Korn Chatikavanij, left, and Supavud Saicheua in a session to recall the 1997 crisis, where they paint a bleak outlook for the Thai economy without more foreign investment.

Supavud Saicheua, managing director of Phatra Securities, warned that too much reliance on exports would shrink the country's size in the world market in the years to come.

He said exports today accounted for 65 per cent of the country's gross domestic product (GDP), whereas total world exports constituted only 32 per cent of world GDP. Thailand's greater reliance on exports is evident in the monthly income of more than US$10 billion (Bt346 billion), which is more than double the level before the crisis.

"We don't have high-value commodities like the Middle Eastern countries or advanced technology manufacturing like Singapore of which export-to-GDP ratio is also high. We have relied on exports since the crisis to earn foreign currencies for debt repayment. But we have paid off all debts, and with our international reserves hitting $80 billion, what are we going to do with the reserves and the additional $10-billion current account surplus this year?" Supavud asked.

Investing the reserves solely in dollar-denominated assets would only strengthen the baht, and that means the more Thailand exports, the lesser income in baht it  will earn.

He said the Bank of Thailand's current baht defence would not lead to another crisis, as the dollar is always available for purchase. But doing so means the central bank needs to issue more bonds, and that would spur rates and inflation.

Meanwhile, Thailand, with its surpluses, could also face trade barriers. "Again, we are running against the tide. Then, we sold dollars to shore up the baht when the baht was about to fall. Now, we buy dollars so that the baht will not appreciate when the baht is destined to rise."

Supavud admitted the current situation was not favourable for new investment, particularly with the interim government's policies on capital control measure, the revision of the Foreign Business Act and the planned enactment of the Retail Business Act. And drawing foreign investment is also harder now given the greater number

of countries available to invest in.

"Too much confidence explained the previous crisis. But now, Thailand is acting out of fear of globalisation," he noted. "Blocking foreign investment will lead to monopolistic power of local entrepreneurs. This will lead to lower pay and drive talented workers out of the country. We need to admit that labour is mobile."

He urged the government to move on with privatisation of state enterprises as well as improve the bureaucratic system to facilitate foreign investment.

Democrat Party deputy secretary-general Korn Chatikavanij said foreign investment was of high importance given that it is usually associated with high technology. "We need more investment and higher technology. [If the Democrats were given the chance to form the government] we'd be open to foreign investment."

Democrat Party leader Abhisit Vejjajiva vowed that restoring foreign investor confidence would be the first priority of his government, saying that so far the interim government had sent the wrong signals.

Achara Deboonme

The Nation