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Mr. Cari, the chairman of World Policy Institute, honorable members of the board, distinguished guests, ladies and gentleman. I must thank you, World Policy Institute, for providing me an opportunity to share my thoughts on the challenges that revolve around the economy, and the regional and global implications of how Thailand will make its way through a period of transition and change. We all know that no society in the 21st century can sustain any form of progress in the well-being of its people without at least two basic foundations. The first one is political stability. The second one is the ability to create economic activities that allow growth and readiness to shift its creativities to sustain wealth.
Ladies and gentleman, let me tell you the tale of two cities, which is not written by Charles Dickens. This is the tale of parallel progress, of Washington, D.C. and Beijing. Each has its own history. As the years go by, the two cities have been seen as rivals which offer competing models for growth and prosperity. One is free market capitalism with the so-called “open democracy” as the foundation of its economic model. The other one is state-led capitalism, with the central control system by one party. Both of the models have proven to be successful in a very dramatic way, from the past to the present. Admitting that the Chinese model was fitting to the change of attitude among the leadership of the country at that time, in parallel with the change of economic models in the West, in which the definition of free trade benefits China’s shifting position from a closed market to a semi-open market. But we must admit, also, that both models are now having to adjust themselves to the new reality: the reality of dramatic change in speed and character of technology for industrial production, the change from a country-based product to a network of global design, global sourcing, and global production. This extraordinary change upends the normal internal economic adjustment of the country and made it very difficult to find a simple economic adjustment.
We must recognize that advancement in the wealth management technique and technologies also upends the normal linkage between capital and changes in production. However, we probably agree that one common thread for survival in this place of so-called “new normal” is either you have the ability and willingness to change or you don’t. Thailand, like other countries, cannot get away from this new normal in the international context.
Ladies and gentleman, there is a tale of a poor English teacher in China who rose to the list of the world’s wealthiest people. He neither built a big factory nor invested in any production facility. But people paid for his service simply to reach the level of supply and demand on a grand scale. I believe he must feel thankful to the Internet. I hope you can guess who he is.
Ladies and gentleman, amidst the global economic slowdown, the pattern of trade has significantly changed due to the development of information technology infrastructure and increasing number of population who is able to access to the internet. E-commerce has become a new engine that sustains growth for both developed and developing economies. According to the UNCTAD [United Nations Conference on Trade and Development] report last year, the value of global business-to-business e-commerce, or B2B e-commerce, in 2013 exceeded $15 trillion U.S. dollars, while global business-to-consumer, or B2C, e-commerce still accounted for an estimate of $1.2 trillion U.S. dollars. This segment has grown at a rapid pace, especially in the Asia and Oceania region, where B2C segment is expected to surge from 28 to 37 percent between 2013 and 2018. Due to the incremental growth of cross-border e-commerce trade, international postal deliveries of small packages and parcels have risen by 48 percent between 2011 and 2014 globally.
For both Asia and the West, I believe these numbers provide us with clues for the new growth opportunities where access to networks is the key—meaning the networks of consumers and factors of production across geographical boundaries. Unlike the economy of 20th century, when access to centers is the rules of the game, today businessmen who do not have big factories are not the owners of multinational corporations can manage to reach and satisfy the needs of their customers worldwide. Through networks of production and distribution, we can assist the new communication technology.
Today’s economy is increasingly decentralized. Consumption and production are more and more dispersed. We could imagine that American producers can sell their products online directly to consumers in the Western part of China without having to spend business hours in Beijing and Shanghai. Vice versa, a Chinese producer can bypass New York to offer their products to customers in New England and the mid-Atlantic states. The network economy has provided the people, both in small and large businesses, with the ability to produce and access customers at lower fees. We, as a global community, must put special emphasis on how each country can invest and share risk with the people to create growth collectively.
Ladies and gentleman, another tale is about the keeper of a road that nobody cares about since the Portuguese discovered a possible sea route from Europe to Asia. The Portuguese did offer an alternative trade route with substantial margins for the goods carried. Although you might lose half of the cargo on the way, you still did not lose your shirt. Since the demand for spices was overvalued, the merchant happily cheated everybody.
Ladies and gentleman, the heavy load transport through the sea has been with us until now, and the land routes from Asia to Europe have been neglected. If the world’s economy is driving like the good old days, probably not so many people would be interested in finding an alternative in life. But, since the situation goes away, I believe any country should consider all possibilities.
Ladies and gentleman, today there are two major initiatives that I think have great potential to accelerate growth and leverage quality of growth that were brought into being by the merchants of the network economy. One is the China-led “One Belt, One Road” to develop transport and logistic connectivity. It will pass through some city countries, which include about 50 percent of the world’s GDP. And the other is the U.S.-led Trans-Pacific Partnership Agreement, the TPP, between 12 participating countries, which account for more than 40 percent of the world’s GDP.
I have not seen these two initiatives as antagonistic, but rather a kind of two parallel processes that, at a certain point, will create mutual economic benefits for Asia and the West. We must overcome the stereotype that perceives China and the U.S. as merely the two opposing political superpowers. In reality, the economy development during the past decade shows us how interdependent these two economies are. China is the largest foreign holder of U.S. government securities, with 1.24 trillion USD worth. With a total trade volume of $521 Billion USD in 2014, the US is China’s biggest trading partner. Total U.S. foreign direct investment in China is $265.77 billion USD at the end of 2014, while Chinese FDI in the U.S. is estimated to have reached $11.9 billion USD. Keeping this interdependence in mind, I believe Southeast Asia, the region that sits in between the two great initiatives of the two major economies, must put special emphasis on how to enhance the mutual economic benefits with its counterparts. For Southeast Asia, in the 21st century, the geopolitics should be about how to enforce the network of wealth creation for the people that stretch across national and regional borders.
Ladies and gentleman, let me tell you the last tale about a Thai restaurant. No matter how many times the master chef tries to teach his protégé, the young man keeps making mistakes in mixing the ingredients. Customers are kept waiting, hungry, and mad. Once the customers are served, half of them got diarrhea afterward. The moral of this tale is that one must make the written recipe right.
Ladies and gentleman, why some people may underline the unique characteristic of Thailand in terms of its history and developmental power. The country itself cannot avoid coming to terms with the global challenges of the 21st century. For half a century, the Thai economy has incrementally integrated into the global economy. Values of Thailand’s export productivity and FDI in a country have shown us clearly how far the growth of the Thai economy has been interwoven with the fate of global economy.
Against this context, we shall consider Thailand’s draft constitution with a very simple question: Will the latest draft constitution enable the country to grow and become stronger in the present world, or will the latest draft constitution provide Thailand with a sufficient institution of infrastructure for investment, production, corporations, and businesses?
Ladies and gentleman, due to the framework set out by the latest draft constitution, it is difficult to foresee a government that is responsive to the people and the challenges of the 21st century. According to the new draft, the 200 seats at the house will be appointed by the so-called ‘experts.’ The Senate will also have plenty of power to block legislation. Regarding the constitution reform, it’s scope of jurisdiction will be expanded. The court will have the power to intervene in cases based on petitions filed directly by individuals without the requirement that an actual dispute be brought by political opponents or other courts. If we consider the doctrine of the separation of powers as the foundation for growth and stability, the critical issue that we shall examine is whether the judicial power will trespass the provinces of legislature and executive office. For a government to be able to manage the economy against the global slowdown, I hope that there will be no over-enforcement of the judicial power. Experiences of SOA countries show us that, if unchecked judicial review can be inappropriately used as a delayed tactic, that, in turn, becomes an impediment to economic policy implementation.
Ladies and gentleman, I believe that the foundation for a country to create growth and prosperity is to build trust in the global community. The constitution shall protect the rule of law and provide at least minimum level of freedom of speech that facilitates economic cooperation between the people and the global community. Trade and investment cannot forge if there is no certain degree of confidence provided by the rule of law. Against the transition and change, Thailand must leave behind its weaknesses. The country shall find a sensible way to regain its political stability and economic dynamism. I have already proposed the way we should think of the phenomenon that is the world today. Thank you very much for your kind attention.