To my mind, Thailand and Asia are now at a crossroads. Over the past five years, we have restored investors’ confidence and put Thailand back in business. Today, our fundamentals are robust. Foreign reserves, as well as revenues from exports and tax collection, are at a record high. Companies are showing strong profits. Through careful planning, the foundations for our greater economic competitiveness have been laid. However, our borderless world is changing fast, and we cannot remain idle. Over the coming years, Thailand will need strategies to take forward these foundations for sustained growth.
And what precisely is the global situation in which our development is taking place? Without doubt, it is one in which Thailand will need to take risks to invest in the future. On the one hand, continuing uncertainty over energy supplies has meant that oil prices have kept rising. On the other hand, we are also faced with the prospects for the strong growth of Asia, driven by a number of important economies.
Growth engines
Over the next few years, I see three possible engines of growth driving Asia forward. First, Japanese postmodern technology-driven growth will serve to maintain Japan’s key role in the global economy. Meanwhile, the growth driven by massive production capacity in China reflects the increasing maturity of Chinese economic production and consumption. This is possibly followed by a third source of growth, Indian maturity of modern mass production, as Indian companies increasingly flex their muscles and reach out to the world.
This scenario is not to dismiss the potential of other economies. South Korea, for example, continues to move strongly ahead in modern technological production. Rather, the point is that this pattern will continue and indeed exhibit more clarity as the future engine of growth in the world, making Asia the location of choice for business.
Development paradigm
Where does Thailand lie in this picture? The implications for us are clear. This growth means fresh demands. In particular, meeting these demands would necessitate further adjustments to our global strategic positioning.
We shall need to build on existing strengths as well as develop new ones. In simple terms, for Thailand to be part of this Asian growth means standing on two strong legs. It requires a qualitative change in our production of basic commodities and raw materials for processing. Second, our products must also be differentiated on value instead of being differentiated on price. This also means that, increasingly, goods and services will have to reflect better the character of lifestyle products that appeal both to the domestic market and discerning consumers around the world.
Before moving to quality, Thailand used to compete on price. People bought our agricultural products and manufactured goods because our prices were attractive. It is therefore ironic that the whole world, including the Asian market, now thrives on quality production. Quality has become the prerequisite for business success. Increasingly, Thai producers have to enact value engineering to create quality, since global demand is now based on both price and quality.
Nevertheless, by expecting quality, global consumers are opening up a new era for us. For while the assembly line will undeniably continue to be part of Thailand’s economic life, reliance on mass production and adding value hold the risk of diminishing returns and margins amid the fierce competition in the marketplace. Faced with the prospect of maturity of production in China, with India closely following, a qualitative change in production and services must be the backbone of our participation in the global economy.
Quality will foster confidence in Thai products, whether it is rubber, tapioca or manufactured goods. And only quality products can withstand negative pricing that comes with competition. Already, the ability to supply quality products at affordable prices has added to our export performance.
Real survival, however, depends on managing both quality and value. Creating value for our products and services is therefore the key to our future. The process of value creation gives us pricing power, by leveraging our existing strengths and resources to create unique products. This is by no means easy. It also cannot be done overnight.
However, I believe that development solutions must be based on the unique circumstances of each country. And making value creation a bigger part of our economy is a realistic scenario for Thailand, given the artistic impulse of our people and our cultural assets. Certainly, it will be most rewarding if successful.
Target sectors
Thus, the government is focusing on target sectors where we have unique advantages, including tourism, agribusiness, and lifestyle products. All these are potential areas where, with the appropriate design, appropriate technology, marketing and capital, we can create value products.
What is certain is that these and other new opportunities will be highly diversified. Lifestyle products, such as spa products and services, fashion, furniture and specialty foods, will form part of the new diversity of national production. Above all, these products and services will embody originality and be differentiated from each other.
Promoted by judicious branding and properly protected by patents and copyrights, I see exciting, trend-setting Thai products taking the global stage. And, as innovation and demand will be the main driving forces, our portfolio will be a dynamic one.
To take one illustration, one of Thailand’s most important resources is our people and the quality of our service. Indeed, Thai people are renowned for their “service mindset”, which is partly why we have made such great strides in promoting tourism. And while it is true that tourism is already our biggest exchange earner, its contribution to net income has never been recognised for what it is.
Value creation
The diversification of our tourism products, in tandem with upgrading our offers to add to our margins, must be an ongoing process. In future, our innate servicing quality must therefore meet the value creation process. Thus, we are actively working with the private sector to promote health tourism and quality medical services, including retirement and post-operative care, to customers from all over the world.
This is also why the government has given priority to infrastructure upgrading. Investments, such as the new Suvarnabhumi Airport due to open this month and the extension of mass transit systems for Bangkok, will contribute to our comparative advantages, eliminate bottlenecks and mitigate our energy difficulties.
At the same time, improvements to the logistics and supply chain will support the new growth character. Other investments being planned for the modernisation of Thailand will further enhance our endowments.
Realising the new vision for Thailand and leveraging our human resources will require knowledge workers. Without knowledge of technology and particularly information andcommunications technology (ICT), finance and design, we cannot improve materials, foster entrepreneurship and ultimately rise in the value chain.
Without these inputs, we would perhaps be making quaint novelties instead of high-tech products that will enrich the world and generate income. This is why the government has given priority to improving the knowledge acquisition system. For a knowledge economy relies on both the formal education system and non-formal knowledge institutions. I have therefore made sure these concerns are being reflected in our 10th National Economic and Social Development Plan.
Creativity and innovation will thrive on people being given appropriate opportunities, through knowledge and science parks and design centres, and allowed to grow. Most importantly, these incubators will provide people with the flexibility to take up new opportunities as they emerge.
Growing with Asia
In strengthening Thailand, I have always been conscious of the need for Asia to grow in unison. For while Japan, China and India may provide the greatest dynamism, Asia as a whole possesses immense potential based on its educated workforce and natural resources. Indeed, much of the world’s energy resources lie in Asia and many are reaping the windfall from high energy prices. It is my view that these oil profits should be used for the overall development of Asia, which comprises both oil producers and consumers.
There is perhaps no finer time for petro-dollars to be invested in the potential of Asia as countries shed the shackles of poverty. Indeed, we should take care lest artificially high energy prices threaten the human development that is taking place all over the continent.
If hedge funds and banks are able to take advantage of excess liquidity to speculate in the energy market, this will further inflate prices and decrease margins for our productive activities. This is why I have advocated that oil profits should be invested in the real sector, in the growth of Asia, including through Asian bonds. Asian bonds mean not only enhanced access to capital for the region’s economies, but also new opportunities for investors. This will benefit not only Asia, but also consumers all over the world.
Positioning for the future
In the emerging landscape of Asian growth, I am convinced that a value creation economy provides a new dimension that will enable Thailand to position itself better for future development. I am even more convinced that to help realise this objective, theprimary job of the government lies in managing opportunities on equitable terms. This is what we have been doing. This is what we will continue to do, and do more. Within Asia, the essential requirement is the same.
Our endeavour to create value for our economy from knowledge application serves to maximise opportunities for Thailand and its people within the globalised world. It is an integral part of our new development paradigm that sees the rural and urban sectors growing together. It means leveraging our people, our knowledge and our assets to bring out their full potential. This will usher in a more knowledgeable and competitive Thailand, as part of a strong and vibrant Asia.
Energised by a new entrepreneurial spirit, Thailand will be not only an attractive business partner but also a valued player in the global economy in the years to come.
