Pete 
FOREIGN INVESTMENT
Thailand in danger of losing out to neighbours
http://www.bangkokpost.com/business/eco ... neighbours
Published: 22/07/2011 at 12:00 AM
Newspaper section: Business Bangkok Post
Critical reforms in strategic sectors and education are needed for Thailand to maintain competitiveness against other regional economies, as the new government's policies threaten to make the country less attractive to foreign investors, say business leaders.
Nandor von der Luehe, chairman of the Joint Foreign Chambers of Commerce in Thailand (JFCCT), said Thailand is slipping regionally in sectors other than manufacturing and tourism.
Thailand has not taken steps to boost its capacity and capabilities in strategic sectors to capitalise on regional economic integration when the Asean Economic Community (AEC) starts in 2015, he said.
"Relevant agreements under the AEC framework targeted allowing 51% foreign equity in all service sectors by the end of 2010, but there appears to have been little progress as far as Thailand is concerned," Mr von der Luehe.
"We see competing economies moving ahead of Thailand and thus attracting capital and skills in important sectors."
Mr von der Luehe pointed to Malaysia, saying it had moved very quickly in opening up its service sector.
Thailand slipped from 16th place to 19th out of 183 countries surveyed for the World Bank's "Ease of Doing Business" report, but to start a business, it ranks a very poor 95th, he said.
Hiking the daily minimum wage to 300 baht as promised by the Pheu Thai Party, which won a majority in the July 3 general election, will make Thailand less attractive to labour-intensive firms.
Increasing the minimum wage to 300 baht would be acceptable if the government ensured productivity was raised too, said Mr van der Luehe.
"Otherwise, we'll have to pay more and see costs increase without getting anything in return," he added.
Mathew Verghis, the World Bank's lead economist, said Pheu Thai's proposed corporate income tax cut to 23% from 30% is unrelated to the wage hike.
Thailand needs to open up its service sector, which would largely involve amending the Foreign Business Act, and reform its education system to keep pace with regional competition, he said.
Prasarn Trairatvorakul, governor of the Bank of Thailand, said 2011 will be a year of normalisation for the Thai economy in several regards.
"Moving ahead amid tough global competition will mean looking beyond what is merely normal," he said.
The new government is facing three fundamental challenges _ balancing public consumption and investment, instituting monetary and fiscal discipline, and ensuring political stability.
"Thailand needs to upgrade its infrastructure in terms of logistics, irrigation and education," said Mr Prasarn.
"But implementing such policies should be gradual, with specific targets to ensure effectiveness and minimise inflationary pressure, with the private sector given sufficient time to adjust. Raising government spending could endanger the fiscal budget in the long run."
Dr Prasarn said there was no definite answer yet as to when the central bank will end its upward interest rate cycle.
"The present policy interest rate [3.25%] is nearly at a normal level. We will normalise it this year," he said.
Payungsak Chartsutipol, chairman of the Federation of Thai Industries, said that as both Thai and foreign firms were likely to invest more with the advent of AEC, the government must find new industrial sites besides Map Ta Phut.
However, the Dawei development project in Burma will take a long time to materialise, given the internal politics in that country, he said.
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