Top Stories : Remarks by the Deputy Prime Minister M.R. Pridiyathorn Devakula on “The New Imperatives of Thailand’s Economic Policies” during World Economic Forum Annual Meeting 2015 News

Top Stories : Remarks by the Deputy Prime Minister M.R. Pridiyathorn Devakula on “The New Imperatives of Thailand’s Economic Policies” during World Economic Forum Annual Meeting 2015

Remarks by M.R. Pridiyathorn Devakula on

“The New Imperatives of Thailands Economic Policies”

World Economic Forum Annual Meeting 2015

23 January 2015

 

 

Distinguished guests,

Ladies and Gentlemen,

Good Evening

 

First of all, I am pleased to inform you that Dr. Naronchai Akrasanee, Minister of Energy and Khun Petipong Pungbun Na Ayudhya, Minister of Agriculture and Cooperatives are also joining us tonight.

 

Ladies and Gentlemen,

 

247 days ago, there was a big political change that took place in Thailand and everyone who was watching us from the outside had a grave concern.  But to most Thais, we saw –and continue to see –hope and potentials. Our country was at a deadlock and, after at least six months of protests, there were mounting fears of violence.  Our economy was really slowing down and recorded a negative growth of -0.5% in the first quarter of 2014.  Spending was weak, investment down, trade and tourism shrinking.

 

The immediate task of this government back then was to restore peace and confidence and, since day one, we have been working on several fronts to put things in order and carry out much needed national reforms that have long been overdue. This, of course, is indeed a great responsibility, given the fact that we intend to keep our promise to stay in power for only a limited time.

One question that I have often been asked is how much we can realistically create key and strategic economic transformations in Thailand within this limited time that we have.

My answer is simple: we will see Thailand that is shifting to its next gear towards a much more sustainable growth with broadly shared prosperity.  We will see a complete picture and substantial progress for our infrastructure development plan.  And we will also see Thailand that is more efficient, and more competitive.  Let me share with you how.

As the chief of Thailand’s economic team, I know that this is not the time to run our economy as if it is business-as-usual given the needs for many significant economic reforms in our country.  The only sensible choice for Thailand is to shift to a multi-gear strategy for stable economic growth. While Dr. Narongchai has been busy restructuring the prices of fuel and while Khun Petipong has been putting things in order in the Agricultural sector, I have put effort to lay a new foundation that provides more opportunities in Thailand.  And before you think that what I am telling you is impossible to achieve in the limited period of time, please allow me to highlight only 4 key elements of what the current Thai government has been doing since we came in September.

First, we have already begun implementing our New Investment Promotion Strategies, starting from 1st January this year until the year 2012, and these are investment strategies that are much more in line with our national development priorities. 

What achievement we want through these New Investment Promotion Strategy.  First, we want to increase our competitiveness in the world market.

Thailand, as you know has successfully industralised during the past 53 years.  We started from labour-intensive industries producing simple downstream product such as electrical appliances, textile, garment etc. and later on, with the finding of natural gas resource venturing into more capital-intensive industries, from upstream petrochemical to mainstream and a variety of downstream products. We have also gradually upgraded our technology on existing plants and the premium service industry.  But with the higher cost and shortage of labor, some of our industries have become less competitive especially against the competitors in the emerging economies in ASEAN who have followed the same pattern of industrialization as ours.

Therefore, the only way we can maintain a healthy and sustainable economic growth, I believe, is to make a necessary shift to move up the value chain in our economy in order to better compete in world markets.  More specifically, Thailand is now in the process of further upgrading our industrial base and turning, instead, to promoting industries that compete based on high and clean technologies, innovation, efficiency, and creativity.  And we are already moving into this direction with a specific plan of actions.

For example, Thailand’s plastics industry, has an ambitious –but I believe achievable, goal; that is, to become one of the global hubs for the emerging bioplastics industry.  We have already been successful in capturing some of the most sizable worldwide biopolymer investment which will then enable us to link our large agricultural base with our plastics industry in order to become a highly competitive centre for making plant-based plastics.  These new investment incentives will help us to achieve just that. 

With Thailand being Southeast Asia’s largest plastics processing industry, comprising 4,000 companies, clearly you will agree that this move is a significant step in the right direction.  Bioplastics can also help us achieve one of our social goals of reducing income inequality as it will give our farmers more valuable end markets to sell their crops.  What I am sharing with you now is not just ideas and visions but we already have our implementation program in place.  We are already looking at investments, infrastructure, and cutting-edged research and development.  This is one of the examples of many new lines of advanced industries which we have added in the new list of promotion.

As for the existing industries which we have been known to be championsuch as Automobile, Food, and Petrochemical, we will put effort to maintain the champion status by introducing more advanced lines of product.  We will move up from eco car to hybrid car and electric car and from normal grade to specialty grade for petrochemical.

As for many consumer products industries that we used to be champion in the past and started losing competitiveness because of high labor cost, in our new strategy, we will encourage Thai entrepreneurs to further expand their production bases abroad in ways that will help to maintain the competitiveness of their brands.  Today, we already have several Thai companies who can produce more products in a range of qualities and prices to serve a variety of markets around the world.  For example, from its plant in Thailand, the Siam Cement Group can produce high-quality ceramic tiles for high-end markets in Europe and the U.S. while producing lower-quality ones for mass market at a lower price. This is also true for other products such as melamine ware and jewelry, just to name a few examples.  We have also approved a new tax package that will promote this expansion of production bases.  This tax package will be further elaborated in the second key element.

 

Ladies and Gentlemen,

Let me now move on to the second key element which I believe will open a new area of economic activities for the Thai Economy.

Recently, in December, we approved the new package to attract more companies to establish International Headquarters and International Trading Companies in Thailand.  In this package, we will NOT collect income tax from dividend and capital gain from investing in overseas subsidiaries; we will NOT charge any tax on income received from providing services to subsidiaries such as training services, treasury management services, and procurement services.  Also we will NOT charge any tax on the profit from trading of products purchased from foreign sources and sold to foreign destinations.

Thai companies that expand production base overseas could now enjoy these tax privilege and they can now trade their products in various overseas production bases from their headquarters in Thailand without any tax burden.  Foreign companies that have production units in Thailand as well as in our neighboring countries, could set up a regional headquarter in Thailand and enjoy such tax benefit as international headquarter.  Foreign trading companies without production units could also apply for the International Trading Companies privilege and could do the out-out trading business from the trading base in Thailand without paying tax.  To make it more attractive, the personal income tax on expatriate staff of the International Headquarters and Trading Companies is now reduced to 15%, half of the normal rate.

We hope that such International Headquarters (IHQs) and International Trading Companies (ITCs) will help turn Thailand into a global trading hub in a very near future.  We also hope that this new measure will contribute to even higher growth in our service sector and intra-ASEAN trade as well as trade between ASEAN and other countries outside the region.   

The third key element of our economic policies is to put in place the necessary infrastructure development that will help to better connect our businesses and people, not just in Thailand but also across ASEAN.  I am sure you have all heard of how Thailand, together with other ASEAN member countries, have been working on promoting seamless connectivity between our countries but let me tell you more about our current efforts to turn Thailand into a “Digital  Economy”.

Currently, our government is planning to work with the private sector to develop hard infrastructure, such as a national broadband network, a spectrum to provide 4G wireless broadband services, the establishment of a national government data center and increasing the number of international internet gateway facilities. At the same time, soft infrastructure, mainly necessary laws and regulations related to cyber security, e-commerce and paperless public services, will also be developed to enhance the private sector’s confidence in terms of online-trade and any potential legal disputes.

By the end of next year, we want internet access to reach every single village in the first phrase and to reach every household a year after that.  With such network, a more effective use of ICT for economic and social development across Thailand will result in greater productivity and more equity in terms of opportunities.  Venture Capital will be available to support young Thai talents in promoting their productions of digital content.  Many platforms will be provided to develop software talents including embedded software.  Many many things are being planned.  We are simply waiting for the National Assembly to pass the law which will empower us to start our plan.

Last but not least, the fourth element of our economic strategies is to do with launching new industries that will better utilise existing natural resources in Thailand.  For instance, Thailand has huge deposits of potash ore, estimated at 400 billion tones, which have yet to be commercially exploited.  Therefore, this government has already begun to support potash mining, using the most advanced and clean potash mining technology.   The first potash mining concession is about to be granted within next month, followed by the second one in June.  More exploratory licenses were recently issued.

Another natural resource which is not yet fully utilized for producing downstream products is rubber.  We are producing about 4 million tons of rubber, the biggest in the world.  But we are using only 550,000 tons for producing rubber products in Thailand.  We therefore determine to attract producers of more rubber products.  Instead of waiting for the investor to visit us, we have approached the potential investor in China to set up production plants for Automobile tires and eight plants have agreed to invest in Thailand.  We will look further for other natural resources, that could be developed as additional industrial base.

In conclusion, I would like to reassure you all the Thai economy is not just back on the right track but now is a very exciting time to take part in many of the key developments that are taking place in Thailand.  Of course, you may continue to ask all the questions you need about democracy, political reconciliation, and so on, but one thing is clear: Thailand is shifting into the next gear and sustainable economic growth is undeniably key to our social and political stability.  And whoever comes in as the next Thai government leader will not have to start from scratch because every economic policy this government is implementing right now is in the interest of our long-term economic development.  You are seeing a number of important economic reforms that are being put in place because everyone agrees that Thailand needs but the past governments have never had the ability to think long-term and deliver.  Yes, the Thai economy has long been known for its resilience but it is our duty to do much more.  Our country simply cannot move forward in a much more sustainable manner without these crucial economic fundamentals.

I therefore invite you to be a part of our country’s exciting developments and to also venture into this promising region of the ASEAN Economic Community in which Thailand will be a key player.

Last but not least, I would like to thank Mr. Aloke Lohia of Indorama and Khun Chartsiri Sophonpanich for arranging the dinner  get together and allow me an opportunity to talk to you.  During Dinner,

Dr. Narongchai can tell you more about his previous action and future plan to make Thailand more energy efficient.  And Khun Petipong can tell you about his ambitious plan to reform the rice production and rubber production to provide higher income for famers which will be implemented this year.

 

Ladies and Gentlemen,

 

Thank you for your patience and please enjoy your dinner.

 

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