Thai plan for drastic economic changes

Press, 3 July 1985, Page 41

Thai plan for drastic economic changes

By

Allen Nacheman

of Agence France-Presse BANGKOK NZPA-AFP Thailand has drawn up a blueprint for sweeping changes in economic ties with Japan, aimed at reducing a crushing trade deficit and casting off its •traditional “little brother” role. The final draft of a 55point White Paper says Thailand’s deficit with its number one trading partner has grown 30 per cent annually over the past five years to a record $348 billion last year. Bangkok’s total deficit amounts to $5.45 billion. “Japan is the biggest foreign investor in Thailand in terms of registered capital,” the paper says. “However, the factor that contributed to the imbalance . . . was the nature of Japanese investments, which tended to produce low value-added goods.” Some 80 per cent of Thai imports from Japan comprise capital goods, semi-finished raw materials, vehicles and parts, while 80 per cent of Thai exports to Japan are produce and raw materials which are being squeezed out of Japanese markets by growing competition from other countries, it says. A key to the solution will be to reduce imports of finished Japanese goods, and encourage Japan to

send Thailand some of the “sunset” industries “which have lost their competiveness back in Japan or whose productivity has lost its edge. “They could be relocated to Thailand to take advantage of labour, land and raw materials whose costs may be lower,” says the proposal. To attract Japanese industry, Thailand will ask Japan for technical and financial assistance to improve infrastructure such as communications, merchant fleets, port and airport facilities, water, electricity, waste treatment and industrial parks. It will also seek Japanese help in upgrading domestic labour pools through education and vocational training programmes. The aim is a gradual transfer of the labour and technological phases of production of imported goods from Japan to Thailand. The paper notes that Japan is “the biggest country in offering grants, equipment, experts and consultants in various fields.” But Japanese aid has concentrated on such projects as flood control, hospital and university buildings, museums and fertiliser shipments. While this type of aid is welcome it does not contribute to Thailand’s basic ability to upgrade the quantity and calibre of its indus-

try, technology and exports, and tends to maintain Thailand in its role as a junior trading partner. “In considering assistance to Thailand, Japan has tended to be the party to determine the priority,” the paper says. “To ensure that Japanese assistance better meets the overall needs of Thailand, Thai government agencies will work jointly to list the priority of important projects in seeking help from Japan.” Long-term measures would include improvement of quality and standards of Thai products aimed at giving them a more competitive edge and a larger share of Japanese markets, the paper says. It criticises preferential loans to Thailand under Japan’s Overseas Economic Cooperation Fund, saying they are geared to Japanese companies here and have done little to improve the Thai economy. “Japanese companies have been the most numerous in winning bids for projects funded by Japanese government loans. “Loans for feasibility studies and engineering designs carry the conditions that only companies from Japan or developing countries may vie for the projects. “Japanese firms have managed to win a large number of projects under

this condition, and that subsequently means that Japanese firms also win bids to construct and purchase equipment,” the paper says. “As a result, Japanese assistance loans have placed Thailand in a position that would depend on imports and services from Japan, adding more deficits.” Lastly “Japan will have to relax her quota system, which has served as an impediment to Thailand’s exports,” the paper says. “Thailand should ask Japan to consider adjusting import tariff rates for certain products ... and relax other restrictions such as industrial and hygienic standards to boost exports from Thailand.” The paper proposes that, once the Thai Council of Economic Ministers approves the proposals, it meet with its Japanese counterpart, the Council of Ministers for Economic and Foreign Relations, to decide on implementation. “This country has become a buffer state between the free world and the socialist countries in the region,” it says. “That underscores the need for Thailand to develop herself economically, politically and socially to set a firm foundation to retain political stability and security in the region and international political arena.”