1. 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. 2 Introduction Long history of having to meet the challenges from globalization Future outlook of the challenges is more complex and multi-dimentional

3. 3 1850 -1855 Colonization or Trade Liberalization? Threat from Great Britain Trade Liberalization (Bowring Treaty, 1855)

4. 4 1932 -1935 Socialism or Capitalism? Change from absolute monarchy to parliamentary democracy Debate on economic regime Global protectionism and global recession State Capitalism

5. 5 1957 - 1960 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

6. 6 1980 – 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

7. 7 1989 - 1993 Financial Protection or Financial Liberalization? More Trade Liberalization? ICT Protection or ICT Liberalization? High growth from 1986 + fiscal and financial strength Industrialization process created demand for downstream industries (Iron and steel, petrochemicals, oil refinery)

8. 8 1989 – 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

9. 9 1989 – 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

10. 10 1989 – 1993 (cont.) Rapid development and growing application of ICT worldwide Limited ICT Liberalization  Private investment in fixed line phone and mobile phone

11. 11 1997 - 1998 Slower Liberalization or Faster Liberalization? 1993 – 1995 --- 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 1997 --- attack on the Baht and its defense 2 July 1997, Baht floatation (July – Dec 1997, Baht25 Baht48)

12. 12 1997 – 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

13. 13 2001 - 2002 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

14. 14 2001 – 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

15. 15 2001 – 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

16. 16 2001 – 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. 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. 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. 19 Local / Regional Link – Global Reach (cont.) Promoting grassroot sector and SMEs Supporting domestic demand Applying global standard of good governance