Pro-active international economic policy ‘a must’
Thailand’s international economic policy is set to be revamped when a new government is formed next year, with the application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CCTPP) high on the agenda, pledged representatives from three political parties.
Some radical proposals were also discussed at the foreign policy webinar series (EP4), including incentives for parents to have more children, a wholesale regulatory guillotine to repeal outdated laws and regulations, the creation of a new network of international allies to tap in the G20 and technology partnerships other nations or selected multinationals.
These and many more are seen as a collective avenue to boost international confidence in the Thai economy.
Paopoom Rojanasakul, of the Pheu Thai Party, Sirikanya Tansakun of the Move Forward Party and Nattima Wichayapinyo, the Kla Party’s Strategy Committee secretary were speaking at the fourth Thai foreign policy series webinar on International Economic Policy and Diplomacy.
They were joined by Kobsak Chotikul, former director-general of the Foreign Ministry’s Department of International Economic Affairs, and Wisarn Pupphavesa, from the Thailand Development Research Institute (TDRI).
The event was co-hosted by the Surin Pisuwan Foundation, Chiang Mai University’s School of Public Policy, Thai PBS and Asia News Network (ANN). The session was moderated by Pana Janviroj of ANN.
Paopoom, Sirikanya and Nattima all called for the country to articulate economic strategic direction to restore international confidence, as “Thailand has lost its place internationally” over the past decade.
Aside from the coup seven years ago and since former Deputy Prime Minister Somkid Jatusripitak and his team left the government more than a year ago, Thailand’s international economic presence has ground to a halt, with the Prime Minister Prayuth Chan-o-Cha, who has no background or experience in economic management, taking charge of the country’s most vital element.
Move Forward Party’s Sirikanya said Thailand needs to go after “quality rather than quantity” in trade and investment and the old mindset, of competitiveness due to low labour costs and political stability under military rule, need replacing.
“We should move to predictable political discourse, which is no longer through crackdowns on protests when there is a political conflict. We can deal with it through the Parliamentary system and democratic process, with transitional leadership changes, and achieve peaceful outcomes, rather than via coups,” she said
“We have been isolated and must return to equilibrium with the superpowers,” she said, citing an example of US Vice President Kamala Harris paying an official visit to Vietnam and talking about the digital economy and cyber security, while Linda Thomas-Greenfield, US Envoy to the UN, came to Thailand and talked about human rights and NGO laws. We can all see the need to hasten a new foreign policy equilibrium,” said Sirikanya.
Kla Party’s Nattima echoed “If we want to boost confidence, we have to set targets and objectives to create a clear direction for the global business community to see. We have retreated from the international business arena for quite some time because of our attention on domestic political issues.”
Both Nattima and Sirikanya called for greater a role for the Thai private sector, whose overseas investments now outstrip those of foreign direct investment into the country and against the backdrop of the current Prayuth government’s expansion of the incumbent bureaucracy to run the economy.
Nattima called for more negotiations to expand FTAs and efforts to further improve Thailand’s ranking in the World Bank’s “Ease of Doing Business” ranking, in which the country ranks 21st, remaining behind Singapore and Malaysia.
Paopoom, who represented Pheu Thai, with its experience in running governments in the past, unveiled his party’s seven-point comprehensive economic strategic manifesto. They are:
- Maximise trade and investment through international cooperation and partnerships with offensive international economic policy.
- Strengthen Thailand’s two global supply chain links, namely Asia and the US, given the recent split due to a trade war, COVID-19 and de-globalisation. “We have to be in both and cannot choose one and not the other. For Asia, we have the Regional Comprehensive Economic Partnership (RCEP), but with the US and EU we are behind. Our party places importance on the CCTPP, but we will have to deal with issues relating to farming and medical health in detail.”
- Take steps to wrap over the global supply chain in a way that Taiwan has done successfully through SMEs. “COVID and superpower rivalry have allowed for a reset of opportunity. Thailand can navigate and win some positioning here.”
- Adapt foreign exchange policy to support the economy, rather than solely relying on interest rate policy to manage inflation. Interest rates are on the upward trend and Thailand is under pressure to raise rates to prevent capital outflows but, in doing so, the economy will recover more slowly.
- Undertake economic restructuring to draw investors, rather than using tax incentives. “(With taxes), it’s like we are not smart looking but we tell others we are. It’s not right.” The restructuring must tie education to supplying the right kinds of workers with multiple skills. There must also be a sizable domestic market to make the country naturally attractive. With these, diplomacy can be deployed to enhance international confidence.
- Build new industries to serve, for example, the globally aging market, health, organics, hi-tech. “There is an opportunity to export without need for face-to-face contact – on finance, health, education, insurance, telecom…we can develop.”
- “Economic growth must be complemented by sound environment agenda. We are behind globally, both in policies and practices, such as taxes on polluters and so on…” said Paopoom.
The TDRI’s Wisarn called for an urgent application to join CCTPP, adding that it is a must if Thailand is to avoid missing out on the global supply chain, given also that Japan is the major manufacturing investor here. “We have missed several opportunities to join CCTPP. We should also convince all ASEAN members to join to make centrality a reality.”
“By delaying or not joining we will fall off the cliff. If we don’t join, Japan’s investment will ground to a halt. New investment is now all about new technologies. If we miss (the industrial upgrade) we will fall behind,” he added.
Wisarn said Thailand’s tax protections for domestic industries have no bearing on global trade. “It is not that they shoulder the burden. In fact, we do. It just delays the adjustments by local producers. It’s a problem of political lobbying from domestic industries and the mindset of bureaucrats not to be seen as conceding when a negotiation is all about give and take.”
“Our trade negotiation tactics so far have caused delays to adjustments towards greater productivity and efficiency and we don’t have a real policy to help industries to readjust to openness from FTAs,” he added.
The international industrial policy mishaps are also compounded by multiple layers of taxes, adding more pain than gain. A unified tax system is sorely needed to help businesses streamline, said the TDRI economist.
Former international economic diplomat Kobsak said the new world order may prevail now, but old problems have not gone away. “We are moving out of darkness into some light after two years, but will we be swallowed up by a tiger on the left or get stamped by an elephant on the right? It’s a turbulent period, lots of disruption…mega trend and new universe of metaverse!”[sic]
There have also been changes in the power equilibrium, away from the WTO and other post World War institutions, to a new order for RCEP and FTAs. “We have to decide where our benefits lie.”
“It’s the economy, stupid!!!” Kobsak said, quoting former US President Bill Clinton about the art of government. He called for the formation of the National Economic Council as a single command directive to take on the fragmented Thai bureaucracies.
“This will signal to the foreign community where we are going, programs, models, aspirations, in order for them to participate.”
Kobsak cited a proposal, by the Organisation for Economic Co-operation and Development (OECD), for governments to dismantle outdated regulations, which could add 1% to the GDP growth of ASEAN, without spending any money.
He warned that vision without implementation is a zero-sum game, citing the example of Thailand’s inability to see through some key COP26 agreements on deforestation, reduction of methane gas emissions coal burning, because of misaligned internal laws and regulations.
“The international economic policy must reflect a better internal policy making structure, to lead to what the three young politicians here want to achieve,” said the former Foreign Ministry official.
Sirikanya underscored the need to get the basics right under a new world order. Targeting “quality” investors and customers also means adhering to universal values, whether they be on human or labour rights, the environment or sustainability.
In her role as a member of the House Committee on Economic Development, Sirikanya said the government and bureaucracy have economic strategies which are very “broad” and lacking in priorities. “The economic diplomacy is fragmented and does not work in unit, making execution difficult. We need to know and have a clear strategy for where in global supply chain we stand.”
“If we don’t have a clear strategy or foreign policy objectives on trade and investment, international confidence will not come about,” she added
Nattima added that “Even if the strategy is clear, but we don’t properly communicate it, it doesn’t help. Clarity and consistency in communication, internationally or internally, are vital so, from outside the inside can be seen to build confidence.”
She cited the case of Vietnam setting a firm target of 2030 to become an upper middle income country, and a high income nation by 2045.
She is optimistic that Thailand has both the capability and capacity to take a regional lead, as it has done in the past, whether it was with ASEAN’s Chiang Mai Initiative or the ASEAN Regional Forum.
“We are not that bad. We are not so small we need outside help. We can return to regional economic leadership, to have regional initiatives together,” she said.
Nattima advocated a quick win for country with tourism, as SMEs need cash injections through deployment of public diplomacy. “Thailand is ready to welcome you back with a good health sector. It is quick cash but reflects international confidence in our soft power. A single message for all agencies and give the private sector a role in shaping and negotiating.”
One of the Kla Party’s campaigns is to digitalise the bureaucracy, to make it smaller, more transparent and efficient.
Paopoom said, if his party is able to form a government, it would be able carry out the seven economic agenda all at the same time but, if asked to choose one, it would be economic restructuring with regards to labour, laws, taxes, infrastructure and technology, which should be accessible to all Thais.
He said the Pheu Thai Party is also open to the importation of skilled workers to help fill the technology gap.
Kobsak sees the growing clout and power of the G20, of which Thailand is not a part. “We should also move beyond ASEAN and Apec etc.”
He cited the case of Singapore being able to attend G20 meetings, although it is not a member, via a network of countries known as the UN-linked Global Governance Group, which it has formed and acts as permanent chair.
Thailand, he said, can form a similar grouping with its networks of allies such, as Bhutan, Sri Lanka, Nepal, Ghana, Kenya, Morocco, Monaco, Lichtenstein, Costa Rica, and Peru.
Or it could be a group of rubber producers, tuna, rice or tin, for example.
Thailand’s international aid budget, which is Bt4-5 billion, can be used to serve these purposes, he said.
“These will give the Foreign Ministry the negotiating power. It’s time to think outside the box,” said Kobsak.
The panelists were open the idea of Thailand forming a technology partnership with a smaller nation, in exchange for access to the larger Thai market. Kobsak cited Israel as one candidate, although this might lead to problems with some countries in the Middle East. He also suggested an alternative involving targeted global companies.
Sirikanya cited the case of Taiwan’s giant Semiconductor Manufacturing Company which, if attracted to be a partner, could provide Thailand with relevance in the global supply chain.
Wisarn added that a sound eco system is also needed to make Thailand attractive to such partnerships. Such does not mean tax incentives, but rather intellectual property protection and availability of skilled manpower.