THE WORLD BANK yesterday suggested Thailand set up a national risk management board to help it better deal with the growing risks of economic, health, natural-disaster, and other external vulnerabilities.
Norman Loayza, lead economist in the research department of the World Bank, said its “World Development Report 2014” showed Thailand stood around the middle of the Preparation Index that the bank devised to evaluate countries on their risk preparedness. It takes into account human capital, physical and financial assets, and state support measures.
Loayza said Thailand was doing better in the area of health-insurance coverage, but it needed to tackle its “cyclical fiscal policy”.
“Counter-cyclical fiscal policy can help a country to mitigate systemic risks,” said the World Bank economist.
He said a national risk board could help Thailand deal with financial, health and natural-disaster risks better through integrated risk management at a national level. The country might look at some best examples including Singapore, Britain and the Netherlands.
Somchai Jitsuchon, a research director of the Thailand Development Research Institute, said that besides risks from cyclical fiscal policy, the World Bank report cited Thailand’s other weaknesses such as its high dependence on the manufacturing sector and its poor performance in dealing with systemic risks, as evidenced by the devastating floods in 2011.
He said the country was also not doing well in social insurance, because 60 per cent of Thai workers still did not have coverage for major risks such as old age and job loss.
He said managing risks for prosperity could be the biggest challenge for Thailand, while it needed to develop more research-and-development and innovation capabilities in a bid to get out of the “middle income trap”. This was evidenced by the country’s declining economic growth rates in recent years.
“We need to have the ability to finance the learning process [of firms that conduct high-risk R&D investments], as South Korea and Taiwan have done successfully,” Somchai said.
However, the lack of political leadership is the biggest hurdle of Thailand’s development efforts, noted the TDRI researcher.
Another TDRI researcher, Duenden Nikhomborirak, said that as pinpointed in the World Bank’s report, the “political economy” was a major obstacle for Thailand to materialise a proactive risk-management approach. This is because Thai politicians prefer to show off short-term measures, rather than pursue policies that are less visible to the public but provide long-term gains to the country.
She said the Bank’s report also cited the country’s high proportions of “informal sectors” and lack of relevant information as other major obstacles to efforts to implement integrated risk management.
For example, she said 27 million labourers, or more than 40 per cent of the workforce, were not included in the social-security system.
Of the 2.78 million small and medium-sized enterprises, only 550,000 were registered and only 1.1 million had access to financial markets.
She said the prime minister should chair a national risk board, and the National Social and Economic Development Board could be the secretariat office of the board, which should have legitimate power.