OBG talks to Kittiratt Na-Ranong, Deputy Prime Minister and Minister of Finance

Interview: Kittiratt Na-Ranong

What kind of role, in your opinion, will foreign investment play in the kingdom’s economy in 2015?

KITTIRATT NA-RANONG: Foreign direct investment (FDI) has been key to the economic development of the Thai economy. With the ASEAN Economic Community (AEC) aiming to achieve regional economic integration by 2015, ASEAN countries should be even more attractive to foreign investors, given that the market will be larger and the production base more integrated. FDI should continue to play an important role in the economic development of the ASEAN region. In 2010, FDI in Thailand amounted to BT137bn (43.7m), with Japan, the EU, ASEAN and China being the top four investors.

Given Thailand’s well-established position as the centre of the automotive and electronic industries in the region as well as its geographical advantage of being situated in the heart of the Indo-China region, Thailand stands to gain from the development of AEC. Having a more integrated regional economy would translate into more goods, services and people flowing into the region and Thailand. To prepare for this, the government is planning to upgrade its logistics infrastructure to fully benefit from ASEAN integration.

How have the recent floods shaped the administration’s economic policy for 2012?

KITTIRATT: The World Bank estimated the damage caused by the 2011 floods to be BT1.4trn ($44.66bn). Our priority, therefore, is to repair the damage and rebuild investors’ confidence in our ability to prevent future floods. In this regard, the Strategic Committee for Water Resource Management (SCWRM) was established by the government to tackle the water management issue. The committee subsequently submitted a plan for water resource management totalling BT350bn ($111.65m) to be implemented over the current and next fiscal year. Development of a water management system as well as flood rehabilitation are the main areas of focus for the SCWRM. The implementation of certain policies, such as the increase in minimum wage, have been delayed slightly, from January to April 2012, to give the business sector room to recuperate from the floods. Nevertheless, I think that the extra spending from the water resource management plan should have a positive stimulus effect.

Given the ongoing volatility of the global economy, what role will Thai firms have in foreign markets?

KITTIRATT: We expect an increasing number of Thai firms to invest in neighbouring countries, especially ASEAN members, as a result of the ASEAN Economic Community in 2015. As for exports, Thailand has diversified its export markets. The share of export to the G3 market, (the US, the EU and Japan) has decreased, while the share of exports to high-growth regions, such as China and ASEAN, has been gaining momentum. In 2011, Thai exports to China and ASEAN-5 had a combined share of 28.9% of the total value of exports.

How will the liberalisation of Myanmar’s economy benefit the Thai business sector?

KITTIRATT: A more liberal Myanmar economy would mean greater opportunity for Thai businesses that seek natural resources and labour, which are abundant in Myanmar. A more prosperous Myanmar would also mean higher demand for imports from Thailand. Given our readiness in terms of physical infrastructure and business facilities, we will be able to become a centre for business activities in Myanmar and other countries in the Greater Mekong Sub-region (GMS).

Connectivity will enable Thailand to fully benefit from Myanmar's economic liberalisation and GMS development. Regarding this, Thailand has contributed to the development of the Dawei seaport, a project that will enhance trade between countries in the GMS. Moreover, Thailand can also benefit from creating a special economic zone at the border of Thailand and Myanmar to facilitate Thai and foreign capital investment, and supply of labour from Myanmar. This will encourage some investment to spill over onto Thai territory.