Opening Keynote Address by
His Excellency Thaksin Shinawatra
Prime Minister of Thailand
at the 15th Asian Corporate Conference
June 8, 2005
I would like to extend my warmest welcome to all the distinguished participants of the 15th Asian Corporate Conference. I also wish to thank the Asia Society for co-organizing this event in Thailand for the first time. The Asia Society has long served as a bridge of understanding between America and Asia. With Asia’s fortunes once again on the rise, this Corporate Conference is playing an important role in helping business to identify the opportunities and challenges in this fast-growing region.
When I saw the theme “Southeast Asia Rising,” I was reminded of the mood over a decade ago. Back then, the Asian Century seemed to be just around the corner. Optimism was in the air, and it seemed as if Asia could do no wrong.
Then came the 1997 currency crisis, sweeping like a tornado through the region and leaving the Asian miracle in tatters. The question on everyone’s mind changed from “Will Asia’s growth never end?” to “Will Asia ever bounce back?”
The answer to both questions came quickly – more quickly, in fact, than anyone expected. We know now that Asia is not some miracle that defies the laws of economics. But because Asia has got back on its feet so rapidly, we also know that Asia’s success was not, and is not, a fluke.
Now that Asia is back in business, I hear people asking whether its economic resurgence is sustainable. To that, I wish to point out that development is a learning process. Because the world is constantly changing, what worked before may not work the next time around. The greatest economies in the world have had their share of setbacks, but that did not stop them from learning from their mistakes and moving on.
That is why I believe Asia’s rise is indeed sustainable. The 1997 crisis was a setback, but it was also a valuable learning experience. Since we all paid an expensive price for this lesson, it is essential that we all learn and benefit from it.
Now that Asia has risen from the ashes, it is poised to take wing once more. The rise of China and India as major economic players is a new development that should be welcomed as an opportunity, not as a threat as some may perceive. As part of this Asian renaissance, and as the natural gateway to both rising powers, Thailand is repositioning itself within the region and the world, not only to take advantage of, but also to give impetus to, the new Asian economic wave. That is what we have been doing and will continue to do under my second term as Prime Minister.
When Thailand became the epicentre for the so-called Asian contagion of 1997, there were doubts whether the country’s economy would ever recover. The damage I set out to repair upon taking office four and a half years ago was therefore not only economic, but psychological as well.
To do that, my government has pursued a dual-track policy giving equal emphasis to strengthening the domestic economy, while maintaining our openness to the global economy. For too long, Thailand had been preoccupied with exports, neglecting our own domestic economic foundations. To correct this imbalance, my government has sought to develop our society’s inner strengths and resilience from the grassroots level on up.
Our OTOP, or “One Tambon, One Product”, scheme has leveraged Thai traditional knowledge, creativity, and skills into a profitable and growing industry. Under this programme, each community is given charge of its own economic potential. The Government plays a supporting role, assisting on supply chain issues, giving advice, networking, and opening up new markets. The benefits of OTOP have not only been economic. Local community leadership and pride have also grown as a result.
We understand that to reduce poverty, we must increase opportunity. That is why we established a revolving fund for villages and urban communities to give the poor better access to capital markets. We have set up an SME Bank to foster Small and Medium Enterprises. A three-year debt suspension programme has been helping small farmers to solve their cash flow problems and acquire new technology.
With these measures in place, confidence returned, and so did economic health. Last year, Thailand’s GDP grew 6.1 percent compared to 2.2 percent four years ago. Exports surged by a record 23 percent last year, compared to minus 7.1 percent four years ago. Over the same period, we have lowered our external debts by nearly 20 billion US dollars, and boosted our international reserves by almost 52 percent, to a record high of 49.8 billion US dollars. Leading credit rating agencies such as Moody’s, Standard & Poor’s, and Fitch Ratings have recognized our solid macro economic performance, and upgraded our ranking twice during the past four years.
Many of you may have noticed that in the latest economic figures just released on Monday, the Thai economy grew at a rate of 3.3 percent in the first quarter of this year. While this is still a very decent figure in many parts of the world, I must admit that it falls somewhat below our target.
In some ways, I wish that this shortfall were caused by factors over which we have some control. However, the record high prices of oil have adversely affected the economic growth of virtually all countries, especially a non-oil-producing, developing country such as Thailand. The Tsunami disaster last December also had a negative impact upon our tourism industry, although things are rapidly returning to normal and tourists have already started to return. In addition, the global economic slowdown has lowered our export growth, while full capacity utilization in Thailand’s industries has led to increased imports of capital goods in line with rising investment.
In any case, this is only the situation for the first quarter of the year and much time still remains. This simply means that the Government will have to work even harder than ever to drive the economy forward. In the end, I am confident that this drop in growth is only temporary and we shall be able to achieve at least 5 percent growth for the year, provided that oil prices do not continue to rise at an alarming rate.
Ladies and Gentlemen,
Encouraging as our economic achievements have been, we never-theless recognize that many more challenges lie ahead. My government’s task now is to consolidate these gains and build for the future. Transforming and re-positioning Thailand will be our mission for the next four years.
Having strengthened the domestic economy from the grassroots up, we now need to ensure that the people’s voice is heard. A country’s most valuable asset is its people. Policy-making, therefore, must be people-centered, both in process and objective.
Besides giving people more say in public affairs, they must be given the skills to survive and thrive in the global knowledge economy. Our approach to education needs a fundamental rethinking. Students and teachers alike must be weaned away from the traditional emphasis on rote learning. The new priority must be learning to think more critically, analytically, and creatively. The goal of education must be to equip our future generations for the constant and quickening change that is now a permanent feature of the world economy. Giving our children the tools to be competitive internationally is essential because that is the direction in which national development strategies will change.
Let me now say a few words on an issue that is of central importance to my government’s economic strategy during our second term, namely, the concept of “value creation”. So far, most developing countries have made commodity exports central to their development strategy. As they move up the development ladder, they add value in the form of manufacturing and assembly, which require low- to semi-skilled labour. And it is not only developing countries that pursue such a model. Certain regions within large, otherwise developed countries may also be dependent on this approach.
Over the long term, however, this model cannot be sustained. Commodities tend to face unfavourable terms of trade. And as the IT industry knows, even initially high value-added products, such as microchips, can become commoditized. Cheap labour is not much of a basis for long-term development, either. Countries that rely on cheap labour tend to get edged out by new, hungrier competitors.
While developing countries may never be able to move away completely from commodities, I believe that they have to make value creation a bigger part of their development strategy.
Value creation goes beyond simply adding value. Developing countries in Southeast Asia and elsewhere may proudly point to high-tech assembly plants where value is added to high-tech products. But at the end of the day, the value of such products comes not from the assembly or the parts, but from intellectual property – the patents, the copyrights, the designs that go into each product. If we are to create value, these are the words in which our present and future generations must become fluent.
For value creation to take place, Southeast Asian countries must first identify their comparative advantages. They must then add intellectual value and skills to create pricing power for their products and services in the world market.
Value creation means that one plus one equals more than two. How much more depends on how highly the market values the ideas that go into the product. For a country such as Thailand, which is rich in artistic and aesthetic traditions, value creation may mean creating distinctive and unique products, developing new brands, and differentiating products based on our unique Thai style. Or it may be based on something else entirely. The important thing is that our people must be given the tools and the freedom to explore, to experiment, and to create. Many will fail, but some will succeed, and a few may succeed spectacularly. That is, after all, what the free market is all about, and that is what makes the free market so compelling.
There is, of course, no fixed economic model or strategy to guarantee sustained growth. Each country comes with different strengths and weaknesses, so a solution that works for one may not work for another. Therefore, what any economic model should aim for is productivity and flexibility, particularly of the workforce, for that is the key to competitive-ness. It should aim for incremental, steady growth, rather than astronomic growth built on flimsy foundations. It must aim for overall sustainability, whether in the social or environmental sense.
I am convinced that value creation represents a new economic model for Thailand and, quite possibly, for Southeast Asia. As its people become more educated and its economies move further up the development ladder, value creation will contribute substantively to GDP growth. The creation and protection of intellectual property will become increasingly important as the value creation model takes hold.
To encourage value creation, education is the first part of the equation, and we are doing everything we can to push ahead educational reform in order to create knowledge workers in every field.
The second part is the creation of an enabling regulatory environ-ment. In this regard, the concept and practice of good governance is of much importance to my government. We are pushing for comprehensive reforms in the financial, corporate, and public sectors in line with good governance practices. At the same time, we have done much to standardize and modernize Thailand’s banking rules and regulations. When all is said and done, we are determined to further improve our corporate and banking sectors to make Thailand one of the most convenient and attractive places to do business.
So far, I have talked about the domestic policies Thailand has been pursuing to adapt to the new economic realities of this new era. On the regional and international fronts, we are developing and creating mutually rewarding partnerships that seek to capitalize on Asia’s great diversity.
ASEAN is the foundation of our regional efforts. Representing the entire Southeast Asian region, ASEAN is a dynamic growth centre and gateway to Asia -- an expanding market with a combined GDP of 700 billion US dollars. Our population of 550 million includes a large, young workforce with growing purchasing power. Despite the decline in global FDI flows, Southeast Asia’s FDI grew by 48 percent to 20.3 billion US dollars in 2003.
With ever closer cooperation and integration, ASEAN is on its way to becoming a single Southeast Asian community by the year 2020, comprising Security, Economic, and Socio-Cultural Communities. The ASEAN Free Trade Area, or AFTA, which is already underway and which will take full effect by the year 2015, is a key part of the integration process.
To facilitate this trend, Thailand is working to bridge the development gap between the older and newer ASEAN member countries. As far as Thailand is concerned, the rise of Asia would mean little if our immediate neighbours are left behind. We are therefore cooperating with our neighbours through various frameworks aimed at promoting sustainable development within the region. The philosophy behind this is the need to reduce existing economic disparities. By closing such gaps, ASEAN would become even stronger, more integrated, and more effective.
While Southeast Asia is our most geographically immediate priority, Thailand is also looking beyond for cooperation opportunities. Asia is where over 60 percent of the world’s population live. Asia’s international foreign reserves make up over 75 percent of the developing world’s combined. We believe that these factors, in addition to Asia’s abundant natural resources, cultural diversity, and ancient wisdom, are sources of strength that can and should be tapped.
I believe the best first step to unlock this potential is through greater cooperation and dialogue. Towards this goal, I initiated the Asia Cooperation Dialogue, or ACD, as the first ever ministerial-level forum to encompass all the various sub-regions of Asia. During the past three years, the ACD has rapidly expanded its membership and scope of cooperation, which now includes energy security, poverty eradication and financial cooperation, among many others.
One of the issues on which the ACD has been particularly active is the development of an Asian bond market. The 1997 crisis taught us the importance of having a regional financial architecture to ensure stability in the face of global volatility and uncertainty. The Asian bond market would serve a dual purpose. It would be another alternative for international and regional investors to put their capital. It would also help channel that capital towards financing Asia’s development needs, thus enabling Asia’s wealth to create greater prosperity in our region rather than elsewhere.
Thailand has joined forces with many Asian countries on this. We have contributed 250 million US dollars to the Second Asian Bond Fund of two billion US dollars. This seed fund is aimed at jump-starting transactions in the local currency bond market. Government incentives include tax exemption to foreign investors who invest in local currency bonds. Also, this would enable the World Bank, IFC, ADB, foreign governments and foreign financial institutions to issue bonds denominated in Asian currencies. I wish to stress that the Asian bond market initiative would complement the IMF’s goal of maintaining global financial stability and help ease some of the demands on the IMF’s resources. In a world where the challenges come in different shapes and sizes, the solutions must be crafted accordingly.
At the international level, we are committed to multilateral solutions in both the economic and political spheres, particularly to seeing the Doha Round of trade negotiations concluded on time. To lock in the benefits of freer trade while the WTO talks continue, we have been pursuing regional and bilateral free trade agreements with key partners, including India, Japan and the United States. Countries with which we already have FTAs in place are China, Australia, New Zealand and Bahrain.
Free trade is a strange creature. It is something that economists overwhelmingly believe in and governments work hard to achieve, because they are convinced it would benefit the economy. But free trade, as part of the broader phenomenon of globalization, also finds fierce resistance from people in both developed and developing countries.
In some developed countries, public alarm is growing over such phenomena as the offshoring of white-collar jobs. But the way to cope with the rise of Asia is not to turn it into a blame game. Globalization is an opportunity to be seized, a challenge to be risen to. Capital will move to where it can be used most efficiently—if not China, if not India, then elsewhere.
Putting a human face on globalization is the duty of us all -- governments and corporations alike. The free flow of trade and capital will always cut both ways. If the imbalance is too great, something will give. As long as governments and corporations perceive the benefits of globalization to outweigh the costs, they must do their best to cushion the impact on the weakest members of society. That is why I have stressed the importance of education and workforce flexibility for economic development.
And it is why I attach so much importance to the role of the corporate sector. The companies represented in this room include some of Asia’s most dynamic. As you look for opportunities in Thailand and Southeast Asia, please bear in mind that these countries are not only fast-growing markets, but also fast-developing societies. Corporations can make valuable contributions to the development of international standards and practices. As responsible corporate citizens, they can help preserve the social fabric and cultural integrity of the communities in which they invest. Corporations can thus be not only engines for economic growth, but indeed for national development.
The rise of Southeast Asia is not a given. But it is a good bet. At no time in history has there been such close cooperation and sustained effort to make Southeast Asia a single market and even a single community. But when you look at Southeast Asia, please do not look only at the leading economies. Southeast Asia as a whole cannot rise as long as its poorer members are still mired in poverty. My government is working with our neighbours to close, or at least narrow, the gaps within ASEAN. This is being done, among other things, through the framework of the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy, or ACMECS. It is a momentous task, involving change on a grand scale, in terms of both time and resources. But it is a task that must be undertaken. I ask you, the corporate citizens, to work with me in accelerating the transformation of this former battlefield into a marketplace, as envisioned a decade and a half ago.
Asia is a region of vast, if not limitless, potential. A cohesive, dynamic and stable Asia would be able to contribute tremendously to global well-being. Southeast Asia, as a centuries-old crossroads of commerce and culture, is well positioned to be at the vanguard of this change. With the right policies, close coordination, and a little bit of luck, we may yet see an Asian Economic Community emerge, with its own well-developed capital, financial, and commodity markets, linked with the rest of the world. What is more, given the increasing people-to-people ties within Asia, there may even emerge an Asian identity, which would lead to Asia becoming a true community.
This is all a dream for now. But if enough people share it with me – and I hope you all do – the dream can become a reality. I hope you will work with me to make it come true, for the sake of our children and grandchildren, who are tomorrow’s global citizens.