Economic concept advocated this week by the World Bank chief has similarities to the sufficiency economy concept proposed by King Bhumibol Adulyadej in 1997 and may become an alternative for a country losing the battle in Southeast Asia to attract inward investment, to Indonesia and Vietnam.
The country chief of the World Bank, Birgit Hansl, has called on Thai authorities to place more of an emphasis on the circular economy concept as one of the answers to the kingdom’s pressing problems in the post-pandemic world as it struggles to compete with key ASEAN partners in attracting inward investment to transform its economy to the next level. The comments came at the launch of a review of Thailand’s private sector where the country’s key problems including its lack of skilled workers and lack of investment in entrepreneurial start-up concerns were addressed.
The top executive for the World Bank in Thailand said this week that Thailand must reinvent its economy to overcome the challenge the country is currently experiencing in attracting inward investment which is critical if the kingdom is to transform its economy.
Pointing to declining levels of investment in the country, she said that Thailand’s commercial sector must stimulate more innovation and advances in technology if it is to successfully build on the export-led manufacturing industry which is the current base for the economy developed over past decades.
Circular economy may be part of the answer for a country struggling to deploy new technology and innovation to underpin a needed boost in productivity
In particular, she said the country needs to improve its underlying productivity which is currently challenged by a growing demographic problem.
One area that has been recommended to the government is the concept of the circular economy.
This involves a move towards more leasing and sharing of utilities such as cars or transport as well as moving towards repairing and reusing materials and products rather than buying new items.
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Ms Hansl estimated that such a programme would generate up to $3.4 billion for the Thai economy in GDP gains and help with creating a more sustainable and self-sufficient economy, a key tenet advanced by Thailand’s King Bhumibol Adulyadej in 1997 and applied by the government and its agencies to 23,000 villages in Thailand.
Sufficiency economy looks to the long term
This economic philosophy advanced by the late and revered King was based on reasonableness, moderation and prudence.
It advocated a long term vision to be pursued by stakeholders in the economy with less of an emphasis on consumerism and the short term profitability of firms or business concerns.
Although the World Bank chief in Thailand signalled that the kingdom’s economy was in recovery mode, she warned that the external economic climate is darkening with worldwide economic growth tipped to fall from a projected 5.5% to 4% this year.
Thailand is losing the battle to attract inward investment in Southeast Asia to develop its economy against stiff competition from Vietnam and Indonesia
The country needs more investment in order to carry out the transformation that is required.
However, Thailand is facing stiff competition from other economies in Southeast Asia, particularly from Vietnam and Indonesia which have decisively outperformed it in attracting inward investment.
Speaking at the same event with Ms Hansl this week to launch an analysis of Thailand’s private sector, Mr Rujira Kumar, a senior economist, pointed to the protective nature of Thai regulations and laws which he saw as acting as a deterrent to inward investment.
He proposed opening up the country by tearing down such restrictions.
He identified this as one of the main reasons for the success enjoyed by Vietnam and Indonesia in recent years.
Vietnam may overtake Thailand in 5 years
Vietnam has managed to establish superior trade relationships to Thailand and higher growth rates over the recent past including a free trade pact with both the European Union and the United Kingdom.
Thailand’s ASEAN neighbour is projected to overtake Thailand’s economy in the next five years as it is increasingly seen as a favoured destination for manufacturing in Southeast Asia and consequently inward investment at the kingdom’s expense.
Lack of venture capital for up and coming enterprises in Thailand as well as lack of access to bank loans
Mr Rujira also identified a negligible level of venture capital being made available in Thailand to startups and would-be entrepreneurs. He identified this as an insignificant 0.03% of gross domestic product.
In addition, the country’s financial system, although strong and stable, has failed to make capital easily accessible to new and upcoming firms engaged in technology and innovative new industries.
He also identified the country’s labour force which he said was underdeveloped with the majority of the Thai workforce being either unskilled or middle-skilled operatives.
He identified this as a major constraint in attracting inward investment.
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