2012 AUSTRALIA-THAILAND BUSINESS CONFERENCE 13 NOVEMBER 2012 DR. KIRIDA BHAOPICHITR Productivity and Skills An imperative in an integrated Asia The World Bank

Challenges for Thailand in the New Global Order 2 Significant slowdown in developed economies/markets and in China Softening of key agriculture prices e.g. rice and rubber Competition from of other countries in East Asia, that are “catching up” with Thailand, especially from China Higher risks of natural disasters

Opportunities for Thailand A bigger middle-income class, especially in China – higher purchasing power Greater investments/capital flows into East Asia Greater Regional integration and openness (AEC & FTAs) Slower increase in energy prices FDI Inflows into Thailand Source: Bank of Thailand and World Bank Staff Calculation Subprime crisis 3

How will Thailand thrive in the new global order? Escape the “Middle Income Trap” 1. Increase labor productivity for a higher value- added economy 2. Increase competitiveness Ensure “Inclusive Growth”  Further poverty reduction  Reduce inequality of incomes and opportunities 4

Labor productivity has grown across the region with China experiencing explosive growth Source: ILO, Key Indicators of the Labor Market, and WB staff estimates 5

Thailand’s Labor productivity is being caught up by regional neighbors Source: ILO, Key Indicators of the Labor Market, and WB staff estimates 6

Future growth requires more Total Factor Productivity (TFP) increases Source: Updated from Bosworth and Collins, World Development Indicators, and National statistics 7

8 Shortage of skills remained a key obstacle for Thailand’s growth Source: Thailand Investment Climate Assessment ( 2008), World Bank

9 Skilled production workers are in short supply compared to other countries Time required to fill the most recent vacancy for skilled production workers (weeks) Time required to fill the most recent vacancy for unskilled production workers (weeks) Source: Thailand Investment Climate Assessment ( 2008), World Bank

10 Filling vacancies take time because applicants lack skills that firms look for Percent of firms identifying these issues as the most important reason for job vacancies At the professional level, quantity is not a problem Source: Thailand Investment Climate Assessment ( 2008), World Bank

1. Performance of Secondary School students in Thailand needs to be improved! 11 Average OECD and Thailand’s PISA scores Source: PISA Results (OECD database)

2. Regional difference in education outcomes needs to be narrowed 12 Source: Office of Basic Education Commission database, in Parandekar PISA Scores in Bangkok comparable to US School level O-NET scores lowest in NE

3. Creativity, Leadership, Information Technology and English are needs to be improved 13

4. Lack of qualified personnel limits firms innovation efforts Percent of firms reporting these as a reason for not engaging more in innovative activities Innovative Activities includes 1.Technological innovation e.g. upgrading of machinery 2.Process innovation e.g. new process of producing the same product 3.Product innovation e.g. developing new products 4.Commercial innovation e.g. joint ventures 5.Marketing innovation e.g. branding Source: Thailand Investment Climate Assessment ( 2008) 14

5. Thailand has fallen behind in moving towards a knowledge economy 15 World Bank ’ s Knowledge Economy Index 2012* * KEI is a simple average of 4 sub-indexes which represents the 4 pillars of the knowledge economy: (1) economic incentive and institutional regime, (2) education and training, (3) innovation and technological adoption, and (4) information and communications technologies (ICT) infrastructure. Ranking 2012 Change from 2000

Global competition is intensifying and Thailand should not be “left behind” Source: World Development Indicators (World Bank) 16

17 World Bank data and reports can be downloaded at THANK YOU