Un­lock­ing labour pro­duc­tiv­ity: ICT’s role in Thai­land’s fu­ture econ­omy

Norway-Asia Business Review - - Contents - Text and pho­tos by Eric Baker

Thai­land has en­joyed rel­a­tive suc­cess lib­er­al­is­ing its man­u­fac­tur­ing sec­tor, but to avoid the mid­dle-in­come trap, it needs to move to a ser­vice-ori­ented econ­omy once it out­grows the labour in­ten­sive low cost man­u­fac­tur­ing phase. The ICT sec­tor plays a dual role in the Thai econ­omy: both as a con­trib­u­tor of eco­nomic of growth on its own and as an en­abler of in­no­va­tion for other sec­tors in the econ­omy, al­low­ing a po­ten­tial mul­ti­plier ef­fect in the econ­omy. A re­cent sem­i­nar hosted by the Joint For­eign Cham­bers of Com­merce in Thai­land ( JFCCT) and the Euro­pean-ASEAN Busi­ness Cen­tre (EABC) in Thai­land took a day to ex­am­ine the is­sue through the lens of the in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy (ICT) sec­tor. The ICT sec­tor needs to be sup­ported in Thai­land so that it can un­lock labour pro­duc­tiv­ity in the ser­vice sec­tor, said De­un­den Nikom­bori­rak, the re­search di­rec­tor for eco­nomic gov­er­nance with the Thai­land De­vel­op­ment Re­search In­sti­tute ( TDRI). Most of Thai­land’s em­pha­sis for for­eign di­rect in­vest­ment (FDI) is on man­u­fac­tur­ing, and low pro­duc­tiv­ity growth in the ser­vice sec­tor is drag­ging down eco­nomic growth, she said. The Bank of Thai­land be­lieves the coun­try’s labour pro­duc­tiv­ity needs to dou­ble from 4% to 8%, given the lat­est min­i­mum wage hike to 300 baht per day. The wage hike seems to have been given with­out re­gard for labour pro­duc­tiv­ity, added Dr De­un­den. “Thai­land has low labour pro­duc­tiv­ity in part be­cause it lim­its for­eign eq­uity share­hold­ing to 49% and do­mes­tic reg­u­la­tions en­trench the mar­ket power of in­cum­bent oper­a­tors,” she said. “This means Thai­land has low qual­ity and less ad­vanced ser­vices, which un­der­mines the com­pet­i­tive­ness of ex­port-ori­ented ser­vices. And ser­vices are also an in­put to man­u­fac­tur­ing; these sec­tors do not stand alone.” In­deed, fig­ures from the Na­tional Eco­nomic and So­cial De­vel­op­ment Board (NESDB) show 44% of the labour force works in the ser­vice sec­tor, but labour pro­duc­tiv­ity has been stag­nant in these fields, be­low 10% in ev­ery seg­ment ex­cept real es­tate, which Dr De­un­den said rep­re­sented an out­lier be­cause prices are not tied to pro­duc­tiv­ity.

“Most of Thai­land’s em­pha­sis for for­eign di­rect in­vest­ment (FDI) is on man­u­fac­tur­ing, and low pro­duc­tiv­ity growth in the ser­vice sec­tor is drag­ging down eco­nomic growth”.

Al­though the po­ten­tial ben­e­fits ac­crued from the planned ASEANASEAN Eco­nomic Com­mu­nity (AEC) could be im­mense, Thai­land is not po­si­tioned to take ad­van­tage of them. “Thai­land’s for­eign in­vest­ment guide­lines still fo­cus on man­u­fac­tur­ing and in­dus­try; ser­vice is in a no man’s land,” she said. “Some 50% of Thai­land’s GDP comes from ser­vices, but only 41% of its FDI is in ser­vices. Thai­land only stands to re­alise ‘sec­ond-hand’ FDI from the AEC be­cause of its fairly re­stric­tive for­eign in­vest­ment regime, as most for­eign cap­i­tal flows through Sin­ga­pore now. In fact, this is what hap­pens now.” Dr De­un­den in­sists sev­eral reme­dies ex­ist for Thai­land to im­prove its for­eign in­vest­ment and lib­er­alise its ser­vice sec­tor. The first is to re­lax FDI re­stric­tions on tech trans­fer. “In fact, Thai­land needs a whole road map for ser­vice lib­er­al­i­sa­tion,” she said. “The For­eign Busi­ness Act of 1999 needs to be amended, and we need to open up more sec­tors to lib­er­al­i­sa­tion, es­pe­cially those that sup­port man­u­fac­tur­ing, such as bank­ing and lo­gis­tics. Other ser­vices that should be open to com­pe­ti­tion are those that are mo­nop­o­lis­tic or oligopolis­tic. But AEC rules have a lot of ‘flex­i­bil­ity’ in them, mean­ing you don’t nec­es­sar­ily have to abide by them. You can sub­sti­tute a sub-sec­tor that is not a pri­or­ity for one you be­lieve is po­lit­i­cally sen­si­tive. Or if none of the mem­ber coun­tries are ready, they can just de­lay the mea­sure. “There is no com­pli­ance now, as only Sin­ga­pore is com­pli­ant with ser­vice lib­er­al­i­sa­tion.” The ASEAN Frame­work Agree­ment on Ser­vices that Thai­land signed in 2012 means that it will al­low a 70% eq­uity share to cit­i­zens of other ASEAN coun­tries in sev­eral fields in­clud­ing tele­com, but as of now this is not hap­pen­ing, said Dr De­un­den. The so­lu­tion is sim­ple on paper but will take a great amount of po­lit­i­cal willpower to achieve, she added. Thai­land needs to at­tract FDI and tech­nol­ogy trans­fers, which will boost labour pro­duc­tiv­ity, which then en­ables higher wages, leading to bet­ter ser­vices, which im­proves man­u­fac­tur­ing com­pet­i­tive­ness. In the tele­com sec­tor, Dr De­un­den rec­om­mended the coun­try abol­ish the for­eign dom­i­nance reg­u­la­tions and pro­mote fair use rules for in­ter­con­nec­tion charges, roam­ing, and in­fra­struc­ture shar­ing. In bank­ing, she sug­gested the cen­tral bank’s ceil­ing for bank­ing fees be abol­ished as well as the re­stric­tion on the num­ber of for­eign bank branches. “The Bank of Thai­land should not set rates for ev­ery­thing, as it means there is no com­pe­ti­tion and it al­lows tacit col­lu­sion,” she said. “And banks not be­ing al­lowed to in­crease their per­cent­age of for­eign own­er­ship is a legacy of the 1997 fi­nan­cial cri­sis.” Dr De­un­den added en­ergy would be quite hard to lib­er­alise be­cause PTT dom­i­nates the mar­ket. But for FDI, her pre­scrip­tion was to lift the four-to- one rule, where four lo­cal work­ers must be hired for ev­ery one for­eign worker for for­eign com­pa­nies open­ing a branch in Thai­land. And she ad­vised the re­lax­ing of re­stric­tions on the move­ment of pro­fes­sion­als, not­ing that as AEC pro­vi­sions stand now there will be no free move­ment of labour. She fin­ished with a stern warn­ing: “The Thai eco­nomic struc­ture mim­ics that of less de­vel­oped coun­tries, not more de­vel­oped coun­tries.” Col Set­tapong Mal­isuwan, chair­man of the Na­tional Broad­cast­ing and Telecommunication Com­mis­sion’s (NBTC) tele­com com­mit­tee, in­sisted the main role of the com­mis­sion is trans­form­ing the regime from con­ces­sions to li­cens­ing. He added the NBTC is also try­ing to pro­mote in­fra­struc­ture shar­ing for small oper­a­tors, as well as more mo­bile vir­tual net­work oper­a­tors, which are wire­less ser­vice providers that do not own the net­work in­fra­struc­ture. Col Set­tapong said he wants a mixed li­cens­ing ap­proach us­ing both auc­tions and “beauty con­tests”, or com­par­a­tive ad­min­is­tra­tive hear­ings, to re­place con­ces­sions.

He said the im­por­tance of ICT to the econ­omy can be seen by the fig­ure that a 10% in­crease in broad­band pen­e­tra­tion raises an­nual GDP by 0.9% to 1.5%. Dr Ban­did Ni­jatha­worn, the head of the Thai In­sti­tute of Di­rec­tors (IOD), pointed out that cor­po­rate gov­er­nance is one prong to at­tract and re­tain for­eign in­vest­ment be­cause com­pa­nies feel more com­fort­able in en­vi­ron­ments where cor­rup­tion isn’t tol­er­ated. Though Thai­land rose from the eight to the third place in the lat­est cor­po­rate gov­er­nance rank­ings for Asia, this is mainly for listed com­pa­nies and not pub­lic sec­tor gov­er­nance. “A very rapid rise in the lev­els of cor­rup­tion in Thai­land is why the coun­try’s com­pet­i­tive­ness is de­clin­ing,” said Dr Ban­did. An IOD sur­vey this year of 1,066 com­pa­nies found 93% be­lieve the level of cor­rup­tion is high to very high, while 75% said cor­rup­tion in Thai­land is get­ting worse. The IOD pro­poses com­pa­nies and govern­ment or­gan­i­sa­tions join its Col­lec­tive Ac­tion Coali­tion (CAC) and pub­licly an­nounce a zero-tol­er­ance pol­icy for cor­rup­tion, share their ex­pe­ri­ences and com­pli­ance poli­cies with oth­ers, and reach out to in­dus­try peers, sup­pli­ers and stake­hold­ers to tell them of their stance. Some 167 Thai com­pa­nies have al­ready joined the CAC. Bob Fox, the chair of the JFCCT ICT group and the vice-chair of EABC’s ICT group, noted ASEAN only has two coun­tries that have trans­formed their tele­com state- owned en­ter­prises into fully in­te­grated com­pet­i­tive play­ers: Sin­ga­pore and Malaysia. He added that businesses crave reg­u­la­tory cer­tainty, which does not ex­ist in Thai­land, and the mes­sage the sec­tor has con­veyed is “for­eign in­vest­ment is not re­ally wel­come here”. Dr Panom­porn Su­van­na­p­at­tana, the vice-pres­i­dent of reg­u­la­tory for dtac, said the lat­est sur­vey of Thai me­dia con­sump­tion showed the aver­age Thai spent 70 min­utes per day brows­ing the web, 127 min­utes per day on mo­bile apps, and 168 hours a day watch­ing TV. “What this means is who­ever has the fi­bre-op­tic ca­ble wins the game,” he said. “You must have the ca­ble if you want to com­pete.”

From left: Mr Nan­dor Von der Luehe, Col Set­tapong Mal­isuwan, Dr De­un­den Nikom­bori­rak, Mr John Svend­gren, Mr Pekka

Dr Duan­den Nikom­bori­rak

Col Set­tapong Mal­isuwan

Newspapers in English

Newspapers from Norway

© PressReader. All rights reserved.