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Chuan lacks 'New Economy' vision

 

The new economy holds both promises and threats for Thailand and other countries, Thanong Khanthong reports in the first of a series.

Perhaps Prime Minister Chuan Leekpai was trying to look sensitive. Or was he rather timid with his vision? For last week, in his address to leaders of various foreign chambers of commerce and Thai business associations, Chuan failed to signal Thailand's launch into the new economy.

His audience was treated to a momentous speech on Thailand's structural reform and the economic crisis the country has experienced over the past three years. But there was not a word from the Prime Minister about the Internet or how Thailand would face the globalisation of its economy, the revolution in information technology (IT) and the turbulence in the financial sector.

He limited his twenty-first century vision to pledges that he would lay the foundation of a legal and regulatory framework for businesses and the economy to prosper in a market-oriented environment and for democratic principles to thrive.

"Should we be able to strengthen the quality of our economic, social and political infrastructures, I believe our people will be able to live a much more productive life, in a society that is not only more just and equitable but also one that provides them with more opportunities," the prime minister said. "At the same time, Thailand will economically become much more competitive and much better positioned in the global marketplace."

In a way, the damage created by the collapse of the old economy, manifested by insolvent banks and debt-ridden companies, has been so huge that it has sapped the country's energy to move forward.

Besides, Chuan cautioned that any move to build up the competitiveness of the country should not lead to the two-tier economic structure that characterised the past. While manufacturing and industry are struggling to survive, agriculture -- which more than half of the 65 million Thais depends on for their livelihood -- is caught in the trappings of its past.

Now Thailand is facing a double-barrelled challenge -- how can it raise the living standard of people dependent on agriculture through restructuring, and how can it undertake industrial upgrading to increase the country's competitiveness? And since industrial upgrading will necessitate incorporating new technologies, Thailand cannot avoid taking on the Internet revolution.

This, however, will require substantial investment in specialised education, research and development, and other knowledge-enhancing areas. Furthermore, industry needs to develop its capability in computers, electronics, and other technology and knowledge intensive products and services.

"The task for Thailand is not easy. It costs us around Bt20,000 to buy a mobile phone here. But how much land and labour do we need before we can grow rice and sell it for Bt20,000 to exchange for the mobile phone?" asks a Bangkok-based commercial banker.

Indeed, Thailand is off to an awkward start in the high-tech race sweeping Asia. The hole in the old economy is so huge that it is still difficult to climb out of it. Besides, there is lack of a clear direction as to where Thailand is heading. "We don't have a strategy on the new economy," said Somkiat Tangkitvanich, a researcher at the Thailand Development Research Institute. Looking eastward to the United States, the new economy, driven by information technology and financial globalisation, is emerging to become a new capitalist monster. And this gigantic monster, buoyed by productivity on a historical scale, is threatening to swallow the rest of the world by its sheer power and predominance.

Productivity, driven by the information revolution, in turn accelerates growth in the more advanced economies, particularly the US. "The poorer countries still lag behind in this kind of productivity growth in the race to the New Economy," said Myoung-Ho Sahin, vice president of the Asian Development Bank.

Goh Chok Tong, Prime Minister of Singapore, is not facing the same constraints of his Thai counterpart in guiding his city-state towards the new economy. Singapore is ready to take on the new economy in a big way, even if that means it has to adjust its business, political and cultural ways. "We have no choice. This is becoming a smaller and smaller world, and if Singapore is going to survive in the future in this new economy, new world, it's got to embrace the cultures of the world," he told the Financial Times.

"We're embracing globalisation and the IT revolution, convinced that they present more opportunities than costs."

Jungsoo Lee, chief economist of the Asia Development Bank, said: "India and South Korea have emerged as the two leading countries in Asia that have made the most in productivity gains from the new economy.

"It's a very interesting issue. Whether the impact of IT on productivity will amount to the next revolution is still debatable," Lee said. "But there's no doubt that IT has enhanced productivity in the US economy and also in India, Korea and other countries.

"Whether this shift to the new economy, dominated by IT, will lead to sustainable or high economic growth is something we have to watch."

Although Thailand is seeing the number of its Internet users increasing significantly, it is still at a very early stage of the new economy. According to Salomon Smith Barney, the number of Internet users in Thailand will reach 2.8 million by 2005 and revenues generated from the Internet, mostly from e-commerce, will soar from Bt1.22 billion this year to Bt51.80 billion in 2005.

With the gradual recovery of the economy, falling prices of personal computers, the proliferation of Thai-language web sites, and improvements in the telecommunications infrastructure, the groundwork for the new economy is being laid. But problems are rampant.

"Thais have adopted new Internet models to sell their products. In the end, they all are doing the same thing. Without distinctive features. They try to attract new advertising. But not everybody is successful," said Somkiat.

 

 

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