The Industry Ministry has worked with 4,000 businesses across 13 industries to draw up a model scheme aimed at boosting manufacturing productivity and efficiency. The ultimate goal is to raise the country's gross domestic product.

Deputy Prime Minister and Industry Minister Kosit Panpiemras said yesterday the local manufacturing sector had slowed down because businesses were less competitive than global players. Another factor is declining domestic consumption.

Under the Bt1-billion project, participating manufacturers will be encouraged to differentiate their products to attract customers and increase their share of the global market.

Last year, Thailand's industrial products accounted for 1.2 per cent of the worldwide market.

The programme was drawn up after a survey by the Office of Industrial Economics showed a fall in the manufacturing product index in the first quarter. Targeted growth in the gross domestic product of the industrial sector was revised to 5 per cent this year in line with the economic slowdown, from an original target of 5.5 to 6 per cent.

While saying the economy will recover in the third quarter through the bidding for mass-transit projects, Kosit added that the government would boost the economy mainly through private investment and government spending.

"We prefer focusing on investment projects rather than domestic consumption because they can stabilise our economy in the long term. But as we have seen, a low MPI indicates that the manufacturing sector could be a factor that pulls down the economy in the long term," he said, highlighting the importance of the ministry's project.

Separately, the National Economic and Social Advisory Council (Nesac) hosted a seminar yesterday at which panellists said that global competition, exchange-rate risks and confusing economic policies had attributed to lower private investment.

Private firms have adopted a wait-and-see strategy over the past six months due largely to the strong baht, said Chavalit Nimla-or, chairman of Nesac's committee on industry and commerce.

Intense competition in the world market has lowered the profit margins of manufacturers. Therefore, they face a higher risk when the baht appreciates against the US dollar, said Chavalit, who is also a textile exporter.

However, the baht has been stable over the past few months, he said.

He added that small and medium-sized firms faced more difficulty, as buyers have turned to larger companies as they can offer better products and services.

Chavalit said few factories were still running overtime, resulting in lower income for employees.

Narong Pethpraseth, political economist at Chulalongkorn University, urged the government and private companies to increase wages. Low-paid workers result in lower consumption, he said, adding that a large part of the economy depended on spending by employees.

Former deputy finance minister Pisit Leeahtam said investor confidence had been partly affected by unclear economic policies and political uncertainty, as foreign investors are fearful that Thailand will close off its economy.

Anti-privatisation movements, amendments to the Foreign Business Act, the sufficiency-economy philosophy, and a new draft law to control foreign retail business have confused foreign investors, who are worried that the government does not welcome their investment, he said.

Moreover, foreign investors have shown interest in putting their investments instead into Vietnam, China, India and Indonesia, he added.

Many research houses have predicted that economic growth this year will be below 4 per cent, far lower than the potential growth rate of 6 per cent.

The Finance Ministry has in the past few days asked state-owned banks to increase their new lending to lower-income groups and small firms. The move is part of a Bt44-billion economic stimulus package.

Chalida Ekvitthayavechnukul,

Wichit Chaitrong

The Nation