FDI success fails to lift Thailand out of its low-growth trap

 

 FDI success fails to lift Thailand out of its low-growth trap

Thailand's political turmoil continues, with another general election set to be held by early February. And while the country's conflict with neighboring Cambodia is currently grabbing the global headlines -- and the interest of U.S. President Donald Trump -- the most pressing matter for the country's next leader will be the state of the economy, with growth slipping to a four-year low in the third quarter.

Priyanka Kishore argues that Thailand's success over the years in attracting foreign direct investment (FDI) is failing to lift Thailand out of its low-growth trap.

Widening investment gaps and other factors "have eroded manufacturing's competitiveness and discouraged international companies from embedding high-tech processes in local production," Kishore writes. "This, in turn, has impinged on the ability of Thai companies to adopt new technologies, learn new processes, integrate deeper into production networks and move up global supply chains."

Kishore adds that the economy is on a path to premature deindustrialization, but offers a solution: "With timely and targeted reforms aimed at boosting the country's physical and digital capital, raising the quality of the labor force, promoting innovation and empowering key institutions, Thailand can stem the premature manufacturing decline and turn its growth trajectory around."

Meanwhile, Henny Sender writes that all appears well for the Indian economy on the macro front. Yet that growth is patchy with some states, especially those in the south, where literacy is high and poverty low, doing far better than their neighbors in the north.

But now, she says, New York-based private equity firm Warburg Pincus is seeking to change this by bringing Chinese-scale manufacturing to India by investing in a joint venture that, if approved by regulators, would vastly expand the Indian operations of Haier, a leading Chinese home appliance maker. "Ultimately, the cooperation between Haier and its Indian offshoot could become a template for a country that has depended far more on low-end services than quality manufacturing."

Yet long-standing frictions between Asia's two largest nations are proving a challenge for the company in bringing Chinese manufacturing to India, and Sender writes that "many Indian executives share the distrust of their politicians, believing that the Chinese will deliberately lower prices to undercut Indian producers in the rare sectors where they may actually compete."

Elsewhere, Lauren Johnston says the e-CNY could alter China's social security and consumption constraints, and David Hutt makes the case for creating smart villages across Southeast Asia, not just megaprojects in big cities.