Tarrin looks for sustainable growth
June 10, 1999 -- ALTHOUGH the financial and stock markets have sprung back to life with ample liquidity and the prospect of successful bank recapitalisation, Finance Minister Tarrin Nimmanahaeminda has cautioned that the recent exuberance may lack the fundamental support needed to attract sufficient investment for Thailand's productive capacity.
In an interview with a group of economic reporters late on Tuesday, Tarrin tried to focus on the sustainable recovery of the Thai economy in the long term, which must be thought over carefully by all Thais if they want to avoid a repeat of the economic crisis that has wreaked havoc in the country over the past two years.
One thing that is certain is that private investment, which is one of the locomotives of Thai economic growth and accounts for 25 to 30 per cent of Thailand's gross domestic product, cannot be expected to rebound since Thai industries are still saddled with over-capacity built up from years of over-investment.
The latest figures of the Bank of Thailand show that Thai industries are operating at about 57 per cent of their potential capacity, suggesting that no fresh investment will come around to spur economic growth because if demand is to pick up, the existing factories can simply raise their capacity.
''If there is new investment, it will be investment in new businesses that must be innovative and competitive. Thais must be able to produce and sell their products competitively in the overseas markets,'' Tarrin said.
Apart from investment in new businesses, Tarrin sees exports and tourism as two areas where Thailand will benefit from its attempts to achieve long-term recovery. But the most important thing, Tarrin warned, is that Thai companies must not fall back on the old habit of complacency or business tricks that do not conform to international standards or practices.
In the immediate term, Tarrin assured that the economic recovery process is under way, driven by domestic-led demand. After successfully bringing the macro-economy back to stability, Tarrin said stimulating domestic demand is the government's prime objective in trying to achieve a growth rate of at least 1 per cent this year.
He produced charts covering the macro-economic indicators, production indicators, consumer indicators, the financial institutions and capital market and operations of the government as evidence of a recovery phase. Although the signs are still mixed, they show that the worst is over and the recovery depends on the reform efforts in the corporate and financial sectors.
So far there has not been enough national debate on how Thailand will emerge from the crisis and build on its strong points. MR Chatu Mongol Sonakul, the Bank of Thailand governor, once said that Thailand's competitive advantage lies in its strategic location as the regional hub for transport. ''All the airlines flying into this region must stop by at Bangkok, the same way with all the sea-going carriers that must pass through Singapore,'' he said.
Chatu Mongol also warned that if southern China can develop its transport hub, it might affect Thailand's national advantage.
From a regional perspective, Tarrin described Thailand as being sandwiched between up-and-coming competitors like Indonesia, which is enjoying political liberation, Vietnam, which is building up its competitiveness, India, which is advanced in some hi-tech areas and China, which is growing faster, and by the newly-industrialised economies (NICs) of South Korea, Taiwan, Hong Kong and Singapore.
''Don't talk about Japan because we'll never be able to compete against the country,'' said Tarrin. ''But we'll be kept under pressure by the less developed countries which will try to catch up with us and from the the NICs which will try to stay ahead.''
With the economic crisis, attention has returned on Thailand's advantage as a food surplus economy. Yet productivity remains unsatisfactory, with agriculture accounting for about 14 per cent of the country's economic output. But some 60-70 per cent of the 60 million Thais are living in this farm sector.
Tarrin said it is not true that the government is not paying enough attention to Thailand's agricultural future.
''There has been a lot of thinking going around on how to improve agriculture. For instance, I have given out instructions that if new roads are to be built, they must be created along irrigation channels to the end of the innermost farms so that the farmers can efficiently ship their produce,'' he said.
''If not, the roads built into the village will become roads of hire-purchase where the local people are trapped in debts of new saw machines, TVs, motorcycles, and so on.''
BY THANONG KHANTHONG and VATCHARA CHAROONSANTIKUL