State firms set to spend more
The government is seeking to double investment by state enterprises to 600 billion baht next year in a fresh attempt to jump-start private investment, a key engine of sustainable economic growth.
The government has also set the ambitious target of state enterprises’ investment budget disbursement reaching 95% in 2017, said Finance Minister Apisak Tantivorawong.
It is necessary for state enterprises to increase their investment efficiency as only half of this year’s targeted investment budget has been taken out so far, he said.
State investment has been the major engine shielding the country from a spate of headwinds as other engines have run out of steam. The government has further resorted to public spending in a bid to ramp up tepid private investment.
According to the National Economic and Social Development Board’s data, Thailand’s total investment expanded at a slower pace of 2.7% for the three months to June from 4.9% in the previous quarter.
Public investment surged 10.4% year-on-year during the April-to-June quarter, down from 13.3% in the previous three months. Private investment growth was still lacklustre, falling to 0.1% year-on-year in the second quarter from 2.1% in the preceding quarter.
“Setting investment budgets for state enterprises must be realistic and requires strong management, as we won’t be scaling back spending,” he said.
Mr Apisak has requested that state enterprises with future investment plans start investing next year to stimulate domestic spending.
He further warned a dearth of investment would blunt the country’s competitiveness.
If private investment gains traction, the country’s gross domestic product growth could rise to 4% from around 3% at the moment, said Mr Apisak.
In an attempt to entice the private sector to invest, the government has offered a number of privileges, including Board of Investment incentives and a doubling of tax deductible expenses for investments — particularly in the 10 targeted industrial clusters aimed at transforming the country into an innovation-based economy.
In another development, the finance minster said he wanted to see efficiency at state enterprises equal that in the private sector.
Efficiency has always been a chief reason behind calls for privatisation in the public sector, though Mr Apisak said public assets would not need to be handed over to the private hands if state firms could boost their efficiency and competitive edge.
He also called each state enterprise to set targets for Key Performance Indicators.
For example, profit maximisation is not a major performance metric for the Bank for Agriculture and Agricultural Cooperatives, but farm equity and the quality of life for agricultural workers are good ways to gauge the bank’s performance.
The 55 state enterprises have combined assets of 13 trillion baht, make an annual profit of around 300 billion and contribute 130 billion to government coffers.