The ambitious mission of the current government to see Thailand's economy grow in an S-shaped curve may not be realised if the country fails to increase public and private investment to match the levels of neighbouring countries.
The world is changing fast and competition has grown more intense. Thailand is no longer the top destination for investors, as some of its neighbours can offer similar incentives and the added bonus of cheaper labour costs.
In the new landscape, Thailand cannot stay the same as before and repeat the success of the past decades. A new strategy must take root to regain the leading position, said Kanit Sangsubhan, a former director of the Fiscal Policy Office now chairing a committee for promoting private investment. He recently shared his views with the Bangkok Post on which direction Thailand should be heading.
According to Mr Kanit, Thai investment in the private and public sectors has been rocked by internal uncertainty and destructive forces around the world.
"These factors have seriously weakened us," he said. "Thus, the 10 industrial clusters under the government's economic strategy are crucial engines if we want to boost growth in a new S curve."
The S-shaped curve and industrial clusters are policy initiatives of Deputy Prime Minister Somkid Jatusripitak, who leads the government's economic team.
If Thailand moves in the right direction with a proper strategy to promote essential functions, the country's GDP should expand by at least 5% a year instead of the current norm of 3%, Mr Kanit said.
Lack of a continuing development policy is undercutting the competitiveness of the Thai economy. In the past decade, private-sector investment fell to a bottom of 2% of GDP in 2014, versus 14% on average in the decades before.
The result is that Thailand showed the lowest economic growth in Asean in 2013 and 2014 and is neck-and-neck with Singapore for the dubious honour in 2015.
Export growth has withered from 14% annually during 1998-2007 to just 5% a year during 2008-14, with economists expecting a contraction of 5% in 2015.
"We desperately need at least 10% growth in investment value each year to raise our development pace and reach our full potential if we want to improve our competitiveness and get back in the world race again," Mr Kanit said.
But if the government keeps investment incentives under the Board of Investment (BoI) unchanged, it could be the wrong formula.
"We have to think about how to attract investment in new industries that the government is planning for," Mr Kanit said.
Thus the BoI's way of thinking must switch from passive to proactive as an investment promoter, he said. The BoI should offer not just investment incentives as a magnet to attract industry, but also a streamlined tax system, longer-duration work permits and so forth.
Mr Kanit's committee comprises senior officials from 15 related departments across several ministries and is responsible for drafting a new master plan for investment promotion.
"We are going for a demand-driven approach, so we hired a private firm to do a survey of investors across the globe," he said.
According to the Baker & McKenzie study, four "destructive forces" are shaping global trends.
Those forces are the emergence of 12 new technologies, greater urbanisation, ageing populations and decentralisation of power.
"The question is how do we design new promotional policies along these trend lines," Mr Kanit said. "We found that we have five existing industries that should be adapting and surviving at a time of global change under those four destructive forces, and there are newborn industries that we have a chance to expand." The existing industries include automotive (which has great potential with the rise of next-generation vehicles), food processing, electric appliances, medical and wellness tourism and agriculture/biotechnology.
In the meantime, emerging industries such as robotics and humanoid parts offer a fascinating glimpse of the industrial wave of the future. Demand for robotic arms used in manufacturing has been rising fast in line with greying populations and the diminishing labour pool.
A rough assessment puts the import value of robotic arms at 600 billion baht, some 30% of which is the value of knowledge. Building a production base in Thailand would save on costs.
"We have such a strong potential in robotics; we could be a production base for robotic arms for manufacturing because we have strong second- and third-tier manufacturers in the supply chain and we have a lot of engineering graduates in this field every year, but we don't have the industries to serve them and they have to find jobs in foreign countries," Mr Kanit said.
Other high-potential industries include aviation and logistics, which suit Thailand's status as an air hub for the region.
The second-phase expansion of Suvarnabhumi airport and the adaptation of U-tapao airport to serve the Eastern Seaboard's industrial estates and tourism sites will make it possible for Thailand to grow its aviation and air-cargo industries. Medical and wellness tourism is another great fit for the country's core competencies, while biofuels and biochemicals hold the promise of energy self-sufficiency and a cleaner environment.
"Some countries have been developing themselves towards a bio-economy by using fewer chemicals and more biological materials, which is what we can do," Mr Kanit said.
"In the future, bioscience will be used as a major non-tariff trade barrier by the US, the European Union and Japan, and Singapore and Malaysia are the pioneers in Asean.
"Thailand has the potential to develop bio-industries in many ways, as the Kingdom is a rich source of agro-business and we can benefit from that. In the future, these countries might impose new standards that force a higher biocontent, stricter ingredient labelling and packaging limited to bioplastics."
In addition, digital technology industries will become a part of everyday life. Big cities around the world will move towards the "smart city" concept whereby technology and electric appliances interact with humans.
"Bangkok will be one of them in 10 years," Mr Kanit said. "We are moving towards that digital city."
Future industries will be the major growth engines to drive the Thai economy and directly boost people's income.
According to the Baker & McKenzie study, 70% of future income will come from the upgrading of existing industries and 30% will come from new industries.
Special incentives must be designed to support targeted industries.
For instance, the Industry Ministry will work on operating plans for each industry to create demand in the domestic market and serve the output of new industries such as bioplastics and industrial robotic arms.
Since it's impossible to succeed without financial support, the subcommittee to accelerate investment in targeted industries chaired by Mr Somkid has taken on the job of luring big players to invest in targeted industries at the forthcoming special economic zones and borrow from the newly set-up Industrial Economic Fund.
Other incentives include personal income tax waivers and five-year work permits for international experts and a tax cut to 15% from 20% for local specialists.
The structure of import duties is to be adjusted to ensure lower duties for imported spare parts and higher tariffs for imported finished products.
More generous packages for investors may be proffered, such as 100% ownership for foreign investors in new industries and land leases extended to 99 years from the current maximum of 30 years.
The next step will be related regulations drafted by legal specialists with the priority of eliminating business obstacles.
"For example, the team has to consider foreign business law, which has been criticised for the rule that a Thai must have at least a 51% stake -- that might be changing," Mr Kanit said.
"We have to push the S-curve growth engines to their full capacity because they are the country's new hope. We can't wait any more."
