Thailand will need to radically reform its economic structure if it wants to keep up with its fast-growing Asean neighbours, says Deputy Prime Minister Somkid Jatusripitak.
He says the three top priorities are creating value for agricultural goods, promoting digital transformation and promoting the growth of secondary cities.
“Thailand has a dire need to acquire the ability to create more value for our agricultural goods,” Somkid told the “Thailand Economic Outlook 2019” dinner event organised on Monday by Krungthep Turakij, a sister newspaper of the The Nation.
He said the low prices of agricultural goods were a chronic problem for the Thai economy. With 20 to 30 per cent of the total population working in the agricultural sector, the continuing low prices of agricultural goods is preventing people’s incomes from going up. This has in turn led to weak domestic demand in the country, limiting Thailand’s overall economic growth and transforming it into an export-reliant nation, he said.
“Instead of selling fine agricultural goods at low prices to foreigners to turn them into valuable products and sell them internationally at higher prices, Thailand should develop its own capabilities to create added value for our own goods and elevate the income of those within the agricultural industry,” Somkid suggested.
The most promising method to add value to Thai agricultural products would be through processed fruits, he said.
The second critical structural reform would be transitioning from a traditional economy to a digitally driven one.
“Thailand needs to promote the growth of digital industries. To achieve growth rate like China and Vietnam, we will need to turn ourselves into a startup nation and promote the use of digital platforms,” Somkid said.
The digital age has lowered the barriers for entry into the market and given the small businessperson the chance to make it big within the market, he explained.
“The key advantage of having a digital economy is the low capital requirements of startups. Individuals with ideas and ambitions can now start their own businesses through a digital platform. This will lead to the rapid growth of startups within Thailand, creating innovative growth and putting Thailand at the forefront of the global market,” Somkid said.
The third requisite economic transformation is to promote the growth of secondary cities through improved transport infrastructure and e-commerce.
“The Thai government has been investing heavily in high-speed railways to link cities like Bangkok, Hua Hin and Chiang Mai with secondary cities like Nan and Surat Thani,” he said. “This will improve tourism in these areas, leading to urbanisation, a key driver for economic growth.”
The government plans to invest as much as Bt2 trillion in the country’s transportation infrastructure in the year 2019, he added.
Another method to promote secondary cities is through e-commerce, which would allow local goods in secondary cities to be sold nationwide and internationally. This would increase the business potential of these areas and propel the Thai economy, according to Somkid.
Somkid predicted GDP growth of at least 3.3 per cent in the fourth quarter of this year, and said he was certain the GDP growth for 2018 would be at least 4 per cent, perhaps higher. He cited the lull in the US-China trade war after the G20 summit as the key reason for his optimism, expecting Thai exports to continue to grow and push up the GDP figures.
Meanwhile, the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) has predicted GDP growth of 4 to 4.3 per cent in 2019, chairman of the Thai Chamber of Commerce and Board of Trade of Thailand Kalin Sarasin said at press conference after the meeting yesterday.
He added that factors propelling the 4-per-cent growth would involve increased domestic spending and public investment as well as recovering tourism numbers.
The committee maintains an 8 per cent export growth target for 2018, citing the new 90-day halt to the US-China trade war as the key reason. However, exports are expected to contract between 5 and 7 per cent year on year in 2019, with risk factors being the resumption of the US-China trade war and uncertainties surrounding UK’s Brexit.
“Next year, Thailand will need to rely more on domestic demand to drive growth,” said Kalin. “We believe domestic spending and total investment for next year to be promising, and continue to predict a 4 to 4.3 per cent GDP growth in 2019.”
This is in light of the announcement of various government policies aimed specifically at boosting domestic spending.
The JSCCIB also believes government spending and investment in various projects, such as infrastructure and the development of the EEC region, will boost the Thai economy in 2019, according to Kalin.
Another factor boosting the 2019 economy will be the upcoming election.
“We believe the election period will boost domestic consumption, especially in the first quarter of 2019,” he said.
“Furthermore, tourism is seeing signs of recovery after a slide in the third quarter,” Kalin said.
Last month, the JSCCIB reported that in August, 867,000 Chinese tourists visited the Kingdom, down 11.77 per cent month on month. In September, only 648,000 visited, another 14.89 per cent fall month on month.
The JSCCIB also has plans to boost investment through capitalising on Thailand’s position as next year’s chair of the Asean summits.
“We aim to cooperate with the Asean Business Advisory Council (Asean-BAC) to organise investment events in 2019,” he said.
Up to 15 events have been planned by Asean-BAC for 2019, with the flagship events “Asean Business Awards” and “Asean Business and Investment Summit” to be held towards the end of next year, Kalin added.