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TRADE WAR: Supachai seeks focus on SMEs amid uncertainties

TRADE WAR: Supachai seeks focus on SMEs amid uncertainties

WEDNESDAY, September 26, 2018

THAILAND, as an export-dependent economy, needs to adjust its strategic policies and support small and medium enterprises against uncertainties and the threat of global capital outflows, experts warned Wednesday. 

Thailand should be concerned about trends in global trade, as they greatly affect the Thai economy due to its reliance on exports, said Supachai Panitchapakdi, former chief of the World Trade Organisation and former secretary-general of the United Nations Conference Trade and Development (UNCTAD). 
The key threat from the trade war between the United States and China is not the level of tariffs but the uncertainty that comes with it, said Jayati Ghosh, professor of economics at Jawaharlal Nehru University, New Delhi.
The two prominent economists issued their warnings during the launch of UNCTAD’s Trade and Development Report 2018 in Bangkok.
Uncertainty from the trade war ties in with how finance remains under-regulated even 10 years after the 2008 financial crisis. This poses big risks to world trade, said Ghosh.
“This issue affects all of us. We get speculative capital inflows, but there are also massive capital outflows whenever there is a hint of a crisis. That has already happened. It has started in many countries such as Argentina, Brazil and Turkey. It is also evident in the Asian stock market, which has fallen significantly in the past month,” she continued.
Uncertainty as a result of the ongoing trade war affects investments, as investors lose confidence and capital starts to flow out of the market, she said. This could lead to a fall in output and a rise in unemployment for all of us, including exporting countries like Thailand, she feared.
The unpredictable change from global capital flows as a result of the ongoing trade war and its uncertainties will eventually lead to problems with the depreciation of currencies as investors lose confidence, according to Supachai. 
However, countries in the Asia-Pacific are relatively well prepared to deal with the impacts of the ongoing trade war. The accumulation of capital reserves is quite high in this region, he said. 
“Thailand maintains a healthy level of capital in its reserves, giving the government a lot of options to stimulate the economy should the impacts of the ongoing trade war hit us,” he said. 

Labour force on the decline
Meanwhile, the Asian Development Outlook 2018 by the Asian Development Bank, launched yesterday, painted a positive picture for the region. It said that Malaysia, Thailand and Vietnam would benefit from the trade war as they could produce and export goods similar to those made by China. 
Supachai, however, warned that increasing the volume of trade alone would not help Thailand prepare for the impacts of the trade war.
“Those that benefit from trade are exporters, which are usually giant companies. Hence, there is a concentration of power in the market. These giant companies have a lot of negotiating power when it comes to wages. Meanwhile, the negotiating power of the labour force has continually decreased,” Supachai said.
This has created a critical disconnect between a falling unemployment rate and sluggish wage growth. 
“We must also facilitate the growth of smaller exporters and support small and medium-sized enterprises in the country,” Supachai suggested. 
“This will allow more income to come to the labour force and not only to the top 10 exporting companies.” 
Another way Thailand could prepare for the impacts of the trade war was to adopt a comprehensive and strategic policy planning approach, according to Supachai. 
“In Thailand, we are slow in adopting policies but we are on the right track. The government is focusing on improving infrastructure, connecting people and linking it to trade. This is seen in the government’s policy to develop the Eastern Economy Corridor and its plan to improve trade relations with Cambodia, Laos, Myanmar, and Vietnam through investments in infrastructure,” he said.