THE shifting of the world’s dominant leader from the US and Europe to China and Asia is among one of the ten key challenges Thailand has to be well prepared to face if it is to survive in the next decade, warned Dr Supachai Panitchapakdi.
China’s economy will overtake the US in 2018, says Forbes. It said in 1970, China contributed 4.1% of the world economic output against 22% by the US. This rose to 15.6% in 2015. In 2025, China’s contribution to the global economy is projected to be 17.2%. Since 1990, China’s percentage of total global output has risen almost every year and by this year (2018) China’s economic contribution is projected to surpass the US.
Dr Supachai, former Director-General of the World Trade Organization (WTO) and former Secretary-General of the UN Conference on Trade and Development (UNCTAD), also stated Thailand should also be prepared for another round of economic crisis arising from the crypto-currency as well as e-commerce bubble.
Other economic and social challenges in the next decade are income inequality of the people in many parts of the world especially in China, the less connectivity among countries as a result of the increasing protectionism policies, the transformation of current economy into digital economy, the UN’s strategic 2030 plan aiming to achieve sustainable growth which means each country has to be cautious in using sufficient economy policy.
Also considering long term threats for the world’s economy are extreme climate changes and natural disasters, geopolitical conflicts including international conflicts and conflicts arising from economic policies, volatility of foreign exchange and the last one being the growing aging society.
For Thailand, he said the Thai economy appears in fairly robust shape, but the seeds of the next financial crisis may be being sown in the property market.
The US economy is improving and the stock market is rising along with Asian stocks, and the Chinese economy is going through an adjustment. Thailand has a strong immunity backed by a sound economy and high foreign reserve while the unemployment rate is lower than 1%. “As a matter of fact, one of the reasons our economy didn’t grow so much during the past two to three years was because our currency was relatively strong.”
What could be problematic in the future is the country’s economic competitiveness. Other Asian countries are quickly catching up and could get ahead of Thailand fairly soon.
Indonesia and India will grow more rapidly in the coming decades, and so will China and the Philippines. Thailand will continue to grow at an annual rate of around 3-4% and that is not a low growth rate in today’s world, but in relative terms it is too low because its peers will each achieve a rate of 5% to 6%.
Where the property market is concerned, he said that a lot of loans have been extended, allowing a lot of property projects to flourish. People in the industry say the market for lower-income residences has faced oversupply by tens of thousands of units, so they are now targeting the higher end of the market where rich Thais and foreign investors are.
“This is a sign we should be careful as rich people from overseas may just stop buying one day, and then non-performing loans may rise to a problematic level and banks will eventually be in trouble.”
Where the digital age is concerned, Dr Supachai is worried about the way that technology giants like Alibaba, Facebook, Google and Apple are doing business, warning that their opaque practices could lead to monopolies in local and global economies.
While the government has been trying to woo e-commerce and other technology companies to invest in the country under the Thailand 4.0 policy, Dr. Supachai was cautious on the benefits that might come from such investments, saying the government should not make too many concessions by allowing them to do everything.
Dr. Supachai earlier last year called for the WTO and UNCTAD to create a code of conduct for the digital technology giants, naming US titans Google, Facebook and Apple alongside Alibaba as companies that, he feared, could potentially control the world economy.
These companies have Big Data that no government can afford to have and they conduct many businesses that have created disruption globally and could become even more disruptive in years to come, he warned.
Top: Dr. Supachai Panitchpakdi addressing an UNCTAD meeting before stepping down as the organization’s secretary-general. Photo: UNCTAD
In-text: The colors of the street in Shanghai. Photo by Matthias Ripp taken with Leica M10 and Summicron 50mm (CC-BY-2.0)
By Kowit Sanandang