Thailand's competitiveness dented by political gridlock: IMD chief

Economy May 14, 2014 00:00

By Erich Parpart

The Nation

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Thailand's competitiveness ranking in 2014 is very likely to fall from last year's level, due to the political impasse which is destabilising society and investor confidence, said the president of the International Institute for Management Development (IM

The latest "IMD World Competitiveness Yearbook" will be released on May 21.

In an exclusive interview with The Nation, IMD president Dominique Turpin said the current political stalemate was hampering Thailand’s ability to grow, while the uncertainty that came with it had most likely lowered the country’s international ranking.

"Thailand has a very strong base in certain industries such as automotive parts, food and services, and its youth unemployment rate is relatively low, while logistically the country is in a good position compared to neighbours, but the country’s social and political uncertainties are making investors nervous because nobody can very [well] predict what is going to be the outcome of the current political struggle," he said.

Last year, Thailand was ranked 27th out of 60 economies in terms of competitiveness. Among five Asean countries in the list, the Kingdom featured behind Singapore (fifth) and Malaysia (15th), but ahead of the Philippines (38th) and Indonesia (39th).

Compared to the Philippines and Indonesia, Thailand is ranked by the IMD as having a good and well-educated labour force as well as better infrastructure thanks to huge investment over the past 15-20 years. However, political uncertainties have remained as the main issue which deters investors.

"On paper, Thailand has lots of assets to succeed, but the political dimension is becoming overwhelming," said the IMD chief.

Based on the institute’s simulation, Thailand’s competitiveness ranking could rise to 16th place if the country could improve in the areas of medical assistance (number of inhabitants per doctor); redundancy costs (number of weeks of salary); income inequality; government subsidies to private and public companies as a percentage of gross domestic product; labour and overall productivity; secondary-school enrolment and pupil-teacher ratio; and total health expenditure.

Turpin added that the country should be able to address the long-term issues once political and social stability was restored.

In 2013, Thailand proved competitive in the areas of dynamism of the economy, business-friendly environment, open and positive attitudes, cost competitiveness, and skilled workforce.

He also noted that Thailand had outperformed most countries in international trade, employment, fiscal policy, and labour market, but had been outperformed in business legislation, social framework, productivity and efficiency, technical infrastructure, education, health and environment.

Looking at the situation closely, it can be seen that the country’s main weaknesses are mostly related to the poor performance of the government, he said.

"For me, the Thais are the French of Asia when it comes to social cohesion, with lots of demonstrations, while the government is totally helpless – therefore business people have to rely on themselves," he said.

In the absence of a strong government, Turpin suggested that the private sector should take matters into its own hands. He said businesses could not always rely on the state, since there are many things such as long-term investment in innovation, research and development, and branding which they can develop by themselves in order to improve their corporate strength in the long run.

"There are three areas in which business can improve regardless of the political environment – innovation, entrepreneurship and brand management," he added.

The IMD president stressed the need for more investment in innovation, as Thai firms are at risk of falling behind in this respect.

Meanwhile, entrepreneurship is a critical issue in the long term, as this would boost employment and become a major engine of future economic growth.

"Long-term investment in branding and fostering entrepreneurship require confidence and, if the economic and political situation is uncertain, people will be reluctant to invest in the long run," he said.

Another challenge is most that Thai executives are reluctant to venture outside the country because they are comfortable with the domestic market. Yet, the prospect of the upcoming Asean Economic Community means that Thai companies should think more about overseas investment, or they will miss out on the economic opportunities, he said.

Thailand also needs a role model for small and medium-sized enterprises, he added, in order to inspire others in terms of what can be achieved.