Identifying the strategy for Thailand’s economic recovery
In an exclusive interview with the World Economic Series, Burin Adulwattana, Chief Economist of Bangkok Bank, identifies the key strategies for Thailand’s economic recovery from Covid-19.
Thailand has been a leading player in the fight against Covid-19. One of the first countries to identify the enormity of the virus threat, it achieved an early local transmission rate of zero and counts only 58 deaths so far. Its policy of the three Rs – response, readiness and resilience – has served it well and now the government is considering how to re-engage with the world and revitalise the economy.
For Burin Adulwattana, Bangkok Bank’s Chief Economist, the answer lies in refocusing the economy to build on the changes forcibly brought about by coronavirus. “Tourism is the first casualty of war,” he says from his city-centre office in Bangkok. “It accounts for around 20 per cent of our GDP, with 80 per cent of tourism coming from abroad. ”
But as the borders remain closed and the Thai people panic about reopening them, the tourism sector is under scrutiny. The staycationing Thais cannot fill the void and the hotels themselves are reducing their rates by as much as 80 per cent to keep going. “I think the Thais are quite content as we are now. We all know many people don't want to let foreigners come in and spoil our bubble,” he says.
But for Thailand to reboot its economy, there needs to be a gradual reopening of this major industry. There had been hopes of a travel bubble with neighbouring ASEAN countries, but a new outbreak in Vietnam has dashed this possibility. In addition, an Egyptian military attaché who travelled to the Eastern Economic Corridor while carrying Covid led to a shutting down of three provinces in a panic-led response. Coupled with the anger at the government about the presence of US Navy units for a military exercise following an outbreak of coronavirus in a similar exercise in Okinawa, Japan, the Thai people are less than enthusiastic about greeting the world.
Travel bubbles for some business initiatives might resume in due course, but these will allow only around 1,000 people a day to enter Thailand. Given that the usual numbers pre-Covid were up to 120,000 per day, it’s nowhere near the figures required to reinvigorate the sector. “The government is looking at a stimulus package to encourage the Thais to travel internally more often, but obviously it will not generate the 40m visitors which was forecast to rise to 80m by 2030,” says Burin.
“But, as the saying goes, we are not going to let a good crisis go to waste. Now that everyone realises we cannot rely on tourism, and people are questioning the building of more and more hotels and airports, we are looking at sustainable tourism that doesn’t rely on huge numbers of low-spending visitors.
“In the past six months without the tourists, it seems that nature and our beautiful tropical islands are recovering nicely. Hopefully, the government will learn that maybe we don't need tourists all year round, certainly not 40 million of them. We might just need five or 10 million of higher quality, and target higher-spending, quality tourists who could come for a long stay.
“We have a few Scandinavian, English and German villages where people could pass the winter or spend up to six months here. It's much more sustainable, and there are good healthcare facilities. Thailand has earned its reputation after Covid and now people realise that our healthcare system is quite good.
“We don't produce enough doctors or nurses or healthcare professionals, but they do get paid quite well. We need more to prepare for the ageing population in the near future. And if we want to tap into medical tourism, then we have to focus on upskilling our workforce. ”
The second casualty of Covid-19 has been the automotive industry. It’s sputtering at the moment but this is a global phenomenon, not just in Thailand, according to the Chief Economist. Along with job losses, he predicts that car production will halve this year with only one million cars being produced. Additionally, car exports are down by 60 per cent and car sales have reduced by 50 per cent – and up to 70 per cent in some areas. “Overall, it’s a bloodbath for the car industry,” he says bluntly.
With incomes low and investment in tourism and industry impacted as well, Burin anticipates consumption will be down along with exports. However, this will not lead to another round of capital expenditure. On the positive side, Thai firms have enough capital and the banking system is quite robust, so access to finance, especially for large infrastructure projects, will not be a problem. Additionally, Thailand’s credit rating is good, so at the end of the day the issue is the willingness to move forward.
Working from home is well established but the general public is reluctant to move back to public transport, preferring to add to the famous Bangkok traffic jams by taking to their cars even more. A stimulus package of around 5,000 baht to those whose jobs were affected by coronavirus has been helpful, particularly in the hospitality sector, and now most areas of everyday life are back to normal. The two-month curfew proved successful and confidence is returning as all Thais wear face masks and feel much safer going about their daily business.
Despite the obstacles, there are several fields where the UK can assist Thailand in restructuring its economy. For Burin, there are three main areas: training, education and immigration. Discussions with Japanese investors have highlighted the lack of proficiency in English in the Thai professional classes, restricting access to training courses and research methods. Additional areas for improvement lie in technical skills and white-collar management skills, both of which can be achieved through greater English proficiency. And while the Thai elite has been keen to educate its youth abroad, the current situation makes it less likely that students will travel, opening up opportunities for online learning courses with realistic fees to make them more accessible to everyone.
Accreditation is another important area linked to remote-learning opportunities, particularly in healthcare. “If people are learning online they will need to have something to show for it, especially if they are not immersing themselves in the UK culture which is so important for the corporate workplace these days,” he says. “A good degree from an English university is still a passport for success. Thailand has a good relationship with Oxford University and many people prefer a UK education to a US one.
“Additionally, we could very much benefit from critical thinking skills which are not taught generally in Thailand. Here we tend to learn by rote, and critical thinking gives confidence in many areas and is applicable to the corporate world in particular. Without it, Thais cannot reach their full potential. ”
He also considers coding to be a necessary skill for digital start-ups in the country. Such skills align with the ambitious plans for the Eastern Economic Corridor, a region in the south-east designated for investment in infrastructure such as high-speed rail, an airport city and deep-sea ports. Other target industries include research and development opportunities, digital, automation and robotics industries, medical tourism and healthcare potential, next-generation automotive industries, biofuels and biotechnology, and agriculture.
Currently, farming in Thailand still revolves around traditional methods handed down from generation to generation, but Burin is confident that methods can improve with UK help. “We need to improve the living conditions of farmers by moving them into value-added products such as avocados. In particular, switching to organic farming could open up new markets for farmers as well as contributing to sustainability by eliminating the vast amounts of pesticides the farmers traditionally use,” he says.
Water management is another key area that requires assistance, particularly as Thailand is suffering from its most severe drought for 50 years.
The emergence of the ASEAN region
The rising importance of the ASEAN region is linked intrinsically to the rapid emergence of China as a global player. “Everyone is looking at regionalisation going forward and the ASEAN countries complement each other with their skills and resources,” he says. “While we have an ageing population with high household debt – the middle-income trap – many countries have a young and growing population with rising incomes so we can capture the dynamism of the middle class. Indonesia, for example, has huge natural resources and a growing population – for this reason, Bangkok Bank has made an acquisition of a local bank in the region as we see plenty of opportunities there. ”
Burin is also hoping to encourage the Thai government to cut the top rate of income tax from 35 per cent to 20 per cent to encourage the ex-pat businessmen who have been so successful in the Gulf region. “We would like to encourage foreign talent and we want people to come here. We can grow as a region now that globalisation has likely peaked. ”
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