SSC 260 : Introduction to Social Sciences : Economic Section Jaruwan Chontanawat Topic 3: Economic force in Daily life (III) : Economic problems and Solutions 23/09/2008

Outlines: Past – Bubble economy, inflation, Unemployment, exchange rate, etc. Solution: Fiscal and Monetary policies, International policy – FTA, AFTA Fact: Existence of various problems Old solution One alternative solution : sufficiency economy

Acknowledgement Aj. Panalert Siriwong

Bubble Economy Thailand had $90,000 million foreign dept (more than ½ of GDP) Most of them were used out of the economic system (ex. stock market)  Result in high the percentage of economic growth  But, in fact, it had low level of development on economic structures.

The Bubble Burst In 1996, Thai export growth rate was at 0% due to the lack of competitive advantages. Thai Baht was depended on USD.  US economic was in the way up,  Thai was not. Investor sold Baht back to the market.

  Baht was sold back to market…

End of the Bubble Bank of Thailand try to buy Baht from the market until the reserved fund was run out. Baht was floated, IMF loan.

Changing in Exchange Rate Shift from 25 Baht/ 1 USD 40 Baht/ 1 USD

Inflation Solution Cost push  Fiscal Policy Demand pull  Monetary Policy

Fiscal Policy Used by = Government Tools = Government revenue (Taxes) and expenses  Objectives: Efficiently resources management Encourage income distribution. Stimulate economic growth Balance economic stability

Fiscal Policy as Economic Solution Expansionary fiscal policy (combat deflation)   government expenses  taxes Contractionary fiscal policy (combat inflation)   government expenses  taxes

Thai activities on fiscal policy Expansionary fiscal policy  Encourage economic growth and balance economic stability In   Government spending  Taxes  Invest in economic infrastructure, public utility.  Reduce import taxes of some capital goods or production materials to reduce production costs.

Monetary Policy  Used by = Central bank  Tools = money flow and loans  Objectives: Balance economic stability, Encourage higher rate of employment, Stimulate economic growth, Control trade balance, Encourage income distribution.

Contractionary monetary policy (combat inflation)  Bank of Thailand sell stock  Increase reserved fund = Decrease personal loan  Raise saving interest rates = People save Expansionary monetary policy (combat deflation)  Bank of Thailand buy stock  Decrease reserved fund = release more personal loan  Reduce interest rates on bank loan = New business = Jobs  Reduce saving interest rates Fiscal Policy as Economic Solution

Thai activities on monetary policy Balance financial stability  Strengthen financial institution stability Sell stock to private sector Control loan pay out to private sector Support economic and social development  Encourage commercial bank to increase loan to agricultural sector.  Provide financial support to agriculture and co-op bank.

International Economy Different economic system  Free-market economic (Capitalism)  Command economic (Communism)  Mixed economic

Capitalism Free decision making by individuals  People have rights to owned business and on profit they made  People can consume whatever they want The price mechanism Marketing as a key success Government not involve on economic activity  Only monitor and control situation

Communism Contrast to capitalism Government occupy resources and all production factors Private sector has no rights on production factors Government control over all production processes and resources allocation All business units and households produce and consume whatever government required.

Mixed economy Combination of Capitalism and Communism Government and private sector cooperate to solve basis economic problem Production factor come from both government and private sector

Capitalism ingredients  Private sector has rights on some assets and freedom to product or consume  Competitive oriented, price mechanism Communism ingredients  Government operate on business unit that has high influence to majority of population i.e. Electric and water supply, and transportation Mixed economy

Baht Value Internal Influence  Influenced by rate of inflation  Rate of inflation  Baht Value  External Influence  Rate of exchange to other national currency (How much of Baht can buy 1 unit of other currency) EEF (Exchange Equalization Fund) which is a subdivision of the Bank of Thailand is responsible for Thai currency adjustment.

Thai’s currency adjustment methods Fixed exchange rate method  Tied with U.S.Dollar fixed in a period of time. Daily exchange rate method  Discuss with member from commercial bank and EEF concern Demand and Supply of U.S.Dollar Exchange rate adjust by EEF  EEF adjust rate of exchange by moritoring Demand and Supply of U.S.Dollar Money basket  Adjust by monitoring group of currency which are trading alliance of Thailand

Free Trade Area (FTA) Thai’s current economic strategy Trading agreement between 2 countries WTO wasn’t benefit Thai trading agreement  Because too many member (145 countries)

Thai’s main customer is U.S., Japan, and E.U. reached peak point = Thai tried to expand market to other region. Thai open FTA to Bahrain = Open middle east market Thai’s FTA with China encourage import value from $20m to $200m (10 times) Free Trade Area (FTA)

Current: Thai is negotiating for increasing FTA activities with… China India Mexico U.S. Australia E.U. South Africa Free Trade Area (FTA)

AFTA: Asian Free Trade Area An agreement by the Association of Southeast Asian Nations, of local manufacturing in all ASEAN countries. consists of 10 members;  Brunei  Indonesia  Malaysia  Philippines  Singapore  Thailand  Vietnam  Laos  Myanmar  Cambodia

Increase Asian's competitive edge as a production base in the world market  The elimination of tariffs and non-tariff barriers Attract more foreign direct investment to Asian Primary Goals

Expand Thai’s International Trade  Free trade among Asian encourage increasing in trading circulation  Exchange in production factors (raw material)  Lower cost for business  Create competitive advantage in east of Asia region  More investment from Japan and U.S. AFTA and Thai Economy

High trading expansion between Thailand and other members in AFTA ( )  Thai export value In 2003 = $80,049 Million In 1993 = $37,325 Million  Thai import value In 2003 = $75,015 Million In 1993 = $46,163 Million AFTA and Thai Economy

Export  Asian became Thai’s no.1 export market replacing U.S.  Important export goods: Computer and equipments, automobile, chemical products, steels, and rubber. Import  Asian became the 2 nd market follow Japan market for Thailand import market.  Important export goods: Chemical products, electrical circuit, computer and equipments, raw gasoline, and natural gas. AFTA and Thai Economy

China Economic Development Mega-Projects Investment Changing to capitalism

Current statistics Economic growth Inflation Trade balance

Inflation Gas price decrease Raw gasoline 2006 = $65/Barrel 2007 = $60/Barrel Government’s fiscal policy GDP 2006 = 4.5% 2007 = % Economic forecast for 20 07

Trade balance +4,526 million Baht New market were Eastern Europe with 94% increase, India, Africa, and South Korea at 22% Export goods had been increasing in all types of goods including agricultural and industrial agricultural products with 28.8% increase Major agricultural and industrial agricultural products most had been increasing including; rice, cassava, food products (frozen, transform food; shrimp, chicken, fruit, and vegetable) and sugar

‘Basis of Thai economy is agricultural sector’ ‘Fact ’

Our prior main focus was to increase revenue and economic growth of “the country” Thai major economic obstacles

National income was continuously increasing  SED-Plan 1-3 = 7-8% per year  SED-Plan 4 = 5-6% per year  SED-Plan 5 = 4-5% per year  A decade before economic crisis (SED-Plan 6- 7) was a period that NI increased tremendously (8-9% per year and more than 10% in some year) Refer as one of the countries that had dramatically high growth rate Result from the prior focus

ข้อมูลพื้นฐานเศรษฐกิจไทย

Problems of majority of population (most are poor in urban and country side)  Still not independent and weak, lack of opportunity to migrate for better living in the city  Poor, or sufficient only to lives day by day  Unemployed, or done illegal work i.e. prostitute, drug dealer  Gap between rich and poor getting wider Result from the prior focus

Other problems…  National resources deficiency  Environmental problems  National and personal debts  Lack of competitiveness  Depend on export markets Result from the prior focus

Question: Where did the NI go? It went to a few Thai millionaire + Foreigner who was the capital holder (owned foreign technology, product, and services) The consequence was that those people became richer and the gab also wider

Same old solution Most of solution done through fiscal and monetary policy  Heavily stimulate economic by previous governments Money input to economic system  Fiscal policy  Monetary policy  To stimulate government spending, private consumption, investment, and supporting export spending

 Money input to economic system through fiscal and monetary policy was doing well to stimulate consumption, but…  Non-competitive producer still survived in the market  Highly supported SMEs and OTOP but lacked of products that were competitive and profitable  Many policy aimed at stimulating export market no matter that product were competitive or profitable  High value of export but still depended on import production factors Same old solution

Same old solution was to use money as the solution to economic problem But never fixed problem in the supply side (production) which was the basis of the economy. And the main reasons might be either it was difficult to do so, or too difficult for the government and private sectors which resulted in many hidden agendas. Same old solution

Populist project Many poverty project Eer-Ar-Torn projects Help poor people? Or for short-term political benefits? Problems in the Country Side

Higher credit card debts due to easily card issued Credit offerings for consumer were everywhere Fully stimulate property investment to enlighten the business Money flow from internal and external came into stock market due to low saving interest rate Problems in the City

Prices of lands, houses and properties, and stocks were increasing Consumerism High purchasing of foreign luxury products, effected trade balance Bubbles were created from many forces of market to stimulate high purchasing activities from all sectors of economic stakeholders Problems in the Nation

Stocks price went up but not the stock in the production sector which was the basis of the economy Those were commercial bank, energy, communication, property, and entertainment business But in production unit still remain the problem of the ability to be “profitability” and “productivity”

Basic wage was not increased New graduates still out of job Majority of people had not benefited from the recent economic growth

Average debt/household is 134,190 Baht per household (Average 20,000 Baht increasing/household)  Formal debt 73.9%  Informal debt 26.1% Research found that 55.2% of the samples had debt payout problem ผลสำรวจกลุ่มตัวอย่าง 1,187 ทั่วประเทศของ ศูนย์พยากรณ์เศรษฐกิจและธุรกิจ มหาวิทยาลัยหอการค้าไทย 84% of population had higher expense than income earning due to the increasing of …  price of goods  interest  gas price What did they do?  Sell personal stuffs  Create debt (lend from their relatives)  Withdraw their saving Living with debt ?

From the violation in 3 provinces in the Southern of Thailand:  Song-Kla had number of travelers decrease by 22.7% Rate of hotel reservation in Hat-Yai reduced by 20% Economist projected that the 2007 economic in Pattani, Yala, and Narativas would increase only by 1% or 0% from 2006  Account for 100,000 million baht economic damages Southern tourism ?

One thing create tremendous demand, high influence which stimulate Thai southern market Marketer views as a “Product of the decade” Quantity demand for over 60 million, create money flow more than 50,000 million baht or nearly 1% of Thai GDP Stimulate Thai southern market particularly Nakornsri-dhummaracha Result in increasing air flight on Bangkok- Nakornsri-dhummaracha to serve high demand of travelers What was a HERO for the South of Thailand economy ?

Gas price push up to 30 baht/litters since May 19 th 2007 may result in;  price of goods  energy costs  public transportation High gas price ? =  price = Slow economic growth

Fuel price effect  costs of production  price of goods  Inflation  demand  production  unemployment

Price of goods raise continuously People change their consuming behavior People became more concern on their expenses  Effects many businesses Fuel price effect

Advantage for Instant/ fresh food House brand Public transportation Natural gas station Public hospital Disadvantage for Restaurants Luxury clothing/ accessory, expensive products; automobile, luxury watch Tourism business, related business Movie theatre, entertainment complex, concert

Politic ? Coup d'etat Bombs Party dissolution Corruption Tourism Political instability Investment

Consumptionalism? Unlimited wants  Cell phone  Motorcycle Asian trend  J-pop fashion  De Jung Kuim travel  Rain’s concert  F4 series Thais don’t travel Thai, go abroad In 2006, 55,000 million Baht moved aboard

Other problems Natural disaster Devastations and flooding Tsunami-Earthquake Epidemic Bird flu  International trade  Trade Barrier  Strengthen of Baht value

Bank Interest Rate Lower than inflation rate Interest rate  Saving deposit = 0.75%  3 month period time deposit = 2.25%  6 month period time deposit = 2.25%  12 month period time deposit = 2.25%  24 month period time deposit = 2.25% Inflation rate

Types of investmentLiquidityReturnRisk 1. Bank SavingHighLow 2. Treasury Note Moderate Low 3. Bond/EquityModerate 4. GoldModerateUnstableModerate-High 5. Currency ExchangesLowUnstableModerate-High 6. AssetsLowUnstableModerate-High 7. SET, MAILow-HighUnstableModerate-High Types of investment

 gas price ?  costs of goods  inflation  Baht value  Baht value reliability  Switch to keep gold  Demand of gold  price of gold!!! Why did price of gold raise ?

Solution? Focus to economic activities or investment that either have  possibility to be sold  competitive, and profitable or  crate income distribution,  money saving in the economy  income from foreign country.

Cannot be sold No market Debt of production Marketing analysis dismiss Non-Marketing knowledge Creativity Quality assurance Competitive advantages  Focus on producer’s needs  Ignore what market needs

Capitalism Pros  Efficiently resources allocation  Attractive from profitability  Freedom to select what to produce  Competition  Profitability from price setting  New production technique to lower costs, higher profit  Resources saving  Efficiently resources usage for high profitability  Higher NI

Cons  Some people focus only on benefit but forget morality  Unfair competition in some situation  Wider gap of income  Tent to become monopoly Political involvement of some producer create high bargain over pricing control or price of production factor Capitalism

HM the King gave an address 9 years ago that do not leave the entire of Thai population with capitalism economy, but do leave some space for the sufficiency economy

Sufficiency Economy and Previous Government Sufficiency Economy had been used only to be as …  Strategic to win the erection  Unclear guideline  Promote as the Motto and Gimmick which succeed in political objectives But still far away from “sufficient living” or sufficiency economy which does not concern money or national GDP

พอประมา ณ มี ภูมิคุ้มกัน ในตัวที่ดี มีเหตุผล เงื่อนไขความรู้ รอบรู้ / รอบคอบ / ระมัดระวัง เงื่อนไขคุณธรรม ซื่อสัตย์ / สุจริต / พากเพียร / อดทน นำสู่ ชีวิต / สังคม / เศรษฐกิจ / สิ่งแวดล้อม สมดุล / มั่นคง / ยั่งยืน แนวพระราชดำริ และหลักการที่สำคัญ

สรุป ปรัชญาของเศรษฐกิจ พอเพียง Reference : Assistant Professor Dr. Suksan Kantabud, Mahidol University, 1 st National Conference, Bangkok University, August 2007.

เราจะเลือกหาน้ำใส่ตุ่ม หรือ จะเลือก อุดรูรั่วของตุ่มก่อน ? ค่าเทอม ลูก ปุ๋ยเคมี ยาฆ่า แปลง ของใช้ใน บ้าน หวย ! ค่าเหล้า ค่า บุหรี่ food ดอกเบี้ย Application of Sufficiency philosophy for the individual level เสื้อผ้ายารักษา โรค

‘Basis of Thai economy is agricultural sector’

Sufficiency Principle Independent  Morality  Society  Resources  Technology  Economy Balance  Human  Plants (Forest)  Animals  Soil  Water

Independent Morality  Religion and cultural values in the community Society  Encourage each community to coordinate and transfer their own wisdom which will benefit both parties Resources  Effectively utilization of human, resources and social wisdom

Technology  Study, research, and experiment to create local technology Economic  Rice, meats, vegetable, and fruits are sufficient in the area and enough to be sold to other region Independent

Income and expenditure Allocate land into 4 areas  Rice  Agricultural plants  Fish  House and animal farm + grow some vegetables Balances

Activities Sufficiency Economy CapitalismReflection Production Aims at consuming Labor = free Aims at selling Labor = costs Use technology Depended on technology, money ไม่ยั่งยืนในการใช้ ทรัพยากร Transferring activities Help each other Barter system Cooperate within community Marketing Agricultural sector are at the bottom Depended on export market Consumption Consume own production Buy everything, Consumerism Media play major role to purchasing activity Consumerism Allocation Community’s rightsPatent, legal rightsIndividualism Capitalism vs. Sufficiency

1. มองการณ์ไกลในการบริหารจัดการและตัดสินใจ ในเชิงนโยบาย อย่างมุ่งหวังกำไรในระยะสั้นแต่ คิดถึงผลกระทบในระยะยาว 2. ให้คุณค่าแก่พนักงานอย่างจริงใจและพัฒนา พนักงานอย่างต่อเนื่อง ( รวมถึงการพัฒนา พนักงานของตนเองให้เป็นผู้บริหาร ) หลีกเลี่ยง การให้พนักงานออกแม้แต่ในยามทุกยากทาง เศรษฐกิจ เพราะพนักงานคือสินทรัพย์ ( ที่พัฒนา ได้ ) ขององค์กร 3. จริงใจและหวังดีต่อผู้มีส่วนได้ส่วนเสียของธุรกิจ ทั้งหมด รวมถึงประชากรและสังคมในอนาคต 4. ให้ความสำคัญต่อการพัฒนานวัตกรรมทั่วทั้ง องค์กร ทั้งในส่วนของผลิตภัณฑ์และขบวนการ ให้บริการหรือขบวนการผลิต 5. ใช้ทรัพยากรอย่างมีประสิทธิภาพและประสิทธิผล Application for Business sector Research work : Dr Apichai Pannasen ผลของการศึกษา ( แนวทางปฏิบัติ 10 ประการแห่งองค์กรธุรกิจแบบ เศรษฐกิจพอเพียง ) จากการวิเคราะห์ (grounded theory) พบว่าธุรกิจที่ ประสบความสำเร็จอย่างยั่งยืนในการศึกษานี้ มี แนวทางในการดำเนินธุรกิจที่คล้ายกัน 10 แนวทาง ดังนี้

6. ใช้ และ / หรือพัฒนาเทคโนโลยีที่มีประสิทธิภาพ แต่ราคาไม่สูง โดยเฉพาะเทคโนโลยีแบบไทย ๆ หรือพื้นบ้าน 7. ขยายธุรกิจอย่างค่อยเป็นค่อยไป เมื่อพร้อมทุก ด้านเท่านั้น 8. ลดความเสี่ยงโดยการมีผลิตภัณฑ์ที่หลากหลาย ตลาดที่หลากหลาย และการลงทุนที่ หลากหลาย โดยอยู่บนพื้นฐานของความรู้จริง 9. แบ่งปัน รวมถึงการแบ่งปันองค์ความรู้ที่มีเพื่อ พัฒนาตลาด เพื่อผลประโยชน์ที่ตกแก่ผู้บริโภค และสังคม 10. สร้างวัฒนธรรมองค์กรที่มีจริยธรรม ความอดทน และขยันหมั่นเพียรเป็นค่านิยมพื้นฐาน ผลของการศึกษา ( แนวทางปฏิบัติ 10 ประการแห่งองค์กรธุรกิจ แบบเศรษฐกิจพอเพียง )

Family undependable Society Sustainable Community Sufficiency

New picture of Economy GDP is no more the indicator of economic development, be only part and not core of the it “Sustainable Development“ became ideal path for every countries “Bhutan” was an undeveloped country, but outstanding example for this new development, because it was using GDH as the development indicator Not GDP but GDH (Gross Domestic HAPPINESS) United Nation’s Development Project (UNDP) began to develop new indicator referring to GDH

Thank you