Anxious Economic Community

With its own competitiveness steadily eroding, Thailand is dangerously ill prepared for the more open borders of the Asean Economic Community (AEC) just three years away, business leaders are warning.

Not a week passes in Bangkok without a seminar on the AEC - but most corporate managers are still groping in the dark and the government is not providing much leadership.

"It's a sign of anxiety," said Kasikorn Bank chief executive officer Banthoon Lamsam, who helped run a recent seminar attended by hundreds of business leaders. The theme: How would the late Steve Jobs have approached the opportunities of the AEC.

The seminar was preceded by a similar one by the government's department of industrial promotion, aimed at briefing small and medium industries - which are seen as more vulnerable to competition than big cash-rich companies.

Under the AEC, Asean's 10 member states will drop barriers beginning from 2015, to form a single market and production base.

In effect, among other things a corporation from, say, Thailand operating in Singapore will be treated like a Singapore corporation, and vice versa across the 10 countries.

Even with a phased buy-in to the AEC, Asean members states' different levels of development and human resources, and cost structures, mean the open competition could be risky.

"These seminars give the various organisations something to do" said Mr Banthoon, barely supressing a skeptical laugh.

"They go through the motions. Actually I don’t think the leaders of the country - and not only this government - have owned up to this challenge."

"They send their top level representatives, hold seminars here and there and talk in generalities. But in terms of... making sure that Thailand is ready to participate in a meaningful way in the AEC, I don't think there has been any clear direction and action. I haven't heard anyone saying anything concrete."

"Only a handful of companies know what to do with or without the government; they have reasonable brands, management resources, and a capital base.

"They rest are sitting and wondering what it is about. They flock to these seminars in the hope that someone will tell them what to do.

"Some may be better shows than others, but they will mostly be disappointed." Mr Banthoon said.

An additional problem is that as the region prepares for the AEC, Thailand's competitiveness is eroding. This has been a matter of increasing concern in recent years.

In an article in the Bangkok Post in February, two consultants at the firm AT Kearney wrote: "Thailand's labour rates for manufacturing are 20-45 per cent higher than in Indonesia and Vietnam.

"There will be a strong need to invest in further vocational and English language skills training for the workforce to raise its productivity and justify Thailand's higher cost structure relative to its neighbours."

They added: "Thailand was once considered a major Asean logistics hub.

"As technology advances and other countries start investing more in their own infrastructure, Thailand is moving down the ranks."
The writers cited  World Bank research in 2011 which showed that the cost of importing and exporting containers in and out of Thailand was 20 more expensive than Vietnam and 40-50 more expensive than Singapore or Malaysia.

Before taking the stage to lecture the audience of top executives on the risks and opportunities of the AEC, Mr Banthoon told The Straits Times: "I think without basic structural support from the government Thailand will continue to slip."

"The free movement of labour is one thing. We have to come to terms that we don't have low cost production any more so some industries will have to leave Thailand."

"We were used to having relatively good infrastructure, low costs, and offering a nice place to live. Only the last may still be true.

"At the moment we can’t go to another level. And Thais are reluctant to go abroad, by tradition we like to stay at home, that's the Thai nature.

"And we don't develop the skills. Thai people are not comfortable speaking English, leave alone Chinese."
In a separate interview former finance minister Korn Chatikavanij acknowledged that anxiety over the AEC was growing. He said he was constantly being asked by professional associations to give talks on the AEC.

Most at risk from more open competition would be Thailand's services sector, and most Thai banks were ill prepared for a regional role, he said. Yet he was more optimistic than most, noting that markets were already fairly open.

"It won't be a big bang." he predicted.

But others are not so sanguine. At the recent World Economic Forum Asean secretary general Dr Surin Pitsuwan chatted with me about his worries over Thailand’s education system.

He was not optimistic about Asean's human resource base in general. Specifically on Thailand, he said: "Thailand has to declare war on lack of analytical skills and the kind of education that will not lead to good preparation for the future."

"It has to be a on a war footing. More investment will have to go into good education, research, design and development. Only Singapore is doing that.

"Thailand has to put education on the highest agenda, it is a matter of critical urgency."

"We have not been able to introduce analytical skills. It is still memorising facts and figures."