Thailand’ s Competitiveness :Thailand’ s Competitiveness : The New Paradigm Under GlobalisationThe New Paradigm Under Globalisation

Office of the National Economic andOffice of the National Economic andSocial Development Board Social Development Board (NESDB)(NESDB)

TDRI Year-end SeminarTDRI Year-end Seminar14-15 December 200214-15 December 2002

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Mechanism for Mechanism for Competitiveness DrivingCompetitiveness Driving

NCCAdvisory Team

Economic Restructuring

Committee

MOF MOLMOACMOC MOI MOE ...

Strategy Setting

Strategy Execution

Reso urce

Alloc ation

Man-age

ment

NESDB : CMU

Visioning

National Committees

3

Globalisation andThailand’s EconomyGlobalisation and

Thailand’s Economy

4

Globalisation and Th ailand’s Economy

0

1000

2000

3000

4000

5000

6000

1997 1998 1999 2000 2001

GDP Export Import

Thailand’s Trade Proportion of GDP (in value term), 2002

Source : NESDB, June 2002

BillionBaht

5

-250000

-200000

-150000

-100000

-50000

0

50000

100000

150000

200000

250000

1997 1998 1999 2000 2001p

Direct Investment Other Loans Portfolio InvestmentSource : Bank of Thailand, November 2002

Thailand’s Investment Flows

Globalisation and Th ailand’s Economy

BillionBaht

6

Conceptual Framework

Conceptual Framework

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Conceptual Framework

Old Paradigm New Paradigm

Export-Oriented

• Higher Export Lower Import

Export

Sustainable Economic Value

Domestic

Balance Local and Global

Value Creation

=

Opportunities

Strategies

Capabilities

X

X

Globalisation/External Factors

Conceptual Framework

Internal Factors

(Competitive-ness Potential)

8

9

Value Creation

=

Opportunities

Strategies

Capabilities

X

X

Opportunities

Global Forces & Trends :Implications to Thailand

Global Forces & Trends :Implications to Thailand

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Change in Change in DemographyDemographyChange in Change in

DemographyDemography

OvercapacityOvercapacityOvercapacityOvercapacity

MoreMoreInterdependenceInterdependence

MoreMoreInterdependenceInterdependence

Knowledge Knowledge DivideDivide

Knowledge Knowledge DivideDivide

Global Forces & Trends• The End of Singl

e Market• Increase SocialBudget• Mobility of Labour• New Product De

velopment

• Global Deflation• Growth with Unemployment

• Incresing Roles of B usinesses & NGOs

• Efficiency Based Government• Power of Informatio

n Occupants• Good Governance

• Increase Formal and Continuing Education• More R&D and Innovation

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Population growth will continue to shift toward developing countries, leaving developed countries

with high aging population proportion

Change in Demography

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13

Over Over CapacityCapacity

Mass Market Mass Market Competitive Competitive

ParadigmParadigmScale Scale Driven Driven

EconomyEconomy

Tragedy Tragedy of the of the

CommonCommon

Over Over InvestmentInvestment

Shortage Shortage of Demandof Demand

Scale,Standardization,

Replication, Efficiency, Hierarchy

Overcapacity

More InterdependenceEthnic diversity are developing tension in several parts of the world. One example is an illicit trafficking network that need

international cooperation among states and non-state actors.

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To leap into knowledge economy, society needs a complete set of information , human capital and technology

Key Enabler• Information

Technology• Human Capital

Data Information Knowledge Social Wisdom

Lacking one will create knowledge divide problems

Example: Lack of IT infrastructure

Example: Lack of adequate education

Example: Lack of free flow of information

Knowledge Divide

Lower Efficiency of

Fiscal & Monetary Policies

Expansion of BKK and Vicinities

Higher CompetitionDecreasing

Prices

Global Trends : Implications to Thailand

Labour Problems• Lack of Knowledge and Skilled Labour

MoreNon-tariff Barriers

Implicationto Thailand

Opportunities for Potential

Product Development

16

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Danger Danger SignsSigns

Lack of Clear Strategy in Geopolitics and

Geo-economics

Stuck in the Competitive Nutcracker

Profitless Growth Trap

Low Responsiveness to the Global

Changes

Few Investment for the Future

Danger Signs

CompetitivenessCapabilities

CompetitivenessCapabilities

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Sources of Capability

PCPC

Physical Physical CapitalCapital

HCHC

HumanHumanCapitalCapital

FCFC

Financial Financial CapitalCapital

SCSC

Social Social CapitalCapital

Value Creation

=

Opportunities

Strategies

Capabilities

X

X

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Thailand’s Competitiveness Ranking

3438

353641

31

1821

30 313330

051015202530354045

1997 1998 1999 2000 2001 2002

IMD

WEF

Source: IMD, World Competitiveness Yearbook, 2002 WEF, The Global Competitiveness Report, 2002

Physical Capital Human Capital

Financial Capital Social Capital

Strengths• Fertile Natural Resorces

Weaknesses• Low access capabilities to tech.• Low R&D expenditure/ investment • Low IT skills

Strengths• Low Dependency Ratio• Good Remuneration of mgt. & service professions• High Rate of Employment

Weaknesses• Low education• Low skilled labour• Low labour productivity• High youth unemployment• Low HRD index

Strengths• Efficiency in tax collection +tax rate• Stabilised capital index• Low cost of capital• Attractive investment policy

Weaknesses• Credit access • No freedom to acquire control in domestic companies

Strengths• Low cost of living• No discrimination• Identity + attractive national culture

Weaknesses• Low efficiency of medical assistance• Too open for globalisation

Source: IMD, 2002 21

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Thailand’ s

Competitiveness Strategy

Thailand’ s Competitiveness

Strategy

23

Value Creation

=

Opportunities

Strategies

Capabilities

X

X

Strategic Strategic PositionPosition

What to do?What to do?

How to do?How to do?

Strategies

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Community-UrbanTrade

Community-GlobalTrade

Between-Community

Trade

Within-CommunitySelf-Sufficiency

SurplusSurplus

SpecializationSpecialization

Dual Track : Global Local Links

Social Cohesion

International Competitiveness Efficiency Cost effective Productivity Innovation

Sufficiency Community Building Cultural Identity Family Value

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High Performance Economy (HPE)

High Performance Economy (HPE)

Desired Strategic Position

Positioning Thailand

Macro Economic Foundation• Fiscal & Monetary Policies• Trade and Investment Policies• International Policies

Generic Factors• Human Resources• S&T • Management• Infrastructure

Knowledge-Based Knowledge-Based EconomyEconomy

Active Active InternationalInternational

PlayerPlayer

Owner of Owner of AdvanceAdvance

TechnologyTechnology

Global Global NichesNiches

Society of Society of Good LivingGood Living

HPEPublic SectorReform

PrivateSectorReform

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• English/Chinerse will be the 2nd language of Thailand• ICT accessibility and literacy• Substantial investment in R&D (Hardware- Software-Peopleware)• Strong sense of lifelong learning• Empowering education and creativity

What to do?

Knowledge-Based Knowledge-Based EconomyEconomy

• Aggressively move towards Asian economic integration

• Leverage Bi-lateral and Muti-lateral Negotiation

• Stimulate and support local business for going global

Active InternationalActive InternationalPlayerPlayer

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• Preserve and leverage Bio-deiversity• Mobilize resources towards advance technology development• Intense collaborative partnership between businesses and education and research institutions

Owner of Advance Owner of Advance TechnologyTechnology

What to do?

• Efficient and impartial law enforcement• Preventive health care focus• Balance the ways of life• Efficient urban mgt. • Empowering local people and institutions• Lean, efficient, and honest bureaucracy

Society of Society of Good LivingGood Living

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What to do?

• Kitchen of the World

• Tourism Capital of Asia

• World Tropical Fashion

• Detroit of Asia

• World Graphic Design Centre

Global NichesGlobal Niches

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Level of Customization

Level of

Sop

his

ticati

on

Hig

h T

ech

Low

Tech

Low Touch

High Touch

Software

Foods

Tourism

Auto industry Fashion

Example Tourism

Tourism

Foods

Foods

Fashion

Fashion

AutoAuto

SoftwareSoftware

Asia TourismCapital

Asia TourismCapital

Kitchen of the World

Kitchen of the World

World Tropical Fashion

World Tropical Fashion

Detroit of Asia

Detroit of Asia

World Graphic Design

Center

World Graphic Design

Center

Potential Global NichesPotential Global Niches

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Issues for Discussion

1. Thailand’s Position - Knowledge-based Economy - Active International Player - Owner of Advance Technology - Global Niches - Society of Good Living

2. Comment on “What to do?”