Meeting the Challenges from Globalization : A Historical Perspective and Future Outlook

1. Meeting the Challenges from Globalization : A Historical Perspective and Future Outlook (เหลียวหลังแลหน้ากับการท้าทายจากกระแสโลกาภิวัฒน์) Narongchai Akrasanee, Ph.D. TDRI and FPRI Presentation prepared for the 2002 TDRI Year-End Conference “Meeting the Challenges from Globalization” Ambassador City, Jomtien, Chonburi December 14-15, 2002

2. Introduction Long history of having to meet the challenges from globalization Future outlook of the challenges is more complex and multi-dimentional

3. 1850 -1855 Colonization or Trade Liberalization? • Threat from Great Britain Trade Liberalization (Bowring Treaty, 1855)

4. 1932 -1935 Socialism or Capitalism? • Change from absolute monarchy to parliamentary democracy • Debate on economic regime • Global protectionism and global recession State Capitalism

5. 1957 - 1960 State Capitalism or Private Capitalism? • Revolution led by F.M. Sarit Tanarat • US influence to adopt the Bretton Woods System, i.e Private Capitalism a la World Bank, IMF, GATT Private Capitalism

6. 1980 – 1984 Import Substitution or Export Promotion? • 1979 Second oil crisis US$ 13.2/B, 1977 to US$ 40/B, 1980 Oil import bill, 31% • Slow growth (4-5%), C/A deficit (7.4%), rising foreign debt (DSR 17.6%, 1980) • WB - SAL conditionality Export Promotion • Devaluation in 1981 (8.7%), 1984 (14.8%) • Investment incentives • Reduced protection • GATT membership in 1982

7. 1989 - 1993 Financial Protection or Financial Liberalization? More Trade Liberalization? ICT Protection or ICT Liberalization? • High growth from 1986 + fiscal and financial strength • Industrialization process created demand for downstream industries (Iron and steel, petrochemicals, oil refinery)

8. 1989 – 1993 (cont.) • Growing need for commercial infrastructure • Ability of private sector to raise foreign money Financial Liberalization • 1990, Signed IMF Article 8 (Lifted FX control) • 1993, BIBF licenses, 47 granted • 1991, New SEC Law and Office

9. 1989 – 1993 (cont.) • Imminent conclusion of GATT –Uruguay Round for trade liberalization (started 1986) • High export growth was reassuring More Trade Liberalization • Lifting import ban (1990) and reducing tariff rates (1991) for automobiles • AFTA 1992 • APEC Summit 1993, Community of free trading nations

10. 1989 – 1993 (cont.) • Rapid development and growing application of ICT worldwide Limited ICT Liberalization • Private investment in fixed line phone and mobile phone

11. 1997 - 1998 Slower Liberalization or Faster Liberalization? • 1993 – 1995 --- Bubble economy due to foreign capital inflow • 1994/1995, Annual net inflow = US$ 20 B • Financial and economic crisis in 1997 • Liquidity problems at financial institutions started in 1996 • Nov 1996 – May 1997 --- attack on the Baht and its defense 2 July 1997, Baht floatation (July – Dec 1997, Baht25 Baht48)

12. 1997 – 1998 (cont.) • Questioning global market capitalism (Privatizing gains, socializing losses) • Need for IMF bail-out (US$17.2 B), and IMF conditionality Faster Liberalization • Liberalization of financial and insurance sectors • 11 Economic Laws

13. 2001 - 2002 Local or Global ? • Global finance has too much inherent risks • Dominance of US$ • Volatility of capital flows and exchange rates • Influences of hedge funds, investment bankers, rating agencies (Moody's, Standard & Poor), analysts and commentators • Negative reaction to foreign elements in financial crisis in 1997

14. 2001 – 2002 (cont.) • Global trade is highly competitive and at times unfair • China in world trade, plus India, former Social Union, and many others • WTO system is not development friendly enough - Tariff liberalization but growing NTBs - Pressure for services liberalization

15. 2001 – 2002 (cont.) • ICT and E-business development is a handicap • Global IPR system makes new technology acquisition very costly • Unsatiable appetite of MNCs for expansion, merger and acquisition • International terrorism adds complication to international economic relations

16. 2001 – 2002 (cont.) • But new WTO-Doha Round promises to be more development friendly, and • Potential of Asian markets, with GNP at 28% of world GNP Local / Regional Link – Global Reach

17. Local / Regional Link – Global Reach • Active participation in multilateral trade and finance systems • Promoting regional and bilateral cooperation in trade and finance • ASEAN (AFTA) • GMS • ASEAN – China, ASEAN – Japan, ASEAN + 3 • Bilateral with China, Japan, Australia, India, etc. • APEC • Regional financial arrangements (Chiangmai Initiative, Asian Bond, etc.)

18. Local / Regional Link – Global Reach (cont.) • Applying global business practices to promote sectors with competitiveness potential (processed foods, fashion goods, automotives, tourism, etc.) • Cluster approach • Logistics approach • IPR system development (innovation, commercialization, protection, securitization)

19. Local / Regional Link – Global Reach (cont.) • Promoting grassroot sector and SMEs • Supporting domestic demand • Applying global standard of good governance