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Sufficiency in style By scrapping excessively ambitious projects and selectively picking truly promising ones, the government hopes to eventually boost growth in a sustainable manner by ARANEE JAIIMSIN  Among the
sectors that have undergone more profound change than others after the Sept
19 coup is the industrial sector, where policy makers have passed the torch
to the private sector.
Spearheading industrial development now are companies big and small instead of the government, which had until recently taken a key role in finding new markets for local products. As a result of the policy about-turn, which is based on the assumption that companies know their industries better than any government body, the private sector has been forced indirectly to boost its own productivity. Industry Minister Kosit Panpiemras, who also serves as deputy prime minister, has reduced the ministry’s role to that of a facilitator, enabling the private sector to take centre stage in penetrating new markets. Despite the fact that the interim government has placed a low priority on inflating gross domestic product(GDP), the key economic indicator would eventually increase as a result of improved productivity, said Mr Kosit. ‘‘The policy of this government differs from that of the Thaksin Shinawatra government whose focus was to push for the highest-possible growth rate by urging consumers to spend more,’’ said MrKosit, while pointing out the budget deficit was a legacy of such a policy. Instead, the interim government has pledged to use the sufficiency-economy philosophy as a platform to ensure more sustainable and balanced economic development. This means the new government will no longer finance projects that are not productive and worthwhile, said Mr Kosit. No longer in fashion One of the early casualties was the 1.8-billion-baht Bangkok Fashion City project, which went technically bankrupt on Oct 30, 2006 after the ministry turned down a request for additional budget for its second phase.  The Department
of Industrial Promotion, the sponsor of Bangkok Fashion City, had earlier
asked for 1.5 billion baht in additional funds to finance the second phase
of the project for the 2008 and 2009 fiscal years.
Mr Kosit attributed the demise of the project to its failure to enhance the overall competitiveness of small and medium-sized enterprises (SMEs) in the sector. Instead, only a small group of entrepreneurs benefited from its existence. ‘‘From now on, the private sector will play an active role, replacing the government or state agencies, in promoting fashion events,’’ he said. Kitchen to be moved Mr Kosit said that during his term the food industry development programme would be transferred to other ministries or agencies more capable of handling it than the Industry Ministry. ‘‘In the next phase, the Industry Ministry will limit its role in promoting the food and restaurant industry to certifying food quality and standards only,’’ he said. Firmly in fast lane For one, the ministry will proceed with the necessary support for the automotive industry, which continues to be a major strategic sector. But unlike the previous government, the priority now will not be for Thailand to become the Detroit of Asia, according to Mr Kosit. On the other hand, he agreed with his predecessor, Suriya Jungrungreangkit, that a second product champion should be promoted for the automotive industry because global demand for one ton pickup trucks, which have long been Thailand’s product champion, would peak in the foreseeable future.
The investment privileges would be given to hybrid electric vehicles, as well as cars designed to run on alternative fuels. Unlike a similar package proposed the previous government, the eco-car incentive programme gives car makers extreme flexibility in terms of car design, without specific sizes set for engines or bodies. Instead, it requires qualified manufacturers to conform with certain limits on fuel efficiency, safety and emissions. The criteria for the tax incentives are scheduled to be finalised in March 2007. Through attractive tax privileges, the BoI hopes the eco-cars can become Thailand’s second product champion in the automotive industry after one ton pickups. In contrast, before the Sept 19 coup, automotive producers and the industry ministry led by Mr Suriya planned to promote trucks of different sizes to become the second national product champion. SMEs on firmer ground While the previous government focused on helping SMEs by improving external factors, for instance, logistics systems and marketing channels, the new government has also tried to improve their inherent ability to compete. High on the agenda of the interim government is to promote the productivity of SMEs in line with the sufficiency economy philosophy, Mr Kosit said. The Federation of Thai Industries (FTI)was requested to provide guidelines for the Office of SME Promotion(Osmep) on what is needed to strengthen SME operators’ productivity.
‘‘Previously, assistance given by the Osmep to SME operators didn’t match their needs,’’ said Mr Kosit. FTI chairman Santi Vilassakdanont said the new government would allocate 1.2 billion baht in 2007 to promote their productivity, particularly in the areas where they were weak such as branding and consistent production, noted Mr Santi. ‘‘The development for the SME sector must be an ongoing programme because we cannot expect all SMEs to excel during the one-year term of this government,’’ said Mr Santi. Sufficiency vaccine On the contrary, the approach urges everyone to expand business within his means and manage his risks more carefully, said Mr Santi. In the year to come, the industrial sector will be mainly threatened by the strong baht and the US economic slowdown, noted Mr Santi. Furthermore, exporters would face new non-tariff barriers, aside from the Waste Electrical and Electronic Equipment Directive (WEEE Directive) and the Restrictions on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive (RoHS). Meanwhile, an anticipated free trade agreement between Thailand and Japan could be signed in the second half of 2007 at the earliest, said Mr Santi. The FTI expects revenue from the industrial sector will grow by 7% in 2007,
compared with 6% this year. Turning the tide to woo investors YUTHANA PRAIWAN Although it lacks an elected government and there’s no guarantee one will materialise in 2007, Thailand still has an opportunity to attract more interest from local and foreign investors, according to Satit Chanjavakul, the Board of Investment’s secretary general.  He said a
World Bank report on a gradual decline in foreign direct investment in China
in 2006, the first time in four years, was considered a good sign that diversification
of funds to other countries was under way. China has been a giant and irresistible magnet for investment from foreign businesses around the world since it opened up its market in the early 1990s. More than a decade later, it is believed that investors now want to keep more equilibrium of their investments in Asia after having injected huge sums into the Mainland, turning it into a major production base in the region. Mr Satit said there was a clear sign that investors from Japan, Korea, the United States and the European Union had begun to diversify their investment to other Asian countries to leverage their risks. Although the shifting of investment to other Asian countries has not been significant to date, he believes it will gain momentum and increase markedly in the second half of 2007. Thailand is expected to see more foreign investment in the coming year from both existing and new players, who want to expand their production capacities and keep their investment in Asia diversified. Yet the inflow is unlikely to be large enough to have a significant impact on economic growth, and local investment by the private and state sectors will continue to be the major growth driver in 2007. The Bank of Thailand projected the country’s gross domestic product (GDP)
in 2007 would expand in a range of 4.5% to 5.5%. He added that the sufficiency economy-oriented policy would promote investment
in industries with growth potential by focusing on adding value and boosting
competitiveness. In order to improve their potential, these industries will need to count more on sophisticated production technology, as well as local content and raw materials. The policy would also promote investment in new industries that Thailand had potential to support in terms of basic infrastructure and personnel. They include alternative energy, logistics, biotechnology, medical equipment and pharmaceuticals. He said the BoI had coordinated with other state agencies to upgrade these industries into strategic ones in order to attract investment in the future. For 2006, Mr Satit conceded that the overall investment had suffered a setback due to volatile fuel prices, political uncertainties and the Sept 19 coup. But that did not stop the BoI from promoting the country. Its officials joined a team of ministers on road shows to China and Japan in early December 2006 to promote a clearer understanding of the interim government’s stand on investment promotion to state agencies and private companies in both countries, Mr Sathit said. They were given assurances that the government would promote investment that helped boost sustainable competitiveness and enhance production efficiency. Also in focus are the development of technology, human resources and small and medium-sized enterprises (SMEs). He said similar roadshows would also be held in Europe and the United States to clarify doubts harboured by investors there and persuade them to invest more, particularly in the electronics industry. Although the overall amount of investments made through the BoI promotion
scheme declined in 2006, the values in such key industries as petrochemicals,
vehicles, and electronics continued to increase markedly, he said. Second, the competitiveness of industries and entrepreneurs will be enhanced. The BoI will join think-tanks and educational institutions to work out a roadmap for each industry to increase productivity. Third, human resources in both labour-intensive and skilled labour based industries will be improved. For labour-intensive industries, the BoI will encourage the relocation of production bases to other countries where costs are lower. One such destination is the Maquiladora Zone in Mexico—an industrial product export zone located along the border with the United States. Many American businesses have already set up production plants in the zone to take advantage of the cheap labour there and ship the output back for sale in the US. For industries relying on skilled labour, the BoI plans to team up with schools and the Science and Technology Ministry to improve the skills, knowledge, and competence of engineers and technicians to ensure their qualifications meet the requirements of each industry. Contrary to popular belief, Mr Satit said the country was not short of skilled engineers and technicians. But their skills and knowledge do not match the needs of industrial operators who are ready to invest in Thailand. The last issue is to further develop skills, technology and innovation in the petrochemicals and electronics industries. The BoI would find new ways to further encourage entrepreneurs to invest in research and development. At present, new applicants for investment promotions are required to invest to improve the skills, technology, and innovation to workers. Mr Sathit pointed out that these strategies were a far cry from what the investment-promotion agency had implemented in the past. Then, the BoI had focused only on granting tax breaks as investment incentives. Now that foreign investors interested in investing in Thailand are not looking only for tax incentives, the BoI has to adjust and the four new strategies are the result. ‘‘We don’t want to hear foreign investors complain ever again that despite their readiness to invest in the country, they have to think twice because they cannot find qualified engineers and technicians in the industries they plan to invest,’’ said Mr Satit. ‘‘But we can’t do all of this by ourselves. Related state agencies must also come up with supporting measures to help us.’’ Still on the catwalk BUSRIN TREERAPONGPICHIT
Thailand’s fashion industry will continue to develop, but without the help of the Bangkok Fashion City project. After running for 18 months, the project was officially terminated by the interim government led by Gen Surayud Chulanont. Under the new sufficiency economy policy, the military-installed government has scrapped the cost-ridden and transparency-challenged project in favour of helping private businesses to improve their competitiveness. The BFC project was initiated by the Thaksin government with the aim of turning Bangkok into a fashion capital on par with Paris or Milan. But the 1.8-billion-baht project was blasted by critics as a waste of tax money, which was spent on luxurious road trips, exhibitions and other events with small genuine returns to the sector. In addition, several bids connected to the project were seen as lacking in transparency.
‘‘Still, Thai fashion had never been in the limelight until the project was launched,’’ said Kartchai Jamkajornkeiat, the president of Apparel Avenue Co and a vice-president of the Thai Garment Manufacturers’ Association. Mr Kartchai said the association had attempted to convince the new government to support the improvement of the entire supply chain, particularly for designers and fashion houses, to ensure the sustainability of the industry. Narong Lertkitsiri of Toray International (Thailand), the producer of the leading textile brand Pasaya, expressed his hope that the government would not let the benefits of Bangkok Fashion City go to waste. He said the project had already boosted international awareness of Thai fashion. ‘‘It is rare for small fashion houses to gain attention from potential buyers overseas, but in the past year and a half, people in every corner of the world have had the opportunity to look at Thai fashion,’’ he said. Mr Narong said the government should not abandon the entire BFC project since some sub-projects had helped fashion operators not only in terms of image, but also marketing, distribution, design and product quality. Pim Sukhahuta, the widely recognised designer behind the established brand Sretsis, said that government support, in terms of funding and expert advice, had been a key to boosting awareness of her brand name. ‘‘The state gave us the opportunity to promote brand awareness of our products, particularly through roadshows. We don’t have the funds to organise a roadshow on our own. Neither do we have any connections to help penetrate selected international events,’’ she said. However, she added that the path to success not only relied on the government, but also designers and team members, who must know how to develop products to meet international standards in terms of creativity, working process, and quality control. Another key to success is efficient training for people in the industry. It was unnecessary for the government to help build up the image of Thai fashion. Instead, it should help with fashion education and training, she said. ‘‘Design students need to learn the right systems and working processes and have the right attitude,’’ she said. ‘‘I really want to see Thai design schools teaching students to create designs themselves. Don’t just let them look at fashion magazines and follow the current trends.’’ However, with or without state support, Ms Pim and Mr Narong said they would
proceed with their goal to become leading international fashion houses. |
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