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

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

Colonization or Trade Liberalization? Threat from Great Britain Trade Liberalization (Bowring Treaty, 1855)

Socialism or Capitalism? Change from absolute monarchy to parliamentary democracy Debate on economic regime Global protectionism and global recession State Capitalism

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

– 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

Financial Protection or Financial Liberalization? More Trade Liberalization? ICT Protection or ICT Liberalization? High growth from fiscal and financial strength Industrialization process created demand for downstream industries (Iron and steel, petrochemicals, oil refinery)

– 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

– 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

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

Slower Liberalization or Faster Liberalization? 1993 – 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 attack on the Baht and its defense 2 July 1997, Baht floatation (July – Dec 1997, Baht25 Baht48)

– 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

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

– 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

– 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

– 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