quality assurance
 Competitive advantages
Focus on producer’s needs
 Ignore what market needs

Capitalism

Pros






Efficiently resources allocation


Resources saving

Higher NI
Attractive from profitability
Freedom to select what to produce
Competition
Profitability from price setting
New production technique to lower costs,
higher profit
Efficiently resources usage for high
profitability
Capitalism

Cons

Some people focus only on benefit
but forget morality



Unfair competition in some situation
Wider gap of income
Tent to become monopoly

Political involvement of some
producer create high bargain over
pricing control or price of
production factor

HM the King gave an address 9 years ago that
do not leave the entire of Thai population with
capitalism economy, but do leave some space
for the sufficiency economy
Sufficiency Economy and
Previous Government

Sufficiency Economy had been used only to be
as …
 Strategic to win the erection
 Unclear guideline
 Promote as the Motto and Gimmick which
succeed in political objectives

But still far away from “sufficient living” or
sufficiency economy which does not concern
money or national GDP
แนวพระรำชดำริ และหลักกำรที่สำคัญ
พอประมาณ
มีเหตุผล
มีภูมคิ ุ้มกัน
ในตัวทีด่ ี
เงื่อนไขความรู้
รอบรู้ / รอบคอบ / ระมัดระวัง
เงื่อนไขคุณธรรม
ซื่ อสัตย์ / สุ จริต / พากเพียร / อดทน
นาสู่
ชีวติ / สังคม / เศรษฐกิจ / สิ่งแวดล้อม
สมดุล / มั่นคง / ยัง่ ยืน
สรุป ปรัชญำของเศรษฐกิจพอเพียง
เศรษฐกิจพอเพียง เป็ นปรัชญาชี้ ถึงการดารงอยูแ่ ละปฏิบตั ิตนของประชาชนในทุกระดับ ตั้งแต่ระดับ
ครอบครัว ระดับชุมชน จนถึงระดับรัฐ ทั้งในการพัฒนาและบริหารประเทศให้ดาเนินไปในทางสายกลาง
โดยเฉพาะการพัฒนาเศรษฐกิจเพื่อให้กา้ วทันต่อโลกยุคโลกาภิวตั น์ ความพอเพียง หมายถึง ความพอ
ประมาณ ความมีเหตุผล รวมถึงความจาเป็ นที่จะต้องมีระบบภูมคิ มุ ้ กันในตัวที่ดีพอสมควร ต่อการมีผล
กระทบใดๆ อันเกิดจากการเปลี่ยนแปลงทั้งภายนอกและภายใน ทั้งนี้ จะต้องอาศัยความรอบรู ้ ความ
รอบคอบ และควาระมัดระวัง อย่างยิ่งในการนาวิชาการต่างๆ มาใช้ในการวางแผนและการดาเนินการ
ทุกขั้นตอน และขณะเดียวกันจะต้องเสริมสร้างพื้ นฐานจิตใจของคนในชาติ โดยเฉพาะเจ้าหน้าที่ของรัฐ
นักทฤษฎี และนักธุรกิจในทุกระดับ ให้มสี านึก คุณธรรมความซื่อสัตย์ สุจริต และให้มีความรอบรูท้ ี่
เหมาะสม ในดาเนินชีวิตด้วยความอดทน ความเพียร มีสติ ปั ญญาและความรอบคอบ เพื่อให้สมดุล
และพร้อมต่อการรองรับการเปลี่ยนแปลงอย่างรวดเร็วและกว้างขวาง ทั้งด้านวัตถุ สังคม สิ่งแวดล้อม
และวัฒนธรรมจากโลกภายนอกได้เป็ นอย่างดี
คุณลักษณะ
คานิยาม
เงือ่ นไข
แนวปฎิบัติและ
ผลที่ คาดหมาย
Reference : Assistant Professor Dr. Suksan Kantabud, Mahidol University, 1st National
Conference, Bangkok University, August 2007.
Application of Sufficiency philosophy
for the individual level
เราจะเลือกหาน้ าใส่ตม
ุ่ หรือ จะเลือกอุดรู
่ั
ม
่ ก่อน ?
รวของตุ
ยารักษาโรค
ของใช้ ในบ้ าน
food
ค่ าเทอมลูก
เสื้ อผ้ า
ปุ๋ยเคมี ยาฆ่ าแปลง
ดอกเบีย้
หวย !
ค่ าเหล้ า ค่ าบุหรี่
‘Basis of Thai economy
is agricultural sector’
Sufficiency Principle

Independent
 Morality
 Society
 Resources
 Technology
 Economy

Balance
 Human
 Plants (Forest)
 Animals
 Soil
 Water
Independent

Morality


Society


Religion and cultural values in the
community
Encourage each community to coordinate and
transfer their own wisdom which will benefit
both parties
Resources

Effectively utilization of human, resources
and social wisdom
Independent

Technology


Study, research, and experiment to
create local technology
Economic

Rice, meats, vegetable, and fruits are
sufficient in the area and enough to be
sold to other region
Balances


Income and expenditure
Allocate land into 4 areas




Rice
Agricultural plants
Fish
House and animal farm +
grow some vegetables
Capitalism vs. Sufficiency
Activities
Sufficiency
Economy
Capitalism
Reflection
Production
Aims at consuming
Labor = free
Aims at selling
Labor = costs
Use technology
Depended on
technology, money
ไม่ยงั่ ยืนในการใช้ ทรัพยากร
Transferring
activities
Help each other
Barter system
Cooperate within
community
Marketing
Agricultural sector
are at the bottom
Depended on export
market
Consumption
Consume own
production
Buy everything,
Consumerism
Media play major
role to purchasing
activity
Consumerism
Allocation
Community’s rights
Patent, legal rights
Individualism
Application for Business sector
Research work : Dr Apichai Pannasen
ผลของการศึกษา
จำกกำรวิเครำะห์
(grounded
พบว่งองค์
ำธุรกกิรธุจทีรกิ่ปจระสบควำมส
จอย่ยง)
ำง
(แนวทางปฏิ
บตั ิ 10theory)
ประการแห่
แบบเศรษฐกิจำเร็
พอเพี
ยัง่ ยืนในกำรศึกษำนี้ มีแนวทำงในกำรดำเนินธุรกิจที่คล้ำยกัน 10 แนวทำงดังนี้
1. มองกำรณ์ไกลในกำรบริ หำรจัดกำรและตัดสิ นใจในเชิงนโยบำย อย่ำง
มุ่งหวังกำไรในระยะสั้นแต่คิดถึงผลกระทบในระยะยำว
2. ให้คุณค่ำแก่พนักงำนอย่ำงจริ งใจและพัฒนำพนักงำนอย่ำงต่อเนื่อง
(รวมถึงกำรพัฒนำพนักงำนของตนเองให้เป็ นผูบ้ ริ หำร) หลีกเลี่ยงกำรให้
พนักงำนออกแม้แต่ในยำมทุกยำกทำงเศรษฐกิจ เพรำะพนักงำนคือ
สิ นทรัพย์ (ที่พฒั นำได้) ขององค์กร
3. จริ งใจและหวังดีต่อผูม้ ีส่วนได้ส่วนเสี ยของธุรกิจทั้งหมด รวมถึง
ประชำกรและสังคมในอนำคต
4. ให้ควำมสำคัญต่อกำรพัฒนำนวัตกรรมทัว่ ทั้งองค์กร ทั้งในส่ วนของ
ผลิตภัณฑ์และขบวนกำรให้บริ กำรหรื อขบวนกำรผลิต
5. ใช้ทรัพยำกรอย่ำงมีประสิ ทธิภำพและประสิ ทธิผล
ผลของการศึกษา
(แนวทางปฏิบตั ิ 10 ประการแห่งองค์กรธุรกิจแบบเศรษฐกิจพอเพียง)
6. ใช้ และ/หรื อพัฒนำเทคโนโลยีที่มีประสิ ทธิภำพแต่รำคำไม่สูง
โดยเฉพำะเทคโนโลยีแบบไทย ๆ หรื อพื้นบ้ำน
7. ขยำยธุรกิจอย่ำงค่อยเป็ นค่อยไป เมื่อพร้อมทุกด้ำนเท่ำนั้น
8. ลดควำมเสี่ ยงโดยกำรมีผลิตภัณฑ์ที่หลำกหลำย ตลำดที่หลำกหลำย และ
กำรลงทุนที่หลำกหลำย โดยอยูบ่ นพื้นฐำนของควำมรู ้จริ ง
9. แบ่งปัน รวมถึงกำรแบ่งปันองค์ควำมรู ้ที่มีเพื่อพัฒนำตลำด เพื่อ
ผลประโยชน์ที่ตกแก่ผบู ้ ริ โภคและสังคม
10. สร้ำงวัฒนธรรมองค์กรที่มีจริ ยธรรม ควำมอดทนและขยันหมัน่ เพียร
เป็ นค่ำนิยมพื้นฐำน
Family undependable
Community Sufficiency
Society Sustainable
New picture of
Economy



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GDP is no more the indicator of economic development,
be only part and not core of the it
“Sustainable Development“ became ideal path for every
countries
“Bhutan” was an undeveloped country, but outstanding
example for this new development, because it was using
GDH as the development indicator
Not GDP but GDH (Gross Domestic HAPPINESS)
United Nation’s Development Project (UNDP) began to
develop new indicator referring to GDH
Thank you