Ministerial Segment

Inaugural Address by His Excellency Thaksin Shinawatra, Prime Minister of Thailand at the 57th Session of ESCAP, UN Conference Centre, Bangkok, Monday 23 April 2001

On behalf of the people and the Government of Thailand, I wish to extend a warm welcome to all distinguished delegates and participants to the 57th session of ESCAP.  I trust that your stay will be pleasant, and the meetings will be beneficial and fruitful in addressing the urgent socio-economic problems of our vast region.

The theme of the 57the ESCAP session, “Balanced development of urban and rural areas and regions within the countries of Asia and the Pacific” is an appropriate theme for our consideration.  I trust that as a result of your deliberations in the coming days, a meaningful and constructive model, or models, for balanced development and sustained growth may be identified.  Indeed, it would prove useful and timely to all member governments in overcoming the economic and financial crisis and fallout in 1997 as well as the impending world economic slowdown looming on the horizon.

Mr. Chairman,

The prospects for the Asia-Pacific region, where over 800 million poor people reside, or 67 per cent of the world’s absolute poor with an average income of one U.S. dollar per day, is most worrisome.  The outlook for Asian economies is extremely precarious and fraught with much difficulty because of severe financial constraints and disruptive foreign exchange volatility.  The plight of the absolute poor, already precarious, will deteriorate further in light of lower economic growth prospects in both developed and developing economies.  It is imperative that correct and effective actions to generate sustainable growth to alleviate poverty will be one of the highest national priorities.

However, it is evident that the existing or traditional policy responses have proven ineffective and indeed futile in addressing these problems. The standard and quality of living in the Asia-Pacific region continues to deteriorate and the incidence of poverty has not correspondingly declined, either qualitatively or quantitatively.

Mr. Chairman,
Ladies and Gentlemen,

What is needed today are new approaches or new frameworks or new strategies for generating sound and sustainable economic development.  A new set of policy responses for different income groups with varied application suitable to either urban or rural sectors, that can address, overcome and resolve the fundamental imbalances and inequities in each economy, that will ensure a balanced response to the dichotomy between the urban and rural sectors, the farm and the factory, and the traditional and the modern of each country.

What is needed today is no longer a singular or one fundamental economic development model that can be uniformly applied.  There seems to be no simple model.  One that can chart a uniform path to rapid, sustained, equitable and balanced growth for all citizens.  A new approach needs to be rethought and reformulated.

Mr. Chairman,
Ladies and Gentlemen,

The present shortcomings and failures of the traditional Japan Inc. model, the US development model, and the responses of the former Asian Tiger economies demand a reassessment of such approaches.  One size no longer fits all.  Domestic fiscal stimulus combined with increasing export growth may not necessarily lead to sustainable economic growth and increasing employment, i.e. Japan today.  Indeed, despite utilization of all known fiscal and monetary stimulus, the Japanese economy continues to contract due in major part to the aversion of the Japanese consumer, who prefers to save rather than consume for fear of an impending economic slowdown and heightened job insecurity.

Another prime example of inadequate policy response is the developing economies in Asia that cloned their development growth on U.S. or Japanese virtues, based on accelerating growth through exports; acceptance of globalization measures; adoption of free market principles; financial liberalization through adoption of Western or G7 business and banking standards; and reliance on external capital inflows to finance economic growth.

These countries have seen their balance of payments turn from positive to negative and suddenly became untouchables or financial pariahs and “non-transparent borrowers” overnight, due to irrational foreign investor fear which led to sudden and abrupt capital outflows and subsequent balance of payments difficulties.

Mr. Chairman,

The recent financial crisis and subsequent demands for banking reforms in Asia based on “so called BIS standards”, which have yet to be implemented fully among the G7 economies, have created massive financial clean-up costs and major roadblocks, which ultimately have become true moral hazards forcing the transfer of private debts to the public sector and which have created a severe and unfair burden to the poor in developing economies.

Implementing BIS standards and guidelines will be useful to make our financial system strong but application timing must be consistent with the state of our economic development and existing limitations.

Adherence to a new set of transparency and good governance banking standards not only has created massive public debts but ensured that these economies will be unable to cope with the problem of poverty alleviation, let alone generate adequate economic growth, or to avoid economic recession or contraction in the near term.

The need to find new and varied responses to the new economic, social and political realities of attaining sustained economic growth, ensuring social equity and responding effectively to prevailing economic difficulties given very limited resources is the primary task and the challenge, which I wish to place on the agenda of the distinguished delegates at this session of ESCAP today.  A new solution is urgently required.

Mr. Chairman,

Thailand, today, is, at a true crossroads in the process of economic and social development.  The path that we had followed in patterning our production and growth strategy to increase our national wealth through an export orientation based on an open economy and a free enterprise system has created a paradoxical anomaly.  The flying geese formation model, which had earlier enabled Thailand to fly and compete well initially in the Asian context, is now the obstacle.

The Asian miracle and success was predicated on the principle that economies can achieve rapid sustained growth as long as their exports will increase exponentially without end.  Financing such rapid economic growth in the bubble era of easy money was no problem because external financing would always be available.  There was no cause for alarm, if our balance of payments remained positive, although it was an illusion because external capital inflows were in reality short-term loans not true assets.

Since the majority of external inflows and new investment relied more on debt creation and were not equity related, the Asian economies in the eighties and nineties were the darlings of fund managers, and their stock markets were the leading playground for investors.  That good feeling era came to an end in 1997, and that development model has become obsolete.

Mr. Chairman,
Ladies and Gentlemen,

The issue facing all of us today is how to cope with a new set of economic realities, new requirements, and how best to overcome them in regenerating growth, creating wealth, sustaining equitable distribution of income and opportunities for our people.

For Thailand, we are making a realistic assessment of the situation and all its ramifications.  We are taking stock and reassessing all our resources, our problems and our limitations, both domestically and externally.

We are reviewing all our options and reexamining our development strategies.  We are going back to basics in every sense of the word and especially in light of the new and less than friendly world environment.

We are looking inward to our original strengths, unique local know how, and matching them with new marketing and communications technology.

The expected worldwide slowdown will have serious impact on the outlook for growth and restructuring of the social and economic fabric of Thai society.  We have to review and rearrange our priorities in concert within the new constraints of our ongoing fiscal and monetary problems of high indebtedness, stagnant economic growth, a malfunctioning banking system, and a downturn in our trade and payments outlook.

Mr. Chairman,
 
 The question that we must answer and the strategy that we have to adopt cannot fully follow the new information and communications revolution, which is based on physical and intellectual property accumulation as in the West.  Thailand and developing economies do not have the process, the capacity, nor the resources for such intellectual property accumulation.  Even in the areas of traditional strength, such as agriculture, biotechnology and genetic engineering, advances in the West have proceeded from academic to industrial production.  Ownership of intellectual property is, at present, a closed avenue of new growth.

We cannot also rely on adopting or importing discarded industries or products of low value nor rely on promotion of export industries requiring high import contents and low cost labor with low domestic value added

We can no longer rely on external financing simply to pay for imported equipment, technology, patents and raw materials to sell to a market that continuously seeks higher quality at lower costs.  The export processing zone modalities, good for foot loose industries or environmentally ruinous, heavy industries, should no longer be the dominant priority for industrial development.

We must look inward to new products and SME industries that are unique, crafted from domestic inputs, traditional or local know how with special appeals into the new market.  The modalities of new production must not be to clone a western product or involve mass production at ever-lower production cost but to promote and support small and medium-scale industries that can satisfy a new breed of consumers at a competitive and fair price along internationally accepted standards.  Old products for new markets, globalization abased on localization, a more balanced and deeply endogenous response to new realities and new markets.

The process of development is an unending quest to produce competitively, to find new buyers and expand market horizons, which create increased wealth, create additional employment, ensure security, and build a stable society with a vibrant economy.  Our hope is to develop a balanced way to attain such growth with grace, style and harmony.

I look forward to your measured response to this challenge.

Mr. Chairman
Distinguished Delegates,
Ladies and Gentlemen,

Permit me once again to welcome all of you to our capital, Bangkok, and to extend my best wishes for the successful conclusion of this session.

I now have the honour to declare open the fifty-seventh session of the Economic and Social Commission for Asia and the Pacific.
 
 Thank you.