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Improving investment climate important to boost economic growth in Thailand

Xubei Luo's picture

The investment climate is the fundamental socio-economic framework in which firms operate – the macroeconomic and trade policies they face, the labor and financial markets in which they recruit and raise money, the available infrastructure and imposed regulations, as well as all other areas of public policy impacting on private business.

In Thailand, the uncertain political situation since 2006 has negatively affected the country’s economy. The Productivity and Investment Climate Survey, which was fielded in 2007 at a time of great political instability and policy uncertainty, clearly reflected the pessimistic views of business managers. One interesting finding of the recently released Thailand Investment Climate Assessment Update is that instability and economic policy uncertainty became major issues – firms that perceived it a major or severe obstacle doubled from one-third in 2004 to two-thirds in 2007.

Comments

If there is excess demand for skilled labor, one hopes that labor's share, or at least skilled labor's share, of income may be rising. And that would be a good outcome -- including providing visible incentives for the development of human capital.

Submitted by YeOldeCurmudgeon on
Let me see if I have this right. The survey of 1,000 companies was conducted from April to November 2007. The report was produced with a date of June 2008. And it took the "crack" staff at the World Bank Group more than a year from that date to issue a press release about the findings of a report that by now is out of date and totally irrelevant, as in the two years since the survey was conducted there have been numerous changes to the global (and Thai)Investment Climate. What can we expect next from the World Bank Group ... a press release about a 2007 World Bank survey that showed people are worried about a global financial crisis on the horizon? Or, perhaps, we can expect the World Bank to report that its 1998 survey on the health of banks in Asia revealed banks needed to recapitalize to survive?

Thanks for your comment. I agree that this subject is important for Thailand. You should be aware that the findings of the report have been available and have been much discussed for the past year. The press release to which you refer was simply notifying the public that the entire report was now available for download. Last year, we have held a series of events to inform the public of the results of this survey, including a press briefing in August, following a seminar on this topic for private sector representatives, government officials, and academics. The summary of the report's findings was prominently featured in our October 2008 newsletter. Over the past year, World Bank officials have been highlighting this issue at many of the conferences on the Thai economic outlook they were invited to speak, including the annual investment conference organized by the Joint Foreign Chambers of Commerce in Thailand, in July this year. Moreover, I would disagree with you that the report is totally irrelevant by now. Just during the investment conference mentioned above, our country director brought this issue to the discussion again, and we received very positive response from the business community. Each of the issues identified here as major constraints by the survey remain very relevant today. For example, anyone in Thailand will tell you that political uncertainty remains high today, although the cause of such uncertainty is different from that of 2007. And this could have a negative impact on corporate managers' investment decisions.Many managers, especially those whose companies are trying to move up the value chain, will also tell you that the skills and the education of workers is still as much a constraint for them today as it was in 2007.

By the way, I am a communications officer in the World Bank's Thailand office, and I work with Xubei Luo, who wrote this blog post.

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