Catch Thai economic pulse – will economic crisis return? Is Thailand ready to handle?
Feeling Thai economy’s pulse; checking if economic crisis is really coming back and how much Thailand is really ready to handle!
HIGHLIGHTS:
- At academic panel discussion on ‘Thai Economy 2017: SOMTUM Crisis?!?’ held by Thammasat University, 3 scholars agreed that the economic crisis would not occur in Thailand any soon (in a short time). However, when the economy reaches halfway, the international economic policy must be observed especially, in China and United States.
- Professor Dr. Sakon Varanyuwatana, Ph.D. has stated that 4 Thai economic machines; domestic consumption, investment from private sectors, government sector’s expenses and surrounding factors from foreign countries, are still effectively working.
- Professor Wittawat Rungrueangpol mentioned that even though Thai economy is generally at recessionary stage, it has started to increase gradually. He confirmed that Tom Yum Goong crisis or Hamburger Crisis is not what to be repeated because of banking sector’s potency.
- Dr. Suthikorn Kingkaew thought that world economy is currently at the period of new normal growing slowly and simply. What Thailand needs to do is getting out of middle-income trap by trying to look for new markets like India, Africa or CLMV countries.
- Even though Thai economy will not be facing any crisis in a short term, the dramatically changing technology and innovation in a long term may cause gradual each part of Thailand’s death.
Tom Yum Goong crisis 20 years ago still remains well in Thai people’s memories turning many Thai millionaires at that time to become bankrupts just over night. Later, it spread all over the world leaving huge scars in many people’s minds.
10 years later, similar financial crisis came back in a form of subprime mortgage crisis or well known among Thai as Hamburger Crisis. Although the origin was in United Stated, it more or less damaged people around the world including Thai people.
Many have been afraid that such financial crisis is about to circle back in 2017 as it is exact 10 years circulation.
The question today is how much chance such financial crisis will possibly occur, how well Thailand be able to handle such financial crisis again and what will be the solutions. The Momentum will take you all to find out these possible answers.
“Thailand needs to change the structure of business, trade and investment; from the previous focus on United States market, which is mostly in a form of export, to the growing countries where they have opened to a huge amount of investment. This way we can improve from exporter to investor and trader.”
4 Thai economic machines are still effectively working.
At academic panel discussion on ‘Thai Economy 2017: SOMTUM Crisis?!?’ held by Thammasat University, Professor Dr. Sakon Varanyuwatana, Ph.D., Economic academician and Dean of Faculty of Economics, Thammasat University identified that most economists would focus on 4 economic factors concurrently that are; domestic consumption, investment from private sectors, government sector’s expenses and surrounding factors from foreign countries, to analyze economic trend.
Today, these 4 machines in Thai economic system are continuously operating. Even though prices of agricultural products such as rice and rubber tree are in recession and export is paused because of domestic financial problems in big giants like USA and Japan which has caused the decrease in people’s income, Thai government has been trying to continuously launch stimulus policies including “shopping to help the country” or “travelling to help the country” which has resulted in the positive signals in people consumption and service sector like tourism.
For the previous government’s expenses, even though the result is not that concrete, the investment in big projects is almost 20% of GDP ensuring the private sectors more on making investment. In 2017, government is preparing to invest in basic structure at 1.4 trillion Baht where simultaneous works will increasingly stimulate the economy.
For surrounding factors from foreign countries, Professor Dr. Sakon mentioned that we have started to see USA’s clear recovery and economic fluctuation in Europe. Even though the situation has not been eased up, the trend has started to be clear; unlike the previous negative situation, there are more positive factors in export from Thailand.
For the last machine of currently effective investment from private sectors, the problem found is that the investment has not been extended to all parts of industry resulting in concentration in only some types of heavy industry. Even though the amount of money in investment is high, the employment has not been much changed. It is because the machines have been used more than human labor in such industries. The challenge today is how to connect the investment to SME thoroughly.
“If we look at it in a short term, Thai economy is having no problem. However, when the economy reaches halfway, the international economic policy and international political policy must be observed especially, the attitude between China and United States. Within our country, there is still nothing to be worried about except SME business”.
“The fact is our economy has not reached the crisis and has not had any signs. At present, government sectors are trying to make investment and Thai economy is starting to go up gradually”
Thai economy is starting to rise gradually.
Professor Wittawat Rungrueangpol, Department of marketing, Faculty of Commerce and Accountancy, Thammasat University stated that although there have been negative factor from the paused period of export, recessions of domestic consumption because of the decrease in labor’s income and government’s stimulating people’s expenditure resulting in the continuous increase of household debt, it is considered much better situations than financial crisis in 1997. This is because most banks are careful about loan decreasing financial risks and counterbalancing the government. Even though the general picture of economy is in recession, Tom Yum Goong crisis or Hamburger Crisis will definitely not happen as long as banks are to effectively support the economy.
“In media’s point of view, I understand that they like to make thing exciting and they can sell something negative more. At the same time, the truth is our economy has not reached the crisis and has not been any signs. Moreover, the government is trying to invest and our economy is of course slowly going up. Therefore, I don’t want the media to build the news that brings the worry about economy’s descending phase to private sectors”
“The reform of government is essential and needs clear KPI for assessment. It is not just to say “let’s move Thailand forward 4.0” and then, throw the reasonability at private sectors or educational institutes resulting in government refusing to make a self-change”
Economic game between USA and China may affect Thailand in some ways.
Another noticeable factor that may affect Thai economy is a factor on foreign affairs especially, in the time of Donald John Trump, the current President of United States declaring the trade war with China led by Xi Jinping, the President of China. Dr. Suthikorn Kingkaew, the director of Thammasat Consulting Networking and Coaching Center, analyzed that Trump’s speeches were quite aggressive after his first 2 months in the position especially, when he was accusing China and Europe of delaying America’s economy. As a result, he had to protect his country’s economy instead of doing a free trade. At the end, Trump couldn’t perform fully 100% like he had mentioned.
“Trump’s working style is to bluff; creating ripple to call people’s attentions, building news and using media to create people’s panic. His policy operation is to smash the table in order to drag others for negotiation. However, he cannot even make what he has said a 100% reality on his negotiation table. What if he has really done it, he himself must realize there will be a massive effect towards America’s economy which greatly depends on foreign countries, especially China”
“Xi Jinping also realizes that this time is important as there is a power transition every 5 years. Therefore, he cannot respond aggressively to United States as it will affect the political power succession. As a result, compromise is made between both sides”
Moreover, Dr. Suthikorn Kingkaew mentioned that the important point to keep an eye on now is China’s visit United States next month. I think when that time comes, both countries will negotiate the acceptable point.
How Thailand can be affected from this trade game?
Dr. Suthikorn thought that world economy is currently at the period of new normal where the growth is slow and simple. Therefore, what Thailand needs is to take itself out of middle income trap, enhance the economy and try to look for new markets like India, Africa or countries in CLMV (Cambodia, Laos, Myanmar and Vietnam).
“One more important thing is Thailand needs to change the structure of business, trade and investment; from the previous focus on United States and Japan markets, which are mostly in a form of export, to the growing countries where they have opened to a huge amount of investment. This way we can improve from exporter to investor and trader. Even for SME, they will have chances to make investments in those countries”
“If private sectors want to make investment, they will invest based on technology. The new economy which government is trying to move forward is likely to be less-human labor businesses. With all these processes, our country’s economy is being effectively driven forward”
Big challenge causing Thailand’s adjustment.
Even though everybody agrees that economy crisis for Thailand will not be happening in a short term, there are big challenges awaiting ahead especially, the adjustment to technology and changing world.
Prof. Dr. Suthikorn gave opinion that Thai economy is currently growing 2-3% a year while neighbor countries’ growth are also consecutively increasing. This shows economic structure is going in a wrong direction due to the fact that Thailand is still walking on the same steps while neighbor countries are moving closer to us.
“We need a measure to improve our economic structure. We cannot do the same no more; we can no longer produce a huge amount of agricultural products for sale. To do all these things are not only private sectors’ responsibilities. This is because the heart is to reform government sector’s structure management as our government’s management is currently being like a bottleneck; they need to be better and more effective.
“This question has been set with no answer for a long time, that is “What has Thailand gotten back in return after government’s massive spending?”. The reform of government is essential and needs clear KPI for assessment. It is not just to say “let’s move Thailand forward 4.0” and then, throw the reasonability at private sectors or educational institutes resulting in government refusing to make a self-change”
Professor Wittawat was worried that if Thailand is used as a base for new-era investment, investment will come in a form of the use of technology. If foreign countries are looking for cheap labors, Thailand is no longer an answer for them. Therefore, if Thailand wants to persuade foreign investors, government needs to drive our country using technology and innovation which respond to new generation investors’ needs.
“If private sectors want to invest, they will base on technology. New economy which government is about to drive should be less-human labor businesses. All these process will move country’s economy forward. However, the situation like the cluster of the rich and the distribution of the poor will occur; newly graduated students will earn quite low income. We will then be growing among big businesses. However, SME trying to adjust themselves to be a part of this economic system will be lesser. Therefore, government has to change SME to be Smart SME in order to connect between big businesses and small businesses”
Conclude with Dr. Suthikorn, he thought that Tom Yum Goong crisis will not definitely happen any soon. The thing that can cause more problem than financial crisis may be changing economic structure.
“We used to hire a million people in textile industry. Now we have only 3 hundred thousand left. We used to export hard disk at 15-20% of the world but now, the need for hard disk is decreasing. This is the structure crisis Thailand need to keep up with the changing world. The question is if we have the ability to teach others to make a change or if our education is ready”
“It is not “Som Tom crisis” but we may be facing “Tom Gob crisis”. We are not putting this frog into boil water to make the immediate crisis. What is happening is we are letting this frog in the water with slowly increasing temperature. Frog is a cold blood animal so, it has no idea that it is about to die. Once the temperature reaches 100 degree, it is killed. This situation is like what Thai economy is facing; we are growing slowly so, there are many things we cannot make well adaptation such as textile industry, motor vehicle industry including service sectors. While all these things are about to be replaced by technology, we will slowly be dead part by part because of slow adaptation”
If we turn back to ask those people who had been hurt from previous financial crisis if they had expected for those crisis to happen, most answers would probably be “No”.
With the huge change that is about to happen, we cannot say “No” completely as we all are well aware that technology ia coming to change people’s life style and all sectors’ business pattern. To create an adaptation or not is each person’s decision to make.
Credit: themomentum.co
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