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Outmoded products mar prospects for double-digit export growth

Unless key exporters make structural changes to reflect the transformations driven by modern technology, they can forget about a quick return to double-digit growth - and that will in turn hamper the growth prospects of the overall economy, warns Siam Commercial Bank's Economic Intelligence Centre (EIC).

Export value in the first five months shrank 1.2 per cent year on year despite improvements in the global marketplace. The EIC forecasts that for the full year, exports will grow by only 1 per cent, against 0.3 per cent in 2013.

Sutapa Amornvivat, chief economist and first executive vice president of SCB, said the outmoded nature of some export products was a factor in the slowdown. Thai producers have been unable to cash in on the global trend to smart devices as the country continues supplying old-fashioned computer parts and consumer electronics.

By EIC estimates, such outmoded products account for 5.1 per cent of Thai exports, compared with 2.2 per cent in Malaysia, and exports in this category in the first five months plunged by 28 per cent year on year.

The government should have a strategy for attracting modern technologies to Thailand to boost exports in the long term, Sutapa said.

"Thailand has spent very little on research and development, so the government should encourage foreign direct investment in modern technologies and clean technologies," she said.

Without this kind of structural transformation, export growth will be stuck in single digits, a risk to economic growth because exports play a crucial role in Thailand's gross domestic product. Therefore, achieving annual GDP growth of more than 5 per cent over the next few years is likely to be difficult even if key engines such as public and private investment and domestic consumption rebound, the economist said.

In the meantime, she suggested, exporters should expand their penetration into CLMV (Cambodia, Laos, Myanmar and Vietnam). CLMV is a high-growth market that still needs to import electronic parts, electrical appliances, vehicles and machinery, so some outmoded products could find buyers there.

The government, furthermore, must place importance on building infrastructure to facilitate transport to CLMV and reduce logistics costs.

The EIC expect exports next year to grow by 4 per cent and GDP by 4.7 per cent backed by investments by the public and private sectors.

Separately, confidence of businesspeople across the country in the second quarter rose above 50 per cent, the first increase in four quarters, as businesses became less worried about the political circumstances, according to a survey by Krungthai Bank.

The KTB Business Index is based on a survey of more than 2,300 entrepreneurs nationwide. In the second quarter it reached 51.03, up from 49.52 in the previous quarter, reflecting improved sentiment that the end of political uncertainty will help the economy and business to pick up.


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