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Infrastructure and efficiency must improve: BOT chief

Bank of Thailand Governor Tarisa Watanagase has warned that despite enjoying strong economic stability, the Kingdom still has a long way to go to protect itself from another crisis such as that in 1997.

The public and private sectors have to address the country's infrastructure problems and seriously improve their efficiency to maintain the country's competitive edge, Tarisa said in an exclusive interview with The Nation.

"Over the past 10 years we have solved many things, but they were easy problems such as tax, laws and information. From now on, we must search out the problems and solve them in earnest," she said.

The government must proceed with mass-transit projects, encourage research and development, solve water-resource problems and improve social welfare, she said.

At the same time, the private sector has to improve the quality of exported goods to increase competitiveness, and seriously adopt risk-management systems.

Tarisa said the current economic conditions were better than those before the 1997 crisis and did not seem likely to lead to another crash, but this would not guarantee that the strength of the economy could be maintained.

In the run-up to the 1997 crisis, the business sector was overspending while the government was promoting economic growth rather than stability. As a result, the economy was accelerating at a rate of 8-9 per cent, while the current-account deficit rose to a huge 8 per cent of gross domestic product.

Now the economy is growing at an appropriate rate and with low inflation. The current-account surplus is expected to be US$5 billion (Bt171 billion) this year, while international reserves currently stand at $72 billion, 3.2 times greater than the amount of short-term external debt, the central bank chief said.

The banking sector's capital adequacy ratio has reached 13 per cent, compared to the minimum requirement of 8.5 per cent, after experiencing net profits for seven years in a row. The return on assets is more than one per cent.

Tarisa said the likelihood of another crisis depended on whether the country was able to correct its weak points and strengthen infrastructure and improve efficiency to stay competitive.

She recommended investment in mass-transit projects to reduce transportation costs for the private sector and lower imports of oil. Businesses should also upgrade production technologies that consume large amounts of oil.

The government should also seriously encourage research and development and address the shortage of skilled personnel such as engineers and scientists.

The agricultural sector also needs to be improved to boost productivity, she added. A solution is needed for managing water resources, since droughts and floods affect not only farmers but also the overall economy.

"Agricultural development would help raise the quality of farmers' lives. Their incomes would surge, causing an increase in purchasing power. They would be able to have their own homes and not need government support," she said.

The governor said exporters should no longer rely on a weak baht but should improve productivity, albeit over the long term.

"The currency is a secondary factor for exports. We have bought time for 10 years and cannot buy any more," Tarisa said.

Anoma Srisukkasem

The Nation


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