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Published on September 14, 2007

Thailand ranked 25th in the IMD's world competitiveness ranking in 2005 and slipped to 29th in 2006. It was ranked 33rd this year by the Swiss management organisation.

"Not only top but also middle-level executives do not have sophisticated managerial skills," he said in a panel discussion on "Thailand's Productivity and Competitiveness" at the Thailand Focus 2007 - Platforms For Growth forum.

Top Thai companies use almost seven persons to process purchasing orders worth Bt1 billion, compared with nearly five persons under the Open Standards Benchmarking Collaborative (OSBC) - a survey of 1,000 companies in the United States and Asia - he said.

It is worse for median Thai companies, as almost 20 persons are used in the process, he added.

In terms of value per order, top and median Thai companies averaged Bt153,561 and Bt67,038 - well below the OSBC level of Bt249,751.

"We purchase a very small amount of orders, we don't have contract suppliers, we don't have business-to-business relationships. Every time we want to order, we start the whole process again," Phanit said.

Furniture, rubber, textiles and processed foods are the country's worst-performing sectors in  terms of employment and cost numbers.

He did, however, soothe the anxiety by saying that the situation might improve as the country had recently introduced its first ever Productivity Master Plan 2007, which included measures to upgrade labour skills and machinery efficiency, develop shared logistics systems and encourage the establishment of industrial networks.

World Bank senior economist Albert Zenfack said the structural driver of competitiveness was productivity. Thailand's more competitive sectors are food processing, textiles and garments, and electronics and electrical appliances.

However, he said the Kingdom's annual average growth rate of labour productivity in relation to gross domestic product was very low.

He referred to a World Bank report stating that Total Factor Productivity (TFP) is promoted mostly in agricultural sectors, but not industrial or service sectors due to the movement of labour from rural areas into major cities. TFP is an indicator of changes in the efficiency of a country.

 "The contribution of TFP to output is extremely low, with more focus paid to employment and capital," Zenfack said, suggesting Thailand focus more on TFP improvement.

The World Bank's major concern is the regulatory issue. There is a need for policy changes with more focus on micro-impediment policy, he added.

Meanwhile, Assoc Professor Nipon Poapongsakorn, dean of the Economics Faculty at Thammasat University, told the panel that Thailand had high potential to be a major producer and exporter of ethanol, as it is the world's top exporter of cassava and fourth-largest exporter of sugar, which are the main raw materials in ethanol production.

"The world demand for ethanol is increasing," he said.

Policy weakness, lack of research and poor incentives for sugar farmers and millers in ethanol production discourage producers from entering the market, he added.

The agricultural sector is the major source of Thai competitiveness, as seen by the fact that it had positive TFP growth in the 1997 financial meltdown, while industrial and service sectors had negative TFP growth.

"This reflects the fact that the agricultural sector is resilient," Nipon said. However, agricultural-sector growth in Thailand is on par with the world's average growth, but lower than many countries in Asia.

He suggested future governments focus on science-based production policies, water and natural resources policies and institutions, land-consolidation policies to yield economies of scale, and more effective food safety and biofuel promotion measures.

Oranan Paweewun

 The Nation