41084 July 2007 TEN YEARS ON AND BEYOND: REMEMBERING THE 1997 ASIAN CRISIS But pundits and policy makers should reflect on the fact that many nations, notably in the Middle East and in Latin, have failed to make this vital transition. Hence the challenge and the urgency facing Thailand today, Dr. Matin said. Remarkable Recovery After Slow Start Though initially slow, Thailand has made a remarkablerecoveryfromthe1997financial crisis, led by strong exports and growth in privateconsumption.Overallgrowthpeaked at an annual average of 6% in 2002-2004 Ten years after the Asian Crisis,Thailand has fewer poor peo- but has fallen to 4.5% since. ple and become more integrated with the global economy Export growth has been significantly faster Inthedecadesincethe1997financialcrisis, thanthatforGDP,export'ssharerisingfrom Thailand has become wealthier and has 47 to 67 percent of GDP in a decade since fewer poor people. The nation has become the crisis. This was made possible by the more integrated into the global economy increased openness of the Thai economy, while being less vulnerable to external which helped it to benefit from China's economic shocks. explosive growth and WTO accession. However, Thailand now faces new Thailand's recovery has definitely led to challenges which stem in part from its lower poverty rates and reduced inequality, recent success. which will remain important reasons for continuing robust growth. The policies which sustained strong growth for more than four decades ­ raising However, Dr. Matin noted that Thailand's Thailand from lower to middle income - and recovery has a critical weak point - slow ensured recovery from the crisis will not be growth of private investment. Investment sufficient to continue that strong growth has been constrained by a spotty domestic in future. investment climate and by vigorous foreign competition. Thailand could find itself in a "middle income trap with low rates of private The regulatory burden, the inadequacy investment and productivity-growth," said of infrastructure and insufficient skill Dr. Kazi M. Matin, the World Bank Lead availability are among the reasons that Economist for Thailand. Thailand's private companies have been constrainedfrominvestingmoreandraising In fact, private investment has been the productivity growth. weak spot through out the recovery and if this persists will result in a slowdown in This weakness in Thai private investmentis Thailand's hoped-for transition to a higher a main reason why the nation's growth income status. since 1997, though notable, has been less than Thailand's own performance in the SouthKorea,Taiwan(China),andSingapore two decades prior to the crisis. each found strategies to continue growth after first achieving middle income levels. Thailand can too. continued on page 2 Page 1 continued from page 1 "It also requires the development of deep Toward Future Growth financial systems that provide a diverse range of services to support the changing The strategy that Thailand will need to economic structure," Dr. Matin added. continue strong growth beyond middle "Movement of the population into livable income levels is quite different than that and effective cities with efficient and highly which has helped it succeed thus far. This competitivepopulationclustersalsorequires has been shown time and again in similar support, so that the country becomes better economies. Dr. Matin noted. integrated within and growth benefits are better shared." Anotherkeythemeforcontinuedgrowthwill be increasing rule of law with transparent government decision making. Regional inequities and social conflict can also quickly stall needed growth. Continued growth, as demonstrated by other middle income countries over the past two decades, will require vigorous private investment in sectors ripe for innovation and specialization. Waiting for higher income... The government should focus on reducing "There are three main elements of the new policy uncertainty, lowering costs of private strategy," Dr. Matin noted. "The first is investment,andenhancingworkforceskills. moving from diversified to more specialized It will also need to reduce social inequities structures. The second is moving from a and continue to improve governance. strategy of accumulation to a strategy of innovation which means working smarter. "The emergences of deep regional inequities Third,istheneed to move from an emphasis of the kind that fuel social conflict and on basic skills to advanced skills, thereby political instability, with potential to stall producing workers that can produce growth, have to be avoided," Dr. Matin innovative products and processes." said. The new strategies are more difficult and "Similarly, a clean government and the rule complex to implement. Notably, over the of law must increasingly become the past two decades, middle income countries norm - recent experience also suggests that - like Thailand today - have grown at rates without such improvements, growth can significantly lower than those of both low also stall," he added. "Fortunately, this income and high income countries, thus is a central aspect of the Government's the dangers of being caught in the "middle agenda." income trap." Thailand, however, has begun this EROSION IS PRIMARY ENVIRONMENTAL process of specialization, with potential for economies of scale and technological CHALLENGE IN THAILAND, leadership, through its strong performance SAYS NEW WORLD BANK REPORT in automotive parts and electronics. Urban and industrial as well as tourism The challenge is to sustain this great developmenthasputThailand'smarine and start with innovation. Other areas in coastal resources at risk. which Thailand could potentially achieve specialization include tourism, medical Toprotecttheseresources,coastaleconomic services, IT and possibly farm-to-table development must be combined with a agriculture. sustainable management of the natural resources, and constructive cooperation Robust growth through specialization in amongkeystakeholdersmustbedeveloped, these sectors will require investment and the World Bank says in its latest report on innovation rather than simple movement Thailand's environmental challenges. of labor from less productive sectors to more productive ones, which has been Exploitation of such resources, which have characteristic of Thailand's growth thus been key for economic growth during the far. past four decades, and coastal erosion have harmed the environment and affected livelihoods along the coastlines, reports the Page 2 continued from page 2 have already taken a number of measures to Thailand Environment Monitor. protect and rehabilitate natural habitats, the World Bank reports. Amongotherthings,largeareasofmangrove wetlands have been lost, coral reefs are at However, more effective administration and risk of continued degradation, and the greatercooperationamongkeystakeholders total fish catch is in decline, explains the is needed to ensure a sustainable Monitor, which tracks Thailand's key management of these resources. environmental issues. "Effective implementation has been undercut "The loss and degradation of the country's by the complexity of the challenge as marine and coastal resources is not only an well as by overlapping laws, insufficient environmental issue, but also an issue with coordination among concerned agencies, and significant economic implications," said limited resources," Porter noted. Ian C. Porter, World Bank Country Director for Thailand. Natural hazards, which occur frequently in Thailand, can also cause severe damage to Erosion has become one of the primary coastal resources, said Jitendra J. Shah, environmental concerns in Thailand, the World Bank Country Coordinator for the Monitor reports. Environment Sector. In many areas, the coastline is eroding at a In addition, the possible impact of global rate of one to five meters per year, resulting climate change also needs to be addressed, in an annual loss of an area equivalent to he added. two square kilometers. This represents a loss of more than six billion baht ($150 "Climate change and an associated rise in million) in economic terms. global sea levels are expected to inundate coastal areas, which will have a negative Take Baan Khun Samut Chin, in Thailand's impact on local livelihoods and annual Samut Prakarn province, for example. Over output. In particular impacts in the flat and the last 30 years, erosion and subsidence low-lying Gulf area, including Bangkok, are has caused the village's shoreline to expected to be high," Shah said. diminish by more than one kilometer. Local schools, government offices, and THAILAND ENVIR NMENT householdshavebeenforcedtocontinuously MONITOR 2006 move inland, away from the crumbling shoreline. Many frustrated villagers have simply decided to leave the village. The loss of mangrove coverage along the shorelinehasbeenanimportantfactorleading toincreasederosionatBanKhunSamutChin and other areas along the Gulf of Thailand .th coastline. ldbank.or or .w www A mangrove forest stabilizes the shoreline, The Latest edition of Thailand Environment Monitor trapping sedimentation and bolstering the The Environment Monitor lays out five shore. Withoutmangroves,theshorelineisno key challenges to sustain present coastal match for the constant forces of wind, waves resources and preserve their contribution and currents. to future development: - reduce coastal erosion While natural causes are the main force - establish sustainable fisheries behindtheerosionontheAndamancoastline, - step up oversight of coastal development human activities, such as sand mining, - increase local participation construction of jetties and breakwaters, and - establish integrated management landsubsidencefromgroundwaterusage,are behindtheerosionalongtheGulfofThailand Strong leadership from the government coast.Conversionofmangrovestoshrimpand must be reinforced through effective fish farms, the Environment Monitor finds, cooperation of key stakeholders in order to has reduced the coastal area's capacity to support current initiatives. contain erosion. The Environment Monitor makes clear TheRoyalThaiGovernment,localcommunity that continued progress will require, from groups,andnon-governmentalorganizations all sides, specific actions, commitment, Page 3 continued from page 3 and preserve these resources for future uses and an increased awareness of the and generations." substantial impact of environmental degradation on Thailand's people and its This is the sixth Thailand Environment economy. Monitors by the World Bank since 2000. The last Monitor, published in 2004, was "We thank the World Bank for their support on the challenges facing the country's in raising awareness of the challenges biodiversity. facing our marine and coastal resources in this Monitor," said Nisakorn Kositratna, PreviousThailand Environment Monitors the Director-General of the Department of reviewed the state of air and water quality Marine and Coastal Resources. and the overall environmental situation in Thailand, including the effectiveness of the "I hope the report will help put this issue country's regulatory and environmental in the national agenda, and lead to a more management systems. integrated national policy to help us protect June Events On June 29, the World Bank in East Asia and Pacific Region organized "Supporting Youth Voices," an inter-regionalknowledge-sharingseminaraimed atincreasingyouth participation in development and promoting dialogue between young people and policy-makers in the region. During this seminar, young people from Thailand, Lao PDR, Indonesia and Vietnam shared their views on youth employment, and policy-makers from these countries were invited to address concerns or questions raised by youth. Participants included youth from civil society, government officials, representatives of the private sector and local as well as international NGOs. The seminar was conducted by videoconference and moderated by World Bank staff in Washington, DC, and in the EAP region. This is the second seminar held since the official publication of the "World Development Report 2007: Development and the Next Generation" last year. Busawan "Bo" Kachonnarongvanish, 27, represented Thailand's youth during this event. Dr. Pichet Durongkaveroj, Executive Director of the Knowledge Institute of Thailand and adviser to the Commission on Higher Education, was also there to present the summary of government initiatives aimed at responding to demands for skilled workers by the job market. For comments or questions about this newsletter, Tel.: 0-2686-8300 please contact Mr.Tinnakorn Sareenun Fax: 0-2686-8301 The World Bank Office,Bangkok Email: tsareenun@worldbank.org Siam Tower,30th Floor,989 Rama I Road,Pathumwan,Bangkok 10330 Website: http://www.worldbank.or.th Page 4