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Thailand moving forward: Economic reforms under the interim govt
Pridiyathorn Devakula
Special to The Nation



BANGKOK: -- A growing trend of Thai success across Asean and China, coupled with three key government measures and more work to come, are paving the way to better times, says MR Pridiyathorn Devakula

Last year, Thailand's economic growth slowed to less than 1 per cent due to the prolonged political protest in the first half of last year and as a result of delays in setting up the Cabinet. However, more encouraging news came in the fourth quarter of last year, with our economy likely to have expanded by at least 2 per cent, a sign that our economy is moving forward as things are now back to normal.

I know you are all asking: How fast can we move our economy forward and what can we do to speed things up even further? These questions are to be expected, especially when you ask people of my generation who still remember the days when the economy was growing over 7 per cent per annum in the '60s and the '70s during the first phase of industrialisation, and the rapid economic expansion between 1986 and 1996 when the average growth rate was as high as 9.25 per cent because of our nation's discovery of natural gas. Unfortunately, the good old days of such high growth figures are over, but this is not really a cause for alarm. Let me explain why.

A slower rate of economic growth has been the new norm in most developed and developing countries around the world for some time now. In the case of Thailand, even if we exclude figures last year, when our economy was plagued by political conditions, our average economic growth over the last five to six years was already less than 3 per cent.

Our private investment has slowed down due to the increase in labour costs as well as the labour shortage. Exports have also slowed, as some of our industries are losing their competitiveness with those in other, newly emerging Asean economies, such as Vietnam and Indonesia.

However, the good news is there is a growing trend of some Thai industries managing to successfully expand their production bases into newly emerging economies across Asean, as well as China, in order to access local markets and to maintain competitiveness of their products and brands around the world.

With various production bases, these Thai companies - SCG-ceramic, Mitrphol-Sugar and Srithai Superware-melamine, to name just a few - have made successful strategic decisions and have now become leading players in the world market for their respective products. However, the actual trading activities for these products from their overseas bases are being done outside Thailand due to the shortcomings of our tax policy.

In order to move our economy forward, therefore, this government has successfully implemented some very important strategic policy decisions over the past few months, which will be key to boosting our growth for many years to come.

First, we have implemented the New Investment Promotion Strategies starting from January 1 this year in order to increase our competitiveness in the world market. We have altered the list of promotional industries to provide more privileges to strategic and high-potential industries that we feel they deserve more of our support; that is industries which compete based on high and clean technologies, innovation, efficiency and creativity. We believe that these industries will provide a new platform for more sustainable economic growth. We want to attract more of these new industries, to move our economy up the value ladder so that our products are more differentiated and we can better compete in world markets. We are already moving into this direction with a specific plan of action.

Take Thailand's plastics industry, for example. This industry has an ambitious - but I believe achievable - goal of becoming a global hub for the emerging bioplastics industry. We have already been successful in capturing some of the most sizeable worldwide biopolymer investment into Thailand, which will enable us to link our large agricultural base with our plastics industry in order to become a highly competitive and more environmentally friendly centre for making plant-based plastics. These new investment incentives will help us achieve just that.

With Thailand being Southeast Asia's largest plastics processing industry, comprising more than 3,000 companies, this move is a significant step in the right direction. Bioplastics can also help us achieve one of our social goals of reducing income inequality, as it will give our farmers more valuable end markets to sell their crops. What I am sharing with you now is not just ideas and visions - we already have our implementation programme in place. We are already looking at investments, infrastructure and cutting-edge research and development.

This is just one of the many examples of new lines of advanced industries which we have recently added to our new list of investment promotion.

As for our existing industries that we have been championing, such as automobile, food and petrochemical, we will continue to maintain our leading status by introducing more advanced lines of products. For instance, we will move up from producing eco-cars, to hybrid cars and electric cars, and also from normal- to speciality-grade petrochemical products.

Second, in December, this government also approved a new package to attract more companies to establish their international headquarters (IHQs) and international trading companies (ITCs) in Thailand. This means we will not collect income tax from dividends and capital gains from investments in overseas subsidiaries; we will not charge any tax on income received from providing services to subsidiaries such as training services, treasury management services and procurement services. Neither will we charge any tax on the profits from their trading of products that were purchased from foreign sources and sold to foreign destinations.

Moreover, Thai companies that expand production bases overseas can now enjoy these tax privileges and, therefore, trade their products produced in various production bases from their headquarters in Thailand without any tax burden. Foreign companies that have production units in Thailand as well as in our neighbouring countries, can set up their regional headquarters in Thailand and enjoy such tax benefits as international headquarter status. Foreign trading companies without production units can also apply for the international trading companies privilege and carry out their out-out trading businesses from the bases in Thailand without paying any taxes. To make it even more attractive, the personal income tax on expatriate staff of the international headquarters and trading companies is now reduced to 15 per cent, which is half of the normal rate.

We hope that, with these new special privileges for the IHQs and ITCs, Thailand will become a global trading hub in the very near future. We also hope that this new package will contribute to even higher growth in our service sector and intra-Asean trade as well as trade between Asean and other countries outside the region.

The third important move made by this government recently is to do with launching new industries that will better utilise existing our natural resources. For instance, Thailand has huge deposits of potash ore, estimated at 400 billion tonnes, which have yet to be commercially exploited. Therefore, this government has already begun to support potash mining, using the most advanced and clean technology. The first potash mining concession will be granted within the next month, followed by the second one in June. More exploratory licences have also been recently issued.

Another natural resource not yet fully utilised for producing downstream products is rubber. We are producing about 4 million tonnes of rubber, making Thailand the biggest producer in the world. But we are using only 550,000 tonnes for producing rubber products in Thailand. Therefore, we are determined to attract more producers of rubber products. Instead of just waiting for investors to come to us, we have already successfully invited - and approved - a good proposal from a potential investor in China to set up production plants for automobile tyres. Eight more plants have also agreed to invest in Thailand. Just as we have made good progress with potash and rubber, we will continue to look for natural resources that could be developed as additional industrial base.

Last but not least is another key element of our economic policies in the pipeline - promoting the "digital economy". This is an area where Thailand still lags behind our friends in the region, but soon, I hope this will no longer be the case.

Our government is planning to work with the private sector to develop hard infrastructure, such as a national broadband network, a spectrum to provide 4G wireless broadband, the establishment of a national government data centre and an increased number of international Internet gateway facilities. At the same time, soft infrastructure - mainly necessary laws and regulations related to cyber security, e-commerce and paperless public services - will also be developed to enhance the private sector's confidence in terms of online-trade and any potential legal disputes.

By the end of next year, we want Internet access to be made available to every single village in Thailand as the first phase of our plan, and to reach every household a year after that.

With this digital network, a more effective use of ICT for economic and social developments across Thailand will result in greater productivity and more equity in terms of opportunities. Venture capital will also be made available to support young Thai talents in promoting their digital content productions. Many new platforms will be provided to develop software talents, including embedded software. These are just some examples of the exciting developments about to take place in our country. As we speak, we are simply waiting for the National Legislative Assembly to pass a law that will empower us to start our plan according to what I have just described to you.

In conclusion, I would like to reassure you that the Thai economy is not just back on the right track, but that now is the best time to take part in many of the key developments that are taking place in this country.

Of course, some of you may continue to ask questions about democracy, political reconciliation, and so on. But one thing is clear: Thailand is shifting into the next gear, and sustainable economic growth is undeniably key to our social and political stability. And whoever comes in as next government leader will not have to start from scratch, because every economic policy this government is implementing right now is in the interest of our long-term economic development.

In short, I believe that, with all the reforms and economic restructuring which have been and will be implemented, the Thai economy will present itself with much more exciting opportunities for private investors and overseas traders, and this should put Thailand on the path of achieving consistently healthy economic growth once again.

MR Pridiyathorn Devakula is deputy prime minister in charge of economic affairs. This article is a shortened version of his keynote address at the international conference "Thailand: Moving Forward", organised by The Nation and the Wall Street Journal at the Dusit Thani last Thursday.

Source: http://www.nationmultimedia.com/opinion/Thailand-moving-forward-Economic-reforms-under-the-30253201.html


-- The Nation 2015-02-03

[Thai at Heart]

However, the actual trading activities for these products from their overseas bases are being done outside Thailand due to the shortcomings of our tax policy.SCG-ceramic, Mitrphol-Sugar and Srithai Superware-melamine,

Now there is an admission I never though I would hear from a Thai PM.

And of course, no one asks how come the farmers are still in poverty....Because the profit is TRANSFER PRICED OUT OF THE COUNTRY......

[Robby nz]

Could just be that these policies are already starting to show promise ?

Have a look at the report in the finance section of todays BKK post ; 'baht rallies on inflows'.

As for why the farmers are still in poverty T a H, you should ask Yingluck that for she has just recently said in her statements to the NLA that she had done so much to improve their lives.

[chainarong]

Maybe it just me but that part of the gum gnashing blurb ,Thailand is changing up a gear , I never knew there was more than one in reverse, I wonder if someone has the guts from the Junta administration to speak the truth and point out some of the shortcomings ,Instead of continuously this barrage of feel good rhetoric, thought not.

[wowfactor10]

Welcome to all foreign investors

We happy to take over 51% of your investments here in Thailand any time of the day.

[Godders]

A growing trend of Thai success across Asean and China, coupled with three key government measures and more work to come, are paving the way to better times, says MR Pridiyathorn Devakula

Better for whom? Millions of Thai workers are still working six days a week for less than the 300 baht minimum wage touted by the last government.

Never mind. Whichever way the new administration's economic plans work out, the deputy PM should scrape by.

"In October 2014 the National Anti-Corruption Commission (NACC) published the declared wealth of all ministers in the cabinet. Pridiyathorn was the wealthiest with assets of 1.38 billion Baht". (Source: Wikipedia).

[Thai at Heart]

Could just be that these policies are already starting to show promise ?

Have a look at the report in the finance section of todays BKK post ; 'baht rallies on inflows'.

As for why the farmers are still in poverty T a H, you should ask Yingluck that for she has just recently said in her statements to the NLA that she had done so much to improve their lives.

Very disingenuous answer. The PM just admitted that Thai domestic companies are transferringn their profits out of the country and you blame Yingluck.

[rubl]

Could just be that these policies are already starting to show promise ?

Have a look at the report in the finance section of todays BKK post ; 'baht rallies on inflows'.

As for why the farmers are still in poverty T a H, you should ask Yingluck that for she has just recently said in her statements to the NLA that she had done so much to improve their lives.

Very disingenuous answer. The PM just admitted that Thai domestic companies are transferringn their profits out of the country and you blame Yingluck.

Just read again, will you?

The Yingluck reference is related to the farmers in poverty only.

Of course I have no idea where Amply Rich people transfer their money to. Didn't then PM Yingluck wanted us to invest in Dawei, Myanmar?

[harada]

Ah good, things are back to normal.