Regulatory
Reform and Competitiveness in Thailand
By:
Sakda Thanitcul
--
delays in passing supporting legislation
--government ownership
--Thai consumer behavior
3. Beer
--high tax/duties on imported beer
--ineffective antitrust enforcement in related industry (liquor)
--scarce upstream resources (barley)
4. Chicken processing
--barriers to chicken meat imports
--high tariff and non-tariff barriers to imported feed raw materials
--low productivity in upstream industries (com, soybean and chicken farming)
5. Cement
--historical requirement to build capacity ahead of demand
--slow-down of construction market
6. Retail
--clear success case example of liberal market conditions promoting modern
retail formats
--non-level playing field (tax regulations and enforcement)
The report further argues that sector-specific regulations are by far
the greatest barrier to higher productivity level in Thailand. It argues
that this finding is consistent with previous research in 13 other countries
around the world : in every country it surveyed, sector-specific regulatory
distortions were found to be the greatest inhibitor to productivity(28).
The previous studies estimated that reform of sector-specific regulations
will contribute from 2% to 4 % of additional GDP/capita growth potential
p.a. to those 13 nations surveyed(29).
The report makes
policy recommendations to the 6 sectors as below:
1.
Telecommunication The telecommunication industry is expected to undergo
rapid change over the coming year. As Thailand has committed to abide
by WTO rules on telecommunication services by the year 2006, a substantial
liberalization drive needs to be implemented. This will involve (1) clearly
defining policy objectives for the sector, (2) setting up an independent
regulatory agency, a framework, and a detailed roadmap to pursue these
objectives, and (3) effectively privatizing state-owned enterprises in
the sector(30).
2.
Retail Banking The report recommends that in order to improve productivity
in the Thai retail-banking sector, three key areas of policy changes should
be made. This will involve (1) developing a financial sector master plan,
(2) ensuring clear and efficient regulations, (3) speeding up supporting
legislations i.e., Credit Bureau Act and the Deposit Insurance Bill(31).
3.
Beer In order to support greater productivity among beer producers, the
government should ensure a high level of competitive pressure within the
industry. Increased competition will lead to industry consolidation, which
will eliminate much of the current excess capacity and will compel less-productive
players to boost their efficiency or exit the market. Two key policy measures
should be undertaken: (1) strengthen monitoring of anti-competitive behavior,
and (2) relax import tax/duties on beer(32).
4.
Chicken Processing Several regulatory changes could help to further enhance
the productivity in Thailand's chicken processing industry. These changes
would need to focus on both upstream and down stream barriers to productivity.
The
primary upstream objective should be to reduce the cost of chicken feed.
As noted, the high cost of feed inflates prices throughout the value chain,
reducing poultry producers's margins and rendering many activities economically
unviable. To address this situation, the following steps should be taken:
(1) removing import barriers and local protection on feed raw materials
(2) encouraging private investment in R&D efforts to
improve
agricultural yield of feed raw materials, and (3) establishing trading
infrastructure i.e., online marketplaces, logistic networks.
Downstream objectives should be focus on increasing the viability of further
processing activities by reducing the cost of basic chicken meat. As discussed,
further processing--the highest value-added aspect of chicken processing--has
not yet sufficiently taken off in Thailand because imports barriers help
keep the cost of basic chicken meat at a relatively high level. Reducing
or eliminating these barriers will allow cheaper chicken meat to be imported,
making further processing economically viable and encouraging investment
in such activities(33).
5.
Cement To help Thailand's cement industry achieve its full performance
potential, the government should pursue the following policy initiatives:
(1) dismantling barriers to effective industry consolidation, (2) creating
a free import-export market for cement and cement products, and (3) promoting
the sue of low cost alternative fuels(34).
6.
Retail Trade Unlike several of the other Thai industries surveyed, the
retail trade sector does not require further deregulation in order to
achieve its productive potential. Rather, the government should focus
on (1) maintaining the current liberal regulatory environment, (2) ensuring
a level playing field and fair competition, and (3) facilitating the transition
to modern formats by, for example introducing a franchise law(35).
III Preliminary Evaluation
of Current Regulatory Reform :
The
author argues that most policy-makers and academic circles agreed with
the regulatory reform detailed in the Master Plan on State Enterprise
Reform but there is a serious doubt on the Mckinsey's report
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(28)
Id., at 22.
(29)
Id.
(30)
Id., at 109-114.
(31)
Id., at 90-92
(32)
Id., at 166-168
(33)
Id., at 152-153
(34)
Id., at 129-130
(35)
Id., at 70-73 |