“We expect the GDP growth for 2019 to be at least 4 per cent. However, the economic growth for 2019 is expected to be slower than 2018,” Apisak said at an event organised by engineering faculty alumni of Chulalongkorn University on Tuesday night.

“The peak of the current economic cycle was during the first two quarters of last year, followed by an acute slump in the third quarter. Given that consumption and private investment are still continuously growing, we expect the economy to continue to grow in 2019, but at a slower pace.”

The first two quarters of this year saw growth of 4.8 per cent year on year. The economy managed growth of only 3.3 per cent in the third quarter and a recovery is expected in the fourth quarter, but not at the pace seen for the first two quarters, Apisak said at the Chulalongkorn event, the Engineering Dinner Talk.

Growth in exports is also expected to slow in 2019. This is due to the lagging negative impact of the trade war between the US and China, with some of the consequences to be felt next year.

“Many have suggested that Thailand can gain from the trade war through replacing Chinese goods in the US market and manufacturers moving their production base from China to Thailand. However, in the long-term, the trade war will only hurt the Thai economy,” the minister said. This is because Thailand is deeply entrenched in the supply chain, which is affected by the tariffs imposed by the two economic giants, he said.

At the event, Apisak addressed the relationship between the upcoming election and growth in foreign direct investment in the Kingdom.

“After talking to many foreign investors, they have said that they are holding off investing in Thailand until after the election. This is because they fear that political stability will be damaged as a result of the election,” said Apisak.

The final key factor likely to contribute to slower economic growth in 2019 is the decline in tourism. Visitor numbers have slumped significantly since a boat accident near Phuket in the middle of this year.

In August, 867,000 Chinese tourists visited the Kingdom, down 11.7 per cent month on month. In September, only 648,000 came, marking an even steeper 14.89 per cent fall month on month, according to the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).

Apisak said the boat accident – which claimed the lives of dozens of mostly Chinese tourists – had led many Chinese to question Thailand’s safety standards, but it was not the only cause of the fall in tourism numbers.

“Tourism has also fallen as a result of external factors which we cannot control,” he said. “The slowing global economy has led key tourist groups visiting Thailand to decrease.

“The slowing of the Chinese economy as a result of the trade war and the weakening of the yuan currency have led to falls in the number of Chinese tourists globally.”

With the declines in exports and tourism, Apisak said investment in the Industry 4.0 policies championed by the government, with the Eastern Economic Corridor (EEC) as a major component, will be the key driver of growth in 2019.

“The EEC is expected to be a key focal point of investment in 2019,” Apisak said. “With strong private investment levels in 2018, we expect this trend to continue into next year. Public investment in infrastructure and transportation throughout the country will intensify in 2019.

“Meanwhile, foreign direct investment into the EEC is also expected to rise after the election in February next year.”

In marking the 160th anniversary of diplomatic relations between Thailand and Denmark with a discussion about future cooperation between the two nations, Wolffhechel, said they have a lot to gain from each other. Denmark has much to offer in the way of high technology, for example, while there are also untapped business opportunities in such sectors as food processing, tourism, clean energy and innovation.

There are more than 100 Danish companies now established in Thailand, he noted, and they employ more than 50,000 people.

Danish companies run many kinds of businesses in Thailand, including service and consultancy, machinery, manufacturing and engineering, transportation, logistics and shipping, healthcare and life sciences, energy and environment, as well as design and creative industries, according to the Danish Embassy in Bangkok. Danish exports to Thailand last year were worth Bt10.7 billion and Danish imports from Thailand topped Bt13.7 billion, resulting in a trade surplus for Thailand.

Apart from trade, the two countries could increase cooperation on sustainable development, climate change, education collaboration and environmental production, said Wolffhechel.

In the past Thailand and Denmark had many development projects in Thailand, with the Thai-Denmark milk project best know. The milk has become a strong brand here.

Thailand has quickly developed its economy and can now stand on its own feet, he said.

Wolffhechel said Denmark supports free trade and wants to reduce trade barriers between Thailand and the European Union, which counts Denmark as a member. “We all would like to see it happening. It is a process, there are some political issues to it about how soon Thailand returns to democracy. [When democracy returns] the EU would be ready to start the process to have a free trade agreement,” he said.

He said that there were technicalities involved and it could take a few years to get through the negotiations before a free trade agreement could be reached. He noted that Denmark and EU had developed from free trade and globalisation, and so have a great interest in [achieving] free trade with Thailand.

Among the Asean countries, only Vietnam and Singapore have so far signed a free trade agreement with the EU. The EU suspended talks with Thailand when the military overthrew the civilian government in 2014.

The junta lifted the political ban on Tuesday , paving the way for a general election on February 24.

Asked about his opinion about a trade war between the United States and China, Wolffhechel said Denmark, like Thailand, has a small and open economy and strongly supported free trade.

“The market is keenly watching what policies the political parties will present to voters, whether they are long- or short-term,” Amornthep Chawla, chief researcher at CIMB Thai Bank, said.

The National Council of Peace and Order lifted the ban on political activities yesterday.

However, Amornthep said investors might adopt a wait-and-watch approach on the next government and look at its policies before making new investments.

“If the next administration is a minority government, then it may find it difficult to implement its policies, which could have an adverse impact on confidence,” he said.

However, he is optimistic that the elections will boost confidence and the government will be able to negotiate free-trade agreements with countries that shunned Thailand after the 2014 coup.

Besides this, there are many other challenges awaiting the next government, ranging from industrial reforms to dealing with the widening gap in income.

Private consumption may slow down, and car sales may also drop next year.

Consumption by low-income groups has not yet recovered due largely to the slump in the prices of farm products. Farm products will continue to play a key role next year, in terms of spending by low-income earners.

Amornthep said the other big threat to the Thai economy next year is the impact of the US-China trade war, especially if it escalates.

China will probably import fewer Thai products if the trade tensions continue. Another factor that may affect imports from Thailand are China’s large stock of raw materials, such as rubber sheets. China’s gross domestic product (GDP) may expand between 6.4 and 6.5 per cent, compared to 6.7 per cent this year.

CIMB estimates that Thailand’s growth will be 3.7 per cent next year, less than the anticipated 4 per cent this year.

“Slower growth is not necessarily bad, but the key is whether the growth will be sustainable,” he said, adding that slower growth next year might be in line with a global slowdown.

“There are no outstanding factors to drive the economy next year,” he said.

He also predicted that the Bank of Thailand might start increasing the policy rate in March, and may do it again later to bring the rate up to 2 per cent from 1.5 per cent at present.

Amornthep also expects the US Federal Reserve to increase the rate twice next year from the previous market projection of three times.

Given such a scenario, capital should start flowing back to Thailand and other emerging markets, he said, adding that the baht might start strengthening to Bt32 against the dollar from Bt32.50 this year.

Foreign investors have pulled investments worth Bt280 billion out of the Stock Exchange of Thailand so far. He also reckons that the overall volatility of global financial markets will not worsen next year.

“The announcement to allow political activities to resume in the country is a milestone that will increase the confidence of investors in the Thai economy,” said Yunyong Thaicharoen, first executive vice president and head of Siam Commercial Bank’s Economic Intelligence Centre.

“The announcement itself will have minimal impact on markets or investor confidence in the economy, but the election will certainly have an impact on the market. Hence, the announcement to allow for political activities will have a positive impact on investor confidence in the economy, but the signs of rising in confidence will not be immediate,” he cautioned.

“Furthermore, this announcement means that political parties can now more openly share their policies with the public, which is expected to be watched closely by investors and those within the private sector,” he said.

The debate on income and wealth inequality has been heating up following the Credit Suisse Global Wealth Report 2018, which was published earlier this month. The report suggested that Thailand is the world’s most unequal country in the world, as the richest 1 per cent hold 66.9 per cent of the country’s total wealth.

Coming in second is Russia, with 57.1 per cent, followed by Turkey (54.4 per cent) and India (51.5 per cent). Two years ago, in the 2016 iteration of the Credit Suisse Wealth Report, Thailand ranked third, after Russia and India respectively.

Pipat Luengnaruemitchai, assistant managing director at Phatra Securities, was the first Thai to post this information on Facebook, which led to a wider discussion on social media.

However, this prompted the government and the National Economic and Social Development Board (NESDB), a state think-tank, to dismiss the report, saying it used outdate information.

Claiming that the situation has improved in recent years, the NESDB cited the World Bank’s GINI index, which shows a narrowing of the income gap in Thailand over the past decade. The index is based on regular surveys of the income and expenditures of Thai families conducted by the government’s National Statistical Office (NSO).

NESDB’s reaction, however, drew yet more people to the debate.

Somchai Jitsuchon, research director at the Thailand Development Research Institute (TDRI), wrote on Facebook that he did not wholeheartedly believe that income inequality had narrowed.

He pointed out that though socio-economic surveys (SES) carried out by the NSO meet international standards, the fundamental problem is the accuracy of information given by the rich respondents.

Rich people have a tendency to state their income as lower than it actually is, he said.

“If the rate of under-representation does not deviate much from previous years, then it would be alright, but I suspect that under-representation has been getting worse over the years,” Somchai wrote.

Pipat, meanwhile, told The Nation that the NESDB had failed to answer the questions raised by the wealth report. Wealth includes income, savings and ownership of land, houses, shares and other assets. Income, on the other hand, is a stream of revenue.

Pipat said people who have an excess of income will usually own more assets, while those with low income would have few or no assets, as some spend all their income just to get by.

“As Thailand has no organisation to collect data on wealth distribution, we have to rely on Credit Suisse. Yet the information collected by Credit Suisse is not fully updated,” Pipat added.

Pipat said NESDB and Credit Suisse had looked at inequality from two different dimensions – income and wealth respectively.

“We should not focus on who is right or wrong, but should pay attention resolving the problem of an unequal society. Otherwise, we will miss the opportunity to address it,” he said.

Boosting awareness

The bright side of the debate, however, is that the Credit Suisse report has created awareness of the problem in the run-up to the February 24 national elections – giving politicians a perfect opportunity to find solutions and present them to the voters, he said.

He added that the current government has not done enough to address this issue. Sure, it has launched a welfare-card scheme for the low-income group, but what about other groups, he asked.

Also, he said, the government needs to reform education so everyone can have access to high quality education, adding that people should also be given access to national resources. Pairoj Vongvipanond, an independent economist, meanwhile, said both sides were correct.

“The conclusion is that we are one of the most unequal countries,” he said.

He laid the blame for this inequality on the current government for doing little to address problems caused by monopolies and not reforming the tax structure. The government collects practically no taxes from the wealthy and the new property tax has been weakened by tax exemptions, such as putting tax levies only on houses priced above Bt50 million.

Pairoj also put the severe inequality down to a weakening of democracy, saying a few elite members of society control politics, which leads to economic monopoly.

“European societies are more equal due to long-standing interaction between capitalists and democratisation,” he said, adding that he hopes the new political leaders, such as Thanathorn Juangroongruangkit and Piyabutr Saengkanokkul of Future Forward Party, will take a bold step.

“The two men understand the cause of unequal distribution of wealth and income in Thailand,” he said.

In response to the debate, Thanathorn said it was sad that the government has dismissed this report, pointing to the severe inequality in the country.

“I think the government is defending itself and the giant capitalists who are defending it. Everybody knows that dictators and oligarchs support each other,” he said.

Rebecca J Stoeckle, vice president of the Education Development Centre (EDC), lauded the Thailand 4.0 development agenda, which she called “a wonderful centralisation of government initiatives” with enormous investment in infrastructure.

“We also see rising challenges brought by an ageing population. With those key phenomena, it is critical to emphasise human capital development where nobody is going to be left behind, especially those from disadvantaged backgrounds,” she said.

“The main concern is that a lot of foreign direct investment [FDI] flowing into Southeast Asian countries is not being invested in local human capital development. They have not taken advantage of the opportunity to institutionalise ways to make sure that FDI actually does translate into local human capital development,” said Stoeckle.

“Examples can be found in Thailand’s automotive industry over the past 20 years, where the local people’s skills have not sufficiently been upgraded. That has spurred the same concern in the case of the S-Curve industry under Thailand 4.0 today.

“We want to show you a good example of a German partner who has worked on that. They have helped create a system that engages vocational schools in the industries and vice versa. We thus want to make sure that we can introduce such a dual-track system locally in the country and develop the local talent pipeline. As Thailand progresses into industry 4.0, this will be absolutely critical. And issues related to human resources development should be more cross-sectoral, rather than just a matter of a single ministry taking care of it,” said Stoeckle.

EDC is a global non-profit organisation that offers lasting solutions to improve education, promote health and expand economic opportunity. Since 1958, the centre has been a leader in designing, implementing and evaluating powerful and innovative programmes in more than 80 countries around the world. EDC has also implemented Accelerating Work Achievement and Readiness for Employment 2 (AWARE 2), which is to realise an impressive mandate: to position technical and vocational education and training (TVET) graduates for success in the digital economy.

Funded by JP Morgan and implemented by EDC, AWARE 2 has provided timely, innovative skills training and work-based learning opportunities to Asean youth who are prepared to enter the workforce and innovate in the digital economies in Thailand, Philippines and Indonesia. Now in its third and final year, the programme seeks to highlight and further build upon the success of its programme through continued innovation and by building new alliances and opportunities.

The AWARE 2 leadership was convened in Bangkok recently to share some of the best practices and lessons from the project, with an aim to identify additional partners and opportunities to advance AWARE 2’s reach and impact.

“For EDC, we focus on enhancement of soft skills, creativity, teamwork, initiative, in addition to technical skills for our TVET students to be able to succeed in a world where jobs are much more fluid and people are moving around from firm to firm. As we have seen, most large firms are successful largely due to great support from SMEs. So we need to develop more students who are able to drive innovation in those small and medium-sized firms so that they are not falling behind. Let’s say innovation is not only produced by the company’s top specialists or bosses, but can also be contributed by young staff who are able to introduce new business models,” said Stoeckle.

TVET programmes need to be much more adaptable and train students to perform cross-sectorally, said Stoeckle. They also need to create programmes that are more flexible in terms of curricula and faculty who are no longer identical in skills and backgrounds.

“We want to promote authentic engagement between industry and schools,” she said, adding that it was interesting to see Australian university graduates who wanted to get a good job go for vocational training.

Regarding the question on how technological disruption affects the workplace and educational sector, Stoeckle said she did not consider herself qualified to speak on the subject.

“What I can reaffirm is that no matter to what extent a company is disrupted, we want our TVET students to disrupt themselves to stay ahead. We want them to be able to disrupt their own systems before being disrupted by the systems. That is why we would rather produce workers with diverse perspectives and backgrounds than seeing hundreds of employees with homogeneous profiles. We believe in the power of diversity. With this, the companies would be able to match their labour skill sets that they bring to the table, making them relevant to the real needs of industries,” said Stoeckle.

Speaking about the shortage of human capital in the workplace today, Stoeckle said she found there were enough competent workers out there but they just had not got the right jobs – the ones that fit their competencies and the company’s needs.

“I think this is largely due to cultural factors in which a family, especially disadvantaged families, always make tremendous sacrifices to pay for the university education of their children. Often their students do not achieve the credentials or the skills that they actually need to get a good job. So we try to strengthen the TVET programmes and foster a new perception that students can have a good job in the digital economy without paying for a university education. And for employers, it is often a wonderful bargain because entry-level salaries of TVET students are low, while the skill levels are good enough,” she said.

“There are not enough young people to take all the good jobs [in the industry], so we must find a way to give a real opportunity for students of TVET,” she added.

“We see the same gaps in the development of industry-ready skilled workers for the digital economy in Asean, especially Indonesia, the Philippines and Thailand. We saw opportunities to further develop vocational education and saw governments’ commitments to reforming education in Thailand and Indonesia, while we witnessed real change in the education system in the Philippines. It is our hope that we can introduce new ways of bridging the gaps between what education can offer and what industry really needs.”

Stoeckle said that EDC, however, is focusing on two things: first, to get industry to engage with the classroom, opening up faculties’ perspectives on what is really happening in the real business world. And, second, to develop human capital as capable, adaptive and innovative in the emerging digital economy.

“We just want to make sure students in Asia get quality jobs, approaching their careers [in a way that] prepares them for the longer pathway, not just entry-level jobs. We want to understand why the government policy is not actually translating into more opportunities for young people. We hope that through our three-year project, our partners are able to identify the gaps and needs and address them all around the ecosystems, from policy to industry engagements,” she said.

“e-Conomy SEA 2018: Southeast Asia’s Internet Economy Reaches an Inflection Point” conducted by Google and Temasek says that Southeast Asia’s Internet economy will be surge from $72 billion in 2018 to $240 billion in 2025. Thailand’s Internet economy in 2018 is estimated at $12 billion. It is the second largest in SEA with 22 per cent growth rate per year and is expected to be worth $43 billion in 2025.

Thailand’s Internet economy currently contributed 2.7 per cent of national gross domestic product (GDP), lower than China and the US’ 6.5 per cent in 2016, which means there is huge opportunity to accelerate growth.

Ben King, country manger of Google Thailand, said that according to research, the key driver of Thailand’s Internet economy is e-commerce and online media.

Thailand’s e-commerce in 2018 is valued at $3 billion and gross merchant values on all e-commerce platforms is the second largest e-commerce market in SEA behind Indonesia with $12.2 billion.

Online media is the distinguished sector since it is growing rapidly. Online media, included advertising gaming, and music and video subscription, is now about $2.4 billion, growing at 44 per cent per annum. It is expected to touch $7 billion in 2025.

The key factors driving online media are growth in Internet users, video streaming, paid video and music, and local developer and creators.

However, ride hailing in Thailand in 2018 saw a slowdown in growth due to consolidation but it is expected to pick up again in 2019. This year saw revenue of $700 million, up from $400 million in 2015. But it is expected to grow at 22 per cent per year to reach $4 billion in 2025.

Last but not least, online travel is another big sector for the Internet economy. Thailand’s online travel market in 2018 was worth $6.1 billion in gross booking value, as the second largest in SEA behind Indonesia with $25 billion. It is expected to grow at 18 per cent per annum to reach $20 billion in 2025.

This visible progress in Thailand’s Internet economy towards solving the ecosystem challenges identified in its previous research included funding, Internet, consumer trust, talent, logistic, and payment.

Consumer trust is rapidly increasing across sectors. For example, in 2018, active e-commerce users were 120 million; gamer active users were 164 million; ride hailing active users were 35 million, and online travel booking had 41 per cent penetration.

Meanwhile, the Internet economy directly created skilled jobs for 100,000 professionals in 2018 and is expected to create 200,000 jobs in 2025. It creates employment at 10 per cent compound annual growth rate.

Moreover, 2018 will be a record year for Internet economy fundraising in SEA. In the first half of this year alone, $9.1 billion were raised. In SEA, $24 billion has been raised since 2015.

Of the amount raised in the first half, around $6.5 billion went to SEA’s nine unicorns. Meanwhile, Grab has become the first decacorn, a company with valuation exceeding $10 billion, which is among less than 20 globally.

However, he said the Thai government should encourage overseas expansion of local Internet companies. SEA’s Internet economy could become a key driver of national economic growth, business development, and job creation.

The report also projects that the pool of skilled Internet economy professionals needs to expand by 10 per cent in the region every year to support the growth of local business.

Governments need to invest in training their people with the right skills for the Internet economy so that businesses have a pool of local developers, computer scientists, online marketing professionals and data analysts to draw from.

“e-Conomy SEA 2018” is the third edition of e-Conomy SEA by Google and Temasek’s research on Southeast Asia’s Internet economy.

The research covers four sectors of the Internet economy: e-commerce, online media, ride hailing and online travel, with four new sub-sectors added this year – video on demand, music on demand, online food delivery, and online vacation rentals.