Higher growth 'hinges on rise in investment'
Thailand could see its economy growing at between 5.5 per cent and 6.8 per cent year after year if it can raise its rate of investment close to the pre-1997-crisis level, according to research sponsored by the World Bank and the National Economic and Social Development Board (NESDB).
Sustained output of 5.5 per cent to 6.8 per cent annually would require gross investment at the rate of 29.5 per cent to 33.2 per cent to gross domestic product - a sharp increase from the rate of 22 per cent in 2004, according to the study conducted by Barry Bosworth, a professor at the Brookings Institution. The pre-crisis investment rate from 1977 to 1996 was 34 per cent. The economy grew at a fast pace of 8 per cent annually from 1977 to 1996, the year before the financial crisis hit. But average growth slowed to 5 per cent after 1997, bringing the average rate from 1977 to last year down to 6 per cent. The study was presented at a sustainable-growth seminar yesterday hosted by the World Bank and the NESDB. The study suggested growth was denominated by increases in employment and the capital stock. Productivity growth was a small positive contribution to economic growth, as total factor productivity (TFP) here grew at modest rate of 1.7 per cent between 1975 and 2003, compared to 3.9 per cent in China. The crisis of 1997-1998 appears to have imposed a permanent cost on the economy. National output has not returned to its earlier path. Bosworth predicted growth of TFP would be 1.5 to 2 per cent annually. Ian Porter, director of the World Bank's Bangkok office, said economic growth this year would be 4.5 per cent and next year would go a little higher. He was optimistic the strong export sector and the revival of consumer confidence would boost growth. Private investment is expected to recover, as the government will invest more in infrastructure projects. He suggested investment in mega-projects should be done prudently and that the "sufficiency economy" model should be explained to foreign investors. Porametee Vimolsiri, senior adviser to the NESDB, believes that lower oil prices, steady interest rates and political stability would encourage private investment after investors had faced many uncertainties this past year. Kazi Matin, lead economist at the World Bank's Bangkok office, urged the government to reduce the cost of doing business here. Investors suffer from the regulatory burden, while the shortage of skilled labour inhibits private investment. The quality of education needs improvement, more engineers need to be produced and workers need to acquire proficiency in information technology and the English language, he added. Wichit Chaitrong The Nation
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