The government allocated 15-16 billion baht in the 2024 fiscal budget to the Competitiveness Fund in a bid to strengthen Thai competitiveness and restructure industry.
Danucha Pichayanan, secretary general to the National Economic and Social Development Council (NESDC) said the government planned to allocate an additional 16 billion baht to the Competitiveness Fund in order to strengthen Thai competitiveness.
The 10-billion-baht Competitiveness Fund was set up as a financial tool of the government to accelerate investment in 10 targeted industries since 2017. The fund is a significant tool for the government to draw targeted companies to invest in Thailand. The Competitiveness Fund for Target Industries Act 2017 was announced in the Royal Gazette in February, 2017.
“The fund is a tool to persuade investors to invest in projects that can restructure Thai industry especially among the high technology industry. The government planned to attract upstream and medium- stream industries of electronics to establish in Thailand such as wafer fabrication which is an upstream of the electronics industry.”
Many countries such as the US, Germany, Japan and Singapore support fund to foreign investors, in case of Thailand alone tax privileges might not sufficient to persuade for investment while in long term tax privileges will no longer to be a significant tool to drive investment because Thailand needs to perform on the requirement of the Organisation for Economic Co-operation and Development (OECD)
The fund also is a tool to restructure Thai industry to transform it into a high technology industry.
Thai economy is a potential to grow by 3%
“Next 3-4 years, the Thai economy has potential to grow by 3% based on the assumption that without any impact to the global economy thanks to the development of electrical vehicles which are expected to be operated within a year and half.”
However, if Thailand can restructure mode of production both in the farm and non-farm sector, the Thai economy will have more potential to grow by 5-6% from better exports and more supply chain to the global market.
Thailand also needs to upgrade skills of labour in order to increase productivity which plays an important role for restructuring mode of production.
The necessity to build inclusive growth
In order to create inclusive growth, Thailand needs to improve better income distribution including an increasing opportunity for Thai people to earn for their income.
In the past ten years, income distribution among the Thai population has improved with 6-7 times the income gap between the first 10% of the richest group and the 40% of the bottom group. Currently, the income gap between those groups was narrowed to 6 times.
The 13rd national economic and social development plan (2023-2027) is aimed to narrow the income gap to 6 times in 2027. The plan aims to assist farmers and each community to generate more revenue, as well as including farmers to state welfare. Currently, around 15 million people are not included in state welfare.
Thailand is at risk from an aging society because of a lesser workforce while they have to shoulder the burden for an expense to take care of the elderly. In 2023, elderly accounted for 20% of the total population while a projection showed there would be only 30 million Thai population in the next 30 years if without any measure to stimulate the birth rate. Currently, only four taxpayers out of a total 11 million people in taxation.
Decreasing the Thai population would cause more severe pressure on the fiscal. Currently, only 13-14% of the country’s income comes from four million taxpayers out of 11 million taxpayers.
Thailand needs to implement tax restructure in order to generate more income to the country and additional proportion for the investment budget such as an increasing of value added tax, increasing land tax and introduction of inheritance tax, land lax.
Without tax restructure, the government needs to further conduct a deficit budget which was in-efficiency fiscal in the long term because the government will have additional burden from a public debt.
Investment budget also accounted for only 20% to GDP in this fiscal year while the past several years investment budget accounted 23-24%.
“Before Covid-19 pandemic, the public debt accounted for 43% of GDP which had room about 16-17% for the government to borrow. Currently, the public debt to GDP accounts 60% to GDP, therefore the government has room to borrow only 8-9% if there is any crisis because the ceiling of the public debt to GDP is 70%.
