It is always a great pleasure for me to be invited to address this distinguished gathering. On behalf of the people of Thailand, I would like to welcome all of you who have come from abroad. I was here last year, roughly the same time in May. At that time, of course, we have just emerged from the riots of April, and the same time the economy was in the middle of the global crisis. Unemployment was still going up, and of course, the economy was actually contracting. Standing at the very same spot this year, you will say that some things have changed, while others perhaps require more time before we can make any judgment. 

 

What has certainly changed is the outlook for the Thai economy. I can proudly say that the approach that we had taken in tackling the economic crisis, as far as the Thai economy is concerned, has been proven right. For those of you who were here last year, you would recall that the Government announced very clearly---that in tackling the economic crisis in Thailand, what we would do is to quickly disperse money to our consumers, particularly those most vulnerable, those least fortunate in our economy, so that while we wait for the global economy to pick up, we can sustain domestic demand.  We hope that we can stop the rising unemployment at the time, and then we would move on to the second phase, of investing in infrastructure, in our plan not just to stimulate the economy, but also increase the competitiveness of the economy for the medium and longer term. 

 

When I say that this approach has been proven right, this is all being confirmed by the numbers that have evolved over this last year. I know because a lot has happened during the last couple of months, and it’s easy to lose perspective. But as I said last year when I was here to address this conference, unemployment was rising, and we were experiencing a negative growth of 4.9 percent year-on-year. After we dispersed the first stimulus package around March and April last year, what we found out was that we were able to stop unemployment from rising. It actually peaked at over, maybe, just 1 percent, which is probably one of the lowest rate of unemployment in the world amidst the financial crisis and economic crisis last year. We were also experiencing growth on a quarter-on-quarter basis, from the second and third quarter onwards, and as the global economy picked up towards the end of the year, we managed to turn things around to experience positive growth in exports in the third quarter, then finally achieving positive growth for the whole economy in the last quarter.    

 

With predictions that were made in the beginning of last year, that the Thai economy could contract even up to 9 percent, unemployment could go up to 2 million in Thailand, what we found out in the end was that unemployment never reached one million. By the end of the year, the figure for growth for the whole year was only -2.3%. That recovery gathered momentum in the beginning of the year. In the first quarter of this year, the Thai economy registered 12 percent growth year-on-year, one of the highest rates in the world. Unemployment is now on its way down, and we were even experiencing the problem of labour shortages in some sectors. This momentum had been sustained in the second quarter of this year, despite the political events that occurred in April and May. Some of the latest economic indicators confirm that the Thai economy continues to expand strongly. Private consumption, as measured by revenues from the real value-added taxes, increased by 18.1 percent from last year. Private investment also robustly improved. Capital-goods import volume showed high growth of 40.3 percent per year, improving from the previous month expansion--- this is for May--- of 39.4 percent per year. And commercial car sales for May grew at 48.4 percent year-on-year. Exports also showed continued signs of strong improvement. The value of export in May also grew at 42.1 percent per year, and it is likely to exceed our annual target for export growth as well. 

 

So as you can see, all this had been achieved and we are exceeding our targets not just for last year, but even for the whole year this year. At the beginning of the year we felt the economy could grow by 4.5, 4.7 percent. The latest forecast and projections put the figure probably at between 5 to 6 percent. This has all been achieved without any cost to our financial stability. International reserves stand at 144 billion US dollars, approximately 4.7 times our short-term external debt. What is more remarkable is that despite the stimulus packages that we have put in, the fiscal position has no risk of being unsustainable. The projected deficit for this fiscal year is unlikely to turn out to be what was going to be one of the biggest year in terms of fiscal deficit. Instead, after about half a year we discovered that our revenues were now exceeding targets by almost 200 billion baht, and we’ll actually exceed that by the end of the year. In the end, the fiscal position is almost balanced rather than experiencing a big deficit. That of course means that our projection for debt-GDP ratio will also have to be revised. We have also already scrapped out plan for extra borrowing. If you recall last year we though we had to borrow something like 800 billion baht to finance the stimulus packages. We are now able to cancel 400, or half of that number because we can now use our extra revenues and we have strong growth, which will generate from the government income to finance those projects. 

 

Of course, we are well aware that there continues to be risks that we have to watch out for. Obviously what is happening in the global economy---the US still has a sluggish labour market, the problems that are being experienced in Europe and also the more flexible Chinese currency---contribute to the potential risk that we have to manage. So to mitigate those risks, we have put in place measures to make sure that our domestic demand continues to be strong. At the same time we have to diversify our export markets and also of course revive the tourism sector, which has been obviously the hardest hit sector following the political unrest. 

 

Just to give on what we are continuing to do, or some of the initiatives that we are taking, first, the “Thailand: Investing from Strength to Strength” programme continues, with a different source of finance. It would now be integrated into the budgetary process for the next two to three fiscal years. We have already dispersed almost half of the first package, that is, a package if 350 billion baht. For the remaining 400 billion baht, or even more, if you take into account public-private partnerships and also investments made by state enterprises, the next two to three years will see major investments in infrastructure, in the railways, in water management and also in schools and hospitals. By the year 2012, we hope to have transformed much of Thailand’s infrastructure so that we are more competitive. 

 

Secondly, we continue with our agenda to integrate. Last year we had the Chairmanship of ASEAN and we made sure that despite the financial and economic crisis, we would continue to make sure that integration region-wide continues. There were free trade agreements signed, for instance, investment agreement signed with India, and the ASEAN-China free trade agreement came into force at the beginning of this year. At the same time, we are also preparing to expand the integration program with our Dialogue Partners, so-called ASEAN +3 and the East Asian economies, the ASEAN +6. That agenda is continuing to be pursued by Thailand and ASEAN countries, now under the chairmanship of Vietnam.   

 

Thirdly, we recognise full well that a stable economic environment is vital for the private sector to flourish. So we continue to make sure that the fiscal programmes continue to be sustainable. From next year onwards, there will also be quite a comprehensive programme on tax reforms to make sure that we have a sustainable fiscal framework.  

 

Fourthly, we continue to put in new initiatives to attract foreign direct investment. The Cabinet has recently approved the tax incentives for multinational companies in establishing Regional Operating Headquarters in Thailand, by putting in a package which, I can say, is probably the most attractive in the region. We also continue to welcome foreign investment and recent announcements by Ford. Later on today, I will meet with the chairman of Mitsubishi Motors Company, to reconfirm Thailand’s status as a hub for auto production in the region. The sector of course continues to enjoy strong growth and production will be highest this year. The applications for privileges through the Board of Investment is up, both in value terms and project terms, reconfirming the confidence that our friends and partners have in the country despite the problems that we have seen during the last couple of months.   

 

Finally, to revive the economy and to build sustainability, we continue to invest heavily in the social sector. I already mentioned the health sector and also the education sector in terms of investing in hospitals and schools. Also, we are trying to create a greater sense of security for all our people, so not just those in the formal sector, but also in the informal sector, and most significantly in the agricultural sector. The income guarantee programme that we have run for the first time towards the end of last year would now provide added security and stability for farm income, which will enable greater stability for the Thai economy as a whole. 

 

I’m sure you won’t allow me to leave without addressing the political issue. What I would say is that over the last two to three months, where we have experienced one of the most difficult times, I’m sure not just for Thai people but for friends of Thailand, I would first like to express my appreciation for the understanding and support that many of you have shown during the crisis. The Government had exercised utmost restraint in trying to deal with the problem, and it was regrettable that there were losses that took place during April and May. But with greater stability, the Government now pushes for a plan of reconciliation where we try to address the political conflict and resolve it at its foundation. The five-points in the plan for reconciliation are the five points that have been identified as points where conflicts and differences have emerged, and we are already getting to work on all these components of the plan. The Government has drummed up a lot of support, and has invited widespread participation from all sectors to make sure that we undergo a period of recovery and reform to achieve reconciliation. The response has been good, we have had a number of initiatives from the private sector, for instance the Chambers of Commerce, the Federation of Thai Industries, as well as the civil society where a number of NGOs and a number of volunteers, particularly young volunteers are now showing their willingness to support this grand programme to try to resolve the political conflict.       

 

It won’t be easy. I have always said that this ride is never going to be smooth. But I think that as we have proven with the tackling of the economic problems, that when there is a clear plan and a clear determination, we can certainly walk together hand in hand and achieve our objectives. That same spirit I hope will be applied to politics, so with support and sincerity from all sides, I’m sure we can and we will overcome every obstacle.  

 

That spirit of cooperation, I think, was seen during the “Big Clean Up Day” a few days after the protests ended, when thousands of Thais and also some foreigners joined hands in doing what they felt was in the best interest of the country – clean up and put the country back in order. The events that you witnessed on “Big Clean Up Day”, I think was certainly characteristic of Thailand and the Thai people that you have come to know over many many decades. We now hope for your support and confidence, as investors, bankers, and as Thailand’s true friends. So, as our true friends, it only remains for me now to invite all of you to pick up the mantle, seize these opportunities, and make this vision of growth and prosperity a reality for the future. Thank you very much and Sawasdee Krub.

 

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Government Spokesman Bureau

Foreign Relations Division