Thailand’s next leader should implement policies for solid development, to solve issues in the domestic economy, the bureaucratic system, and leverage cooperation with neighbouring countries, according to President of American Chamber of Commerce (AMCHAM), Mook Pibuldham, adding that the key to attracting foreign direct investment (FDI) is to maintain political stability.
In an exclusive interview with Thai PBS World, Mook said that what foreign investors want to see is the government formed quickly, with a smooth and fast transition. They want to see the winning majority form the government, “because the strength of the government leads to political stability for the next 4 years’’.
High household debt impacts FDI confidence
In addition to political stability, the American business community is concerned about Thailand’s domestic issues, including high household debt and the electricity price. The domestic consumption and costs are significant factors for business leaders when considering investment in Thailand.
‘’The first challenge is high household debt. As we speak, it’s already at 90 percent. We have some sympathy for the current government, as the household debt was at 80 percent when they took they came to power. As COVID19 hit the country, the current government did not have flexibility, in terms of extending policies to tackle the household debt issue, which means people do not have money to spend. It impacts domestic consumption.’’
‘’The rise in electricity costs is significant. Right now, foreign investors are paying for electricity at double the rate in Vietnam and 3 times higher than in Malaysia. How can companies in Thailand, not only foreign investors in Thailand but local companies, be competitive in international market? Another issue is Thailand’s energy source. Two thirds of energy sources rely on imports, which puts Thailand at very high risk of energy dependency.’’
Mook mentioned that the current government has initiated policies in terms of renewable energy plans, implemented 3 months ago. The next government, however, should look for other alternative energy sources, via cooperation with neighbouring countries, including Cambodia.
Mook Pibuldham
Uncertainties cause plunge in stock market
The unsteadiness in Thailand has also led to a plunge in the stock market. In the first half of 2023, foreign investors have sold off more than 100-billion baht in equity. Mook told Thai PBS World that this occurred due to the slowdown in global markets and the political situation in Thailand.
Thailand’s stock market performed well in 2022, but it has grown slowly due to China’s policies, ‘’because of the global economic slowdown and the slow reopening of China’s borders, it impacts a lot on Thailand’s economy, as we are relying on exports of products to China and Chinese tourist. Misfortunes never come one at a time. The unstable political situation accelerated the massive sell-off in the stock market. Setting up next government quickly can definitely help’’.
Mook highlighted that good policies are already in place. The concern lies in how the government will implement these policies. The Foreign Chamber Alliance, including the US, the UK, Australia, Germany and Japan, has come up with initiatives for the next government.
‘’ (They) include the consistency of law and regulation. We haven’t seen much progress on regulatory control of transparency and clarity. Another initiative is about ‘’E’’, including electronic transformation. Due to COVID19, we’ve seen a lot of progress concerning e-platforms on government websites. Finally, there is a shortage of labour.’’
Foreign workers are vital for economic growth
With an aging demographic and a declining birth rate, foreign workers are vital for the growth of the economy. The bureaucratic system should be simplified to enable them to get relevant visas and work permits, without piles of paper.
‘’The volume of paperwork and the offer that we need to put in to obtain a visa and work permit is still very onerous. We would like to see the process simplified and more straightforward.’’
From left to right Franc Han Shih, Mook Pibuldham
Collaboration is more potent than competition
Competition with neighbouring countries is another tough task for next government. Since 2010, FDI has flooded into Asia from western countries, with 200 billion dollars just this year. Although other Southeast Asian countries, including Singapore and Vietnam, have attracted a lot of FDI, Thailand still has an abundance of opportunities.
‘’It seems that each country in Southeast finds its own niche. For example, Indonesia benefits from flows into batteries, downstream commodities, and EV related products, mainly from north Asian countries like Japan, Taiwan and South Korea. Malaysia manages to secure the interest of European and North American countries in electronic products. Malaysia represents 30 percent of semiconductor output globally.’’
‘‘For Thailand, I don’t think it’s too late. We may miss the first trend of global supply chain shift. Thailand is always here for the policy of China plus one. Originally China plus one came from the rise in labour costs in China so, through multinational cooperation, it started looking for the plus one. Because of current geo-economic fragmentation, I am sure that the investment will be pouring into Asian countries.’’
Leveraging cooperation with neighbouring countries, Thailand has the chance to attract a great amount of FDI and to develop its power rapidly. The next leader would, however, need to implement policies effectively, foster good relations with other countries and maintain political stability to push Thailand forward in the global supply chain. ‘’There’s enough cake for every country. Cooperation is more important than competition in the international market,’’ Mook added.
By Franc Han Shih, Thai PBS World
