Interview with H.E. Apisak Tantivorawong, Minister of Finance Thailand

Business Focus: What are the main pillars of your current strategy in order to achieve the much needed political and economic stability in the coming years?

The objective of this government is to reform Thailand, this is fundamental for the future of our country and this is the key. Thailand as you know has been facing some political instability for around 10 years; this has created a level of uncertainty. We are looking to restore confidence in Thailand not just for foreign investors but for Thai investors as well. What happened is economic activity practically stopped however after this government came into power confidence has significantly increased. Naturally they know that this government is a temporary government as there is an election next year. As an interim government, this government planned to reform what couldn’t be reformed in the past, we are trying to fix everything.

The key thing for this government is to stabilise the economic situation and then lay the foundations for the future growth. When this government came into power investment was low, government spending was low and the economic situation was not great. During this government’s first year in power GDP growth was around 0.8%. This government planned to focus on a key measure that was in their control, government spending. On the spending side of things what can a government spend? This could include distributing the money to the people or investing in something more rational, to invest in Thailand’s future. We chose to invest in infrastructure, in particular transportation infrastructure. This government planned to invest in: railroads, high-speed trains, inter-city transport, shipping ports and also airports. These type of mega projects take time.

For our second year we are on track and expect to spend around 1.7 trillion Baht towards mega project investment by the end of this year. So that will be the catalyst for the private sector to invest in Thailand. As the government has spent a huge amount of resources we hope this will encourage the private sector to also invest more into Thailand. Luckily our private sector is in a very strong position however, over the past few years they haven’t invested in Thailand, they have invested abroad. A large proportion of the private sector are buying companies and assets in Europe and the US. It is clear from this activity that a lot of the private sector has wealth and money to spend, therefore our aim is to encourage these people to invest their money in Thailand and not abroad. The large majority of this 1.7trillion will be used towards PPP (public private investment partnerships) in order to encourage these investors to focus once again on Thailand. Using this kind of investment project will ensure a smaller proportion of the government’s budget being spent, as the costs are being split with the private sector. Apart from this we are trying to establish what kind of investor would help the future of Thailand. Around 20 years ago Thailand discovered natural gas within the gulf of Thailand, this was a boom period for investment into Thailand. This period is however coming to an end which therefore means the IS (investment demand) curve of Thailand will become flat. When we are looking for investors we have to identify what industry is going to benefit Thailand in the future. For example Thailand could provide food for the world. Thailand is also currently at the centre of car manufacturing, I think we are currently ranked 2nd or 3rd in the world in terms of production but we need to continue the growth of the industries we have invested in. We have therefore identified 5 industries that will be good for Thailand.

This so called S shape economy recovery you were talking about in Frankfurt in a speech here. You highlighted the main points your administration needs to follow, the path that Thailand needs to follow in order to regain its competitiveness within the region which is very very important as you said before the 2nd largest economy within the region and also as you correctly said Thailand is the platform of entry to whole region and even beyond. Recently a delegation from the Thai government has been approaching multinational companies around the world to showcase the opportunities available here, the human capital that you have, how competitive you are and last but not least the state of the art technology this country has especially applied to manufacturing. In a nut shell what would be the main selling points for multinational companies interested in setting up their operations here?

Asia is going to be at the centre of the future growth of the world and Thailand is at the centre of Asia. Look at the area surrounding us, Thailand is the country that has the best infrastructure. Despite this we are still looking to improve our competitiveness by investing more into infrastructure, especially transportation. Our transportation costs are still higher than those of developed countries we believe that after we have invested in infrastructure our transportation costs will reduce and align with the costs of developed countries. Costs are clearly a key consideration for anyone looking to invest into a country. We have a great number of supporting industries that can help support many areas of investment. For example Rolls Royce recently decided to produce their aviation engine in Thailand and because of this they will expand their investment over many industries across Thailand.

As a result of the incentives we provide to businesses, I believe many international companies will be attracted to Thailand especially when they the Asian market. We have 600 million people within the region and Thailand is the key. Apart from the tax and financial incentives that we have provided to investors we have also focused on improving the bureaucracy and the efficiency in doing business here so that when people come to Thailand they will feel that doing business in Thailand is easy. Most of the expats who live in Thailand are happy here and don’t want to leave, this is mainly down to the environment as the people are friendly here, the cost of living is low and the food is amazing. Japan has been the top investor in Thailand for almost 10 years and many of these Japanese executives who work here don’t want to leave. Many who have to leave end up returning and this is the nature of Thailand and the Thai people. So what we need to do is develop our infrastructure to support the needs of multinational companies so we have what they expect. We are not ready at the present time but we are close to the end.

BF: Going back to your speech in Frankfurt last year you were mentioning that Thailand needs to focus on the sectors that realistically speaking can bring in the near future a profitable return on investment. You also mentioned that high tech sectors like robotics, aviation, medical/pharmaceutical are the way forward in the coming years. Very exciting sectors I must say, could you please expand on this strategy please?

Those sectors are actually provided by international companies who we hire to determine what industries Thailand should focus on in the future and that’s the 5 industries I mentioned. These 5 industries will help Thailand to grow Robotics, Aviation, Biofuel/Biochemical, Digital and Medical health. After we introduced this focus, in just the first 6 months of this year there have been 12 applications for international projects and there are 20 more in the pipeline so the supply is definitely there! The key for a country like Thailand to grow from a middle-income country to a more developed country is research and development. So we are pushing very hard to induce companies who have knowledge and know how to set up their research centres here in Thailand. We provide a lot of incentives for not only the company but also for the researchers. We have attracted some of the best researchers in the world here as a result of our very generous tax incentive. We just continue to buy technology from everywhere and in order to grow our country to become a developed country we must be able to research ourselves. We will prepare our people on the technical side. So far the majority of graduates from universities in Thailand are involved in social sciences but we need to change. To become a developed country we need to focus our education on general science in order to diversify our workforce. This is where we are pushing and we know human resources is key in preparing ourselves. We even talk to the companies who want to set up research centres in Thailand and request they set up institutes that can educate our people to work for your company.

BF: As I mentioned before Human capital remains one of the most competitive advantages that this company possesses, when it comes to development of other industries such as tourism for example how optimistic are you in complementing the existing infrastructure with a new one in order to maximise the volume of tourism coming into your country?

All the tourists in Thailand are enjoying their time here basically because of the Thai people and their welcoming approach. So far what we have is our culture and the national resources that we have. What we are thinking is that we need to focus our budget on the history of our country and create more tourist attractions, places where people can learn about our country but also enjoy a spectacle. Transportation is key in order facilitate the growth in tourism here. We are always looking to attract more tourists to Thailand. Currently we have around 30 million tourists per year however in the future we are aiming to attract over 60 million. In order to achieve this we cannot just rely on the natural assets that we have we need to build, we need to create and provide for these tourists.

BF: You are a very respected individual when it comes to the international banking sector you have worked for some very important institutions and have been president of two major banks here in Thailand. You are now minister of finance and you have a huge responsibility on your shoulders, can you give the readers of the Guardian and the international investment community an overview of the resilience behind the Thai banking sector and what is the role the Thai banking sector will play on the development of your country?

The banking sector in Thailand has gone through a difficult time, especially during 1997 Asian Financial Crisis. If you look deep into the crisis it will become clear that those banks were insolvent. The government has imposed a lot of measures to support a large number of these banks however not all of them as some had to close down. With that experience the management of the banks are very conservative and know how to prevent the risks of this crisis and at the same time the bank of Thailand plays a very key role to push these banks to ensure they are strong. Thai banks are considered to be very strong and very technical with high liquidity. I would say now Thai banks are very strong but their only limitation is that when one compares them internationally, they are still considered to be quite small. Size is very important for a bank as they can share their resources that will lower operating costs, especially in regards to IT. Thai banks are playing a key role in supporting the growth of Thai industry. Most of the total debt of the Thai economy is local debt, the foreign debt is only around 6%. Most Thai investment is in Thai Banks. As a result of this situation Thailand is considered to be a safe haven within the emerging markets and after the brexit we have seen an increase in money entering Thailand. This situation may not be good for us as it’s making our currency stronger.

BF: Honestly speaking please be very transparent, do you think that brexit will affect the relationship between the two countries?

I do not think that Brexit will affect the relationship between our two countries because our exports to the UK are only about 1.8% of our total exports and the inward invest from the UK is only about 3% of total FDI. It will have a relatively small impact except for international money coming into Thailand.

BF: There was a Thai delegation a month ago visiting the UK in Manchester, can you give the readers and the international investment community an insight into the importance of Thai delegations visiting the UK and vice versa?

I think Thai delegations that visit the UK are looking for investment opportunities there especially after the brexit which means the property prices have decreased and the currency itself is weaker thus investors from abroad can acquire sterling a lot cheaper. For the UK delegation to Thailand I do not think that there is much of an influence as the UK does not represent a large proportion of FDI in Thailand. The UK are buying from Thailand but just a relatively small amount.

BF: When it comes to the importance of the brand Thailand being adequately showcased in the UK how important is that for you?

We promote our investment opportunities all over the world and not just one country we hold open arms to anyone who is interested in investing in Thailand. The key investor in Thailand is Japan and the second largest is China.

BF: In a few lines what would be the final message you would like the readers of the Guardian to maintain in their mind?

Thailand is a beautiful country and they should come and see it for themselves whether they are looking to invest or just as a Tourist. It is a country that they must visit.