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Sluggish start for Thais as regional integration looms
Publication Date : 17-03-2014
The latest economic research and surveys are competing to deliver warnings and straightforward bad news. Thailand, they say, has been progressively less and less attractive when it comes to foreign investment. This year's economic growth, it is expected, may be the lowest in many years thanks to the prolonged political crisis. And with the beginning of the Asean Economic Community (AEC), the regional free-market, looming around the corner, the timing couldn't be worse.
The poor prospects for foreign investment are nothing new. One doesn't need to be an expert to see why foreign investors will struggle to find good reasons to bet on Thailand. Corruption is rampant and has become deeply politicised. Mega government spendings, a key factor in every modern economy, has been and will remain tied to political volatility, rightly or wrongly. The country also has a poor ranking in education and our labour attractions are losing ground to neighbouring countries.
Other issues include compatibility for offshore businesses and infrastructure. Both are more or less embroiled in troubled politics or corruption. This is not to say that our neighbours don't have these problems, but it's fair to say that ours are more on show.
How much we need foreign investment is an entirely different subject. One school may argue that a food-producing nation like Thailand has advantages it doesn't really appreciate. In other words, the country may not register a flashy economic growth, but it will survive difficult economic times. "Developed countries" that have to buy foods will suffer more if slammed by drastic winds of economic change.
With Thailand's agricultural sector weakened, however, the other school sees foreign investment as essential. Some view Thailand's deteriorating attractiveness with growing concern. Thailand, this camp insists, must take a great stride into the AEC, not limp into it. But as things stand now, we will have to race against time to really get ready for the regional economic rearrangements.
Thailand's private sector used to be strong, boasting some good resistance against political turmoil. That is no longer the case. Big corporations have been drawn into the political fight. A senior foreign businessman faces deportation. There is a state "blacklist" accusing leading firms of sponsoring anti-government activities. And, as stated, projects that could generate jobs or investment or draw in foreign money have hit political snags, rightly or not.
There is a relatively short period before the AEC begins. Good news, as far as Thailand's bad situation is concerned, is that drastic changes won't happen overnight. Many tax or tariff reduction schemes are a follow-up of what have been tried before. The shift of skilled labour across the borders will still face non-legal problems or restrictions. Singapore may be more attractive, but it has always been more attractive than Thailand, AEC or no AEC.
Bad news is the AEC is not a short-term thing. That means whoever gets a good head-start may hold advantages for years.
For example, countries that manage to draw in foreign investment over the next two years will be able to solidify their positions or competitiveness. With inroads being made in Myanmar, Singapore always more attractive, Malaysia far more politically stable and Vietnam better dressed up, Thailand faces an uphill battle to win over investors.
Each side of the Thai political conflict is blaming the other for the country's dismal prelude to the AEC. Who is right or who is wrong may not matter much when the AEC is concerned. And the longer the blame game drags on, the weaker Thailand will look on the AEC racetrack.