By: Achara Deboonme

The government should take a pro-active role to boost confidence and end the low-investment cycle, says a World Bank economist.

He said urgent action was necessary as investors are more pessimistic about the business outlook in Thailand than they were three years ago despite only a slight worsening in the overall indicators.

"This perception has led to low investment. A quick fix will require a public-relations campaign and regulatory amendments," Kirida Bhaopichitr said.

"If the government could speed up the mega-projects, that would help greatly. It's the perception that matters."

A preliminary survey conducted late last year covered more than 1,000 companies in nine industries.

The survey was conducted in collaboration with the National Economic and Social Development Board (NESDB) and the Thailand Productivity Institute (TPI) and funded by the Industry Ministry.

Its main objective was to benchmark competitiveness in those industries. The survey focused on four major indicators: unstable macroeconomic conditions and access to funding; shortages of skilled labour; taxes and regulations; and infrastructure quality.

The survey showed that low investment led to low innovation and therefore low productivity.

Compared with other countries, Thailand's ranking is in the median in all categories except for a slight advancement in regulatory procedures. Yet other countries have boosted productivity more quickly. For example, India halved the annual number of blackouts in only four years.

"Thailand demonstrated slower productivity growth [compared with the first survey in 2004] than competitors like India and China. It needs to do more to move from cost-based to value- and knowledge-based industries. It's important to boost the investment climate. If the four indicators improve, the climate should improve, and productivity could be better," said Xubei Luo, the World Bank economist who led the survey team.

The TPI said companies in the auto, furniture and garment industries demonstrated high productivity but that the last two would be affected by low labour productivity in the long term.

At the bottom of the rankings were companies in the processed-food and electrical-appliances industries.

"Thai companies are weak in adding value to their products, as they focus on contract manufacturing. This reduces their price competitiveness, and they could lose when costs rise. Our survey found some companies' production costs account for 98 per cent of the price," said Phanit Laosirirat, executive director of the institute.

"While the information-technology sector's added value is 20 per cent, it still suffers from skilled-labour shortages."

The preliminary results of the survey will be submitted to the Cabinet, which will use them to decide what the government should do to raise the country's competitiveness, said Thanin Pa-em, executive senior adviser for policy and planning at the NESDB.

While urging policy continuation from the government, Thanin also prefers to see greater collaboration with the private sector to ensure success.

Kirida predicts business sentiment will improve this year, because factors of concern are softening, such as the oil price, raw-material costs and the baht/dollar exchange rate, despite a continuing threat of inflation.

"Business operators must adjust themselves. They simply cannot wait for government assistance, because the public sector accounts for only 20 per cent of the economy," she said.

The survey showed 25 per cent of the respondents had no single measure protecting them from risk factors, but rather used more than one.

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