Thailand - Thailand warned on weaknesses

Thailand must address ongoing structural weaknesses such as logistics costs and education if it is to reap full benefits of regionalisation under the coming Asean Economic Community, say analysts with the Oxford Business Group.

Alex Gordy, editorial manager for the OBG, a London-based global publisher and research consultancy, said areas such as knowledge of foreign languages remain issues that must be addressed.

Regulatory reforms also need to be kept on track. Mr Gordy said the delays in auctioning new third-generation licences in the telecommunications sector and continued foreign ownership limits in certain segments will keep having a negative influence on the business environment.

But the move towards regional economic integration under the AEC, due in 2015, will benefit the Thai economy.Mr Gordy said the linking of Asean capital markets this year, while unlikely to lead to a significant flood of new portfolio investment in the near term, represents another step towards Asean integration.

"More Thai companies than ever before are investing in their near-abroad, while Thailand will benefit from its central geographical location and the growing trade that entails," he said.

"We're already seeing this with border regions, particularly Myanmar and Cambodia, which account for more than 10% of trade."

The liberalisation of Myanmar in particular offers strong potential.

"[Myanmar] is making up for a lot of lost time, and Thailand is well positioned to provide it with neighbourly assistance in the process," said Mr Gordy.

"Thailand is also well positioned to be a top investor and exporter to Myanmar, a gateway if you will. Large infrastructure projects like Dawei, in which Indian and Thai companies have shown interest, will capitalise on Thailand's location."

The shift by Thai companies towards higher-value products together with the increase in the daily minimum wage has already led to a relocation in labour-intensive production for sectors such as garments to lower-cost border regions.

"On the other hand, Thailand will also have to face fresh competition within Asean from such economies as Vietnam and Myanmar as these markets develop," said Mr Gordy.

"Myanmar was long the breadbasket of Indochina, and that country's agro-industrial capacity stands to benefit from higher investment and integration into the global economy."

In any case, the OBG says the Thai economy has recovered quickly from last year's flood crisis.

Mr Gordy said efforts by the government to ease difficulties in securing insurance and to establish a clear water management plan has helped to rebuild investor sentiment.

"Following on from this short-term shock, economic growth is now well on its way to exceed the last five years' average," he said.

But he said medium-term growth will certainly benefit from political and policy stability.

"Thailand will benefit from a more stable political climate, which will enable a certain amount of consistency and coherence for government policies over the long term," said Mr Gordy.

"Nonetheless, Thailand has remarkably been able to sustain healthy growth in recent years despite a certain lack of stability. If the country is to attain its full growth potential over the long term, however, it would be in the economy's interest to have a more stable political atmosphere."

http://www.bangkokpost.com/

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