ThailandThailandin the New Global Landscapein the New Global Landscape

SSuvit uvit MMaesinceeaesinceeSasin Institute for Global Affairs (SIGA)Sasin Institute for Global Affairs (SIGA)

• Thailand Thailand from the Outside-In Perspectivefrom the Outside-In Perspective

• Thailand Thailand from the Inside-Out Perspectivefrom the Inside-Out Perspective

During this decade

We are facing with perpetual crises

GlobalEconomic

Crisis

GlobalFinancialTurmoil

CommodityPrice

Bubble

RealEstateBubble

DotComBurst

AsianFinancial

Crisis

European European Sovereign Sovereign Debt CrisisDebt Crisis

For much of the next decade after the economic crisis, we can reasonably expect to see

• Weak global growth

• Pressure from overcapacity

• Persistently high unemployment

• Volatility in the financial markets

• Costlier capital

• A great expanded role for governments

• A much larger burden of regulation and taxation for all

Post crisis Trade-Related Scenario

• The rising tide of economic nationalism temps nations to look inward-driven more by self interest rather than by the outward- looking aspirations of collective interest that shape a deeper commitment to globalization

• A tough business cycle exacerbated by sharply rising unemployment and a muted recovery, could well reinforce the tendencies of the localization alternative

• An era of heightened trade friction, increased protectionism

Change in Geo-Climatics

Change in Geo-Economics

Change in Geo-Politics

Change in Geo-Demographics

Global Structural Change

The New World Economic Structure

Global GDP* %

1820 70 1913 50 73 2005

Developing CountriesDeveloping Countries

Developed CountriesDeveloped Countries

25

50

75

The Rise of the RestThe Triad

The Rest of the World The Rise of Asia

China/IndiaThe Rest of Asia

World Economic Structure

Change in Geo-Economics…

• In 1980, the seven largest economies in the world in USD terms were all developed economies

• That list now includes all of the BRICs

Spending power has already been shifting away from the richest countries towards a growing middle income bloc

By 2050 China and India will together account for nearly 50% of global GDP--about the same as the G7’s current share, which is expected to decline to 25%

The Asian Century

China in the Global Landscape

South Africa

IBSA

Brasil

ChinaIndia

Russia

IndonesiaJapanSouth Korea

BruneiCambodiaLaosMalaysiaMyanmarPhilippinesSingaporeThailandVietnam

ASEAN +3

KazakhstanKyrgyzstanTajikistanUzbekistan

ShanghaiCo-operationOrganization

G20

ArgentinaAustraliaBritainCanadaFranceEuropean UnionGermanyItalyMexicoTurkeySaudi ArabiaUSA

BASICs

ASEAN

ASEAN + 3

ASEAN + 6

585 Mil (9% World Population)

2,068 Mil (31% World Population)

3,284 mil (50% World Population)

The New USA

12,250 bil US$ (22% World GDP)

1,275 bil US$ (2 % World GDP)

9,901 bil US$ (18 % World GDP)

American Ideology

• Capitalism is better than Socialism

Retrospectively, the 20th century was dominated by the American ideologies

• Democracy is better than Dictatorship

• Western culture is better than all the rest

American Democracy

American Capitalism

American Culture

Americanization

Change in Geo-Politics…

Political Landscape Non-democratic state e.g., China has had the greatest success meeting the basic human needs of its people and pulling them out of poverty

Economic Landscape Capitalism is now split into distinctive and competing forms, with government owning and directing large parts of the economy in some of the most critical sectors

Modernization did not bring homogenization; culture and identity are powerful enduring forces between and within societies

By hosting the Olympic Games, China, for example, has symbolically and emotionally reclaimed its historic centrality and its international legitimacy

Cultural Landscape

Challenges facing Americanization

Multipolarity

Nonpolarity

State Actors

Non-State Actors

Territorializationof Politics

Nation-State

De-territorializationof Politics

Global Civil Society

Globalization from Above VS. Globalization from Below

Hyper-conflict

Totalitarian regimes slaughter one another to establish supremacy without acknowledging any law of war or even any arbitrators

Terrorists

Corsairs

Private Armies

Pirates Mercenaries

From a “World of Enemies” to a “World of Threats & Risks”

Security

Freedom & Equality Human

Security

National Security

Management of uncertainty, risk & insecurity

Construction & maintenance of social & political order

Precaution

Laissez-faire

In the age of perpetual uncertainty, fear determines the attitude towards life

Four Southeast Asian countries are likely to face more severe consequences than the global average due to limited adaptive capabilities

Change in Geo-Climatics…

CopenhagenCopenhagen Accord

Numerical targets of emission reductions

Sectoral Approach for Heavy Emitters - e.g. Steel, Cement, Electricity , Paper pulp …(possibly including agriculture sector)

Carbon Off-shoring

Carbon Leakage

Linkage to trade measures

Emission Trading

Carbon Credits

Nationally Appropriate Mitigation Actions

(NAMAs)

Adaptation

Finance

Technology

REDD+

Mexico AccordMexico Accord

A handful of mutually agreed concepts are noted in the “Copenhagen Accord”, yet loads of contentious issues with diverting views on details remain

•Reduction of GHG Emission by both developed & developing countries;

•Low Carbon Development Pathway;

•Reduction of emissions through deforestation and degradation (REDD+);

•Copenhagen Green Climate Fund & Technology Transfer.

Climate-Related Multilateral Arrangement

Global Forces & Trends Towards Low Carbon Society

• Environmentally Awareness / Go Green

• Health Concern

Citizens

Change in Consumers’ Preferences - “Eco-buying”

• Korea To become the World 7th Green Power by 2010 and 5th by 2050• Japan Carbon Minimization in All Sectors

Toward a Simpler Life Style that Realize Richer Quality of LifeCoexistence with Nature

• US, UK, China, India etc.

Government

• Green Growth as a new economic growth engine

• Stricter rules on “less green” imports & provision of adaptation support to maintain competitive edge of domestic industries.

Carbon Leakage/Off-shoring to Developing Countries??

Examples

• Improvement of energy

efficiency to reduce costs

• Voluntary emission reduction

for “green” image

• Low Carbon, Technology-

driven

Business

Manufacturing Services

Source: DB Research

Double Winners

Double Losers

Beneficiaries from Climate Change under Government Control

FoodIndustry

Tourism

Auto-motive

Chemical Industry

Textile & Clothing

Building Materials, Paper IndustryMetal Industry

Energy Sector (Fossil Fuels)

Renewable Energies

Mechanical& ElectricalEngineering

Finance Agriculture & Forestry

Construction& Associated Sector

Transportation

Regulatory Market

EconomyCondition

(+)

(-)

Environmental Climate Dimension (+)

(-)

Beneficiaries from Government Measures with Climate Risks

CC is affecting or will affect a wide range of industry sectors, some more than others

Are Thai’s Companies still fitting in ?

Green Green Green GreenThai’s

Companies ??

?

Global Supply Chain

DevelopedCountries

DevelopingCountries

AgingSociety

Dynamic Young Society

Towards the Century of Geo-Demographical ImbalanceChange in Geo-Demographics…

DevelopedCountries

DevelopingCountries

AgingSociety

Dynamic Young Society

A First World of the aging industrialized nations

North America, Europe, and Asia’s North America, Europe, and Asia’s Pacific Rim (Including Japan, Pacific Rim (Including Japan, Singapore, South Korea, and Taiwan, Singapore, South Korea, and Taiwan, as well as China (after 2030)as well as China (after 2030)

DevelopedCountries

DevelopingCountries

AgingSociety

Dynamic Young Society

A Second World of fast growing & economically dynamic countries with a healthy mix of young and old inhabitants

Brazil, Iran, Mexico, Thailand, Turkey, and Vietnam, as well as China (until 2030)

Demographic Challenges & Issues Facing Thailand

Potential supportive ratio

7

6

5

4

3

2

1

0

2000 2020 2050Source: Kua Wongboonsin

Shortage of LaborEconomic

Socioeconomic Lower potential supportive ratio

Sociological 1:2:4

DevelopedCountries

DevelopingCountries

AgingSociety

Dynamic Young Society

A Third World of fast growing, young, and increasingly urbanized countries with poorer economies and oftenweak governments

The rest of the world

Three Great Waves of Outsourcing

Foods & Agriculture

Resource War--The world will demand 70 percent more food by 2050, outstripping population growth

The First Wave

The Second Wave

The Third Wave

Manufacturing Services

Change in Geo-Climatics

Change in Geo-Economics

Change in Geo-Politics

Change in Geo-Demographics

Global Structural Changes

• The Third Wave of Outsourcing

• Geo-Demographic Imbalance

• Asian Century

• The New Global Middle Class

• The Impact from Climate Change

• The World at Risk

• The Age of Philanthro-Capitalism

E) The Third Wave of Outsourcing

B) Geo-Demographic Imbalance

A) Asian Century

C) The New Global Middle Class

D) The Impact from Climate Change

F) The World at Risk

G) The Age of Philanthro-Capitalism

A1) Internal Consumption A2) Regional Logistics A3) Increase Pan-Regional Integration A4) Similar Culture/Easy Market Access A5) Internationalization A6) Strong Competitors in world marketA7) Strong Trade Bloc

B1) Halal Food / Kosher / Hispanic B2) Long Stay B3) Senior Tourism B4) Brain Drain B5) Service Trade (Medical,Education) B6) Imported Labour

C1) Increase in Commodities Prices C2) Demand for High Protein Content Food C3) Demand for Health Food/Health Products C4) Tourism Industry Opportunity C5) Service Trade (Healthcare/Education)

D1) Food & Fuel Security0 D2) Carbon Footprint D3) NTBs D4) Green Products D5) Waste Management D6) Higher cost of imported products

E1) Global Land Grab E2) Technology Transfer

F1) Security/ Terrorist F2) Higher cost of imported products F3) Insurance Service & Security Service Opportunity

G1) CSR G2) Higher cost of imported products G3) Service Trade (certify body)

H

M

L

HML

C3

A1

A3

A2

A4

A5

A6

A7

B1

B5

B2

B3

B4

C1

C2

C4

C5

D1

D5

D2

D3

D4

E1

E2

F1

F2

F3

D6

G3

G2

G3

Impact

Pro

bab

iliti

es

Opportunities & Threats Matrix

Source: Dept. Export Promotion, MOC

Can Thailand accommodate global risks and opportunities?

Change in Geo-Climatics

Change in Geo-Economics

Change in Geo-Politics

Change in Geo-Demographics

• Thailand Thailand from the Outside-In Perspectivefrom the Outside-In Perspective

• Thailand Thailand from the Inside-Out Perspectivefrom the Inside-Out Perspective

Revisit the Asian Financial Crisis 1997

RealSector

PublicSectorFinancial

Sector

PeopleSectorAttacked by

Hedging FundsUnemployment

Social Unrest

Political Instability

Bankruptcy

Credit Crunch

Collapse ofFinancial Institutions

Capital Outflow

Gap II

Gap I

High PerformanceEconomy

EconomicRestructuring

A Nation in Crisis

Closing Strategic Gaps--1997

Economic Recovery

The Current Compounding Crisis

PrivateSector

PeopleSector

PoliticalTurmoil

EconomicVulnerability

SocialFragmentation Climate

Change

Pandemic

Global Economic

Crisis

PublicSector

Gap II

Gap I

High PerformanceEconomy

Competitiveness

A Nation in Crisis

Closing Strategic Gaps: 2010

Cohesiveness

Current Political Battlefield

SocialConflict

Political Conflict

Economic Conflict

UltimateReality

PerceivedReality

Bias

Distortion

A huge gap between ultimate & perceived realityCohesiveness…

Bias

DistortedUndistorted

Unbias

DangerousZone

ReconsiderVs.

Ignore

FramedVs.

Ignore

Dangerous Zone

• No mutual trust• No mutual respect• No shared value• No collaboration

• Hyper-conflict• Instability• Insecurity

Cohesiveness…

Post-May 19, 2010Scenario

War against Terrorism

Pre- May 19, 2010

Last Decades

ThisDecade

War against Poverty

War against Communism

Future ScenarioCohesiveness…

Thailand’s Overall Competitive Position

First Sphere

Second SphereSecond Sphere

Third SphereThird Sphere

PoliticalDisorder

Mature/Stable Liberal Democracy

Mature/Stable Market Economy

Stagnant/ChaoticEconomy

•ThailandThailand

• Singapore

• South Korea

• Vietnam

• Dubai

Source: Tanaka Akihiko

Competitiveness…

Overall Thai Industry’s Competitive Position

Lea

der

s

Tec

hn

olo

gy

and

Des

ign

Fo

llow

ers

Low Cost

Competitive Advantage

Differentiation

Italy (2)

China (1)

Thailand (11)

Design/ Differentiationbased competition

Low cost-based competition

Hong Kong (3)

Apparel

Apparel Competitive Nutcracker

Competitiveness…

The Current Compounding Crisis

Current Development PositionCurrent Development Position

So

cial

Dev

elo

pm

ent

Economic Development

Developmental Imbalance

Ideal Position

ActualPosition

InitialPosition

(+)

(-)

(+)(-)

From the year 1946 to 2009

• Population increased 3.7 times (From 17mil to 63mil)

• GDP increased 32 times (From 0.133bil to 4.2bil)

• Income/capita increased 10 times (From 6,600 Bahts to 64,500 Bahts)

• People under poverty line (From 24mil in 1986 to 5 mil in 2007)

Economic Success

Vulnerable Social Capital

• One in every ten children are born from the adolescent parent

• High divorcing rate of 1 in every 4 new spouses

• One fourth of the elementary school students does not live with their parents

• 39 % are families which are violent to their children

• 62% are families with alcoholic parents

• 46% are families with smoking parents

Social Failure

4.8

3.6

2.9

4

3.9

.6

3.6

3.9

.9

3.2

.9

.8

.7

5.3

3.4

.7

4

21.7

22.2

22.5

22.6

23.4

24.8

28.5

28.5

29.9

29.9

32.8

33.1

33.4

34.9

37.8

38.4

44.7

47.2

64.5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Japan

Sweden

Korea

Finland

Norway

Canada

Indonesia

India

USA

Vietnam

Singapore

China

Thailand

Hong Kong

Sri Lanka

Malaysia

South Africa

Bolivia

Namibia

Share of Income (%)Poorest 10 Percentile Richest 10 Percentile

Income Inequality

0

100,000

200,000

300,000

400,000

500,000

600,000

0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000

GPP (Million Baht)

GPP/Capita (Baht) GPP vs Per Capita GPP

Remark: not including BKK

A wide gap of wealth exists among 76 provinces

Turning from Constructive to Destructive Social Structure

Inequality Wealth

Power

Opportunity

Privilege

Corruption

Not Clean & Clear

NotFree & Fair

Not Care

&Share

DestructiveSocial

Structure

Building a Clean & Clear Society

Good

Bad

Anti-corruption Measures

TightLoose

Go

vern

ance

Building a Free & Fair Society

Yes

No

Degree of Freedom

YesNo

Fai

r P

ract

ice

Building a Care & Share Society

Yes

No

Free & Fair Society

YesNo

Cle

an &

Cle

ar S

oci

ety

NaturalInequality

Unacceptable Inequality

ForcedInequality

FeltInequality

Le

vel o

f In

equ

alit

y

Acceptable Inequality Level

Sufficiency Economy

Over

Under

Actual

OverUnder

Per

ceiv

ed

Sufficient

Sufficient

• Parochialism• Nepotism• Cronyism

• Materialism• Consumerism• Hedonism

Economic

SocialPolitical• Authoritarianism• Profitism• Populism

Norms & Value

• Law & Regulation Reform

• Tax Reform

Instrumental Reform

• Land Reform

• Budgeting Reform

.

.

.

.

.

Gap II

Gap I

High PerformanceEconomy

Competitiveness

A Nation in Crisis

Closing Strategic Gaps: 2010

Cohesiveness

1960s: Import Substitution

1970s: Export Promotion

1980s: Foreign Direct Investment

1990s: Trade Liberalization

2001-2007: Dual Track Development

2007- : ??

What’s Next ?

Thailand’s Trade Policy

Market-led Economy

Knowledge based Society

Entrepreneurial Spirit

Regional Integrated

Remove the systemic impediment that currently render Thai enterprises uncompetitive and make Thailand an unattractive place for place for multi-national corporations to do business

Move forward to overcome the shortfall in both managerial and technical knowledge by drawing heavily on the outside world. There is no way back. Thailand must move forward to be knowledge-based.

For Thailand to be adaptable in its AEC strategy, and to re-energize the growth engine in the economy, entrepreneurialism will be crucial.

Thailand ’s greatest opportunities, and greatest competitors, lie within 2000 km. of Bangkok. Thailand needs to become a tightly integrated insider in this region

Globally Connected

Thailand has long history of self reliance, but will fail to realize its potential if it continues to pursue this approach. The country’s real opportunities going forward are to become the best globally connected country in this region

Thailand’s Strategic Intent

Thailand’s Trade & Investment Architecture

Agriculture

Manufacturing

Services & Tourism

Enabling Infrastructure

Trade & Investment Policy

Global Dynamics

Capacity Building

MarketPenetration

Market Facilitation

MarketAccess

ASEAN Economic Community

ResourceResource

Production

Service

• Rubber• Automotives • Tourism and Aviation• Fashion • Food • Education• Logistics/Transportation• Agriculture and Fisheries • Wood • ICT and Healthcare • Electronics • Financial Services• Energy• Construction

Singapore

Thailand/ Malaysia/ Indonesia/ Philippines/Vietnam

BruneiCambodiaLaosMyanmar

AEC-Thailand Trade Structure

AEC

Matured Countries

Advanced Countries

Emerging Countries

• African Countries• Middle East

• The US/Canada• Western Europe• Japan/South Korea

• China/India• Russia• Argentina/ Brazil/ Chile• Mexico• South Africa

Using AEC as a stepping stone to enhance Thailand competitiveness in the global markets

Thailand

Aviation/Education/Healthcare

Cultural Tourism

Automotives

Rubber/Leisure Tourism

Textile

Jewelry: THA,MYN,CAM

Land Transportation: THA,MYN,LAOS,CAM,VIET,MAL,SING

Food & Restaurant: THA

Regional Hub

Global Reaches, Local Links

Cluster Cluster of Provinceof Province

ProvinceProvinceVillageVillage GlobalGlobalRegionalRegional

Social Cohesion

International Competitiveness

Efficiency Cost effective Productivity Innovation

Sufficiency Community Building Cultural Identity Family Value

SocialWell-Being

Economic Wealth

Human Wisdom

Environmental Wellness

Rebuilding Thailand

GreenSociety

Value Creation Economy

DemocraticCulture

WelfareWelfareStateState

The New Nation Architecture

• Entrepreneurial Society• Innovation Driven• Pro-competitive Eco-structure• Local Linked, Global Connected

• Low Carbon Economy• Climate Resilient Society• Green Growth Industry

• Open Society• Rule of Law• Plurality• Civility

• Social Assistance• Social Safety Net• Social Insurance

Challenges facing our nation

Wil

lin

gn

ess

to C

han

ge

Yes

No

Ability to Change

YesNo

Know When to Change

Know Howto Change

Know Whyto Change

Know What to Change

Ability to Change

Leadership in the New Global Landscape

Hard Power

Soft Power

• Assertive• Competition• Authoritarian• Focuses on commanding the behavior of others

• Collaborative• Participative• Integrative• Aims to co-opting the behavior of followers

Mandate for Change

Abilityto Change

MandateFor Change

Willingnessto Change

Leadership

Every morning in Africa, a gazelle wakes up.It knows it must run faster than the fastest lion or it will be killed.

Every morning a lion wakes up.It knows it must outrun the slowest gazelle or it will starve to death.

It does not matter whether you are a lion or a gazelle.

When the sun comes up, you better start running.

African Proverb

“If You want to go quickly, go alone;

if you want to go far, go together.”

African Proverb

“It is not the strongest of the species that survive,

nor the most intelligent,

but the one most responsive to change.”

Charles Darwin