Somkid, in a speech at the Belt and Road Summit in Hong Kong yesterday, was referring to the Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS) and the Greater Bay Area (GBA).

He said that Thailand would act as a coordinator between the Southeast Asian-focused ACMECS and the GBA, which promotes economic integration between Hong Kong, Macau and Guangdong province in southern China

After discussions with Hong Kong Chief Executive Carrie Lam, Somkid request that Hong Kong push for a mechanism to coordinate linkages between the two groupings for the strategic development of both initiatives.

With a population of about 230 million, with 130 million workers, ACMECS is a political, economic, and cultural cooperative grouping that brings together Thailand, Laos, Vietnam, Cambodia and Myanmar, as well as the key market and supply chains in Asia.

GBA, with its promotion of economic integration between Hong Kong, Macau and Guangdong, seeks to highlight the area as a gateway for Chinese companies looking to expand their business overseas. The area has a combined gross domestic product of US$1.34 trillion.

In contrast, New York in the United States has an economy of US$1.61 trillion and that of Greater Tokyo in Japan amounts to US$1.78 trillion.

China’s Belt and Road Initiative (BRI) has helped to ease global trade concerns and has become an effective strategy at a time when the Asian economy is growing strongly, Somkid said.

In relation to the BRI, Thailand has been cooperating with China on proposed high-speed train projects and has expedited construction of double-track railway in parallel with high-speed train routes from the Eastern Economic Corridor (EEC) to Laos, Cambodia and Myanmar for transport of people and products, he said.

In the future, trade, investment and tourism linkages between Asean countries and China will be increased and more roads would be constructed for routes taking in Myanmar, Laos and southern China, with another route to Myanmar, India and Bangladesh.

“Seamless connection of transport routes is the key to BRI,” Somkid said. “Meanwhile, in the future, digital linkage is no less important. Now, Thailand has accelerated its investment in an underwater cable to link with Hong Kong for Internet connections with its neighbouring countries, China and China’s Greater Bay Area to cope with China’s Internet Plus.”

Sompop Manarungsan, president of the Panyapiwat Institute of Management, said that the GBA is a very important economic area of what he calls “New China”.

China has used Hong Kong’s financial centre and Macau’s financial liberalisation system for smooth investment and business operations, he said.

The GBA, full of startups and technology firms, seems like China’s Silicon Valley and is the most important area of China now, he said.

“This area not only acts as a large financial centre linking investment among China’s southern areas, but also connects investment flows from China and other regions,” Sompop said.

“Thai government officials, in their visit to this area, should find opportunities to make investment linkages with companies in the area and invite them to make investments in Thailand.”

Elsewhere, the US-Asean Business Council (USABC) says its stands ready to become a partner to push for the advancement of the Thailand 4.0 policy and digital economy strategy, while supporting Thailand’s reform in laws and regulations that facilitate doing business in the country. Members of the council visited Thailand from June 26-28.

The USABC representatives who met Prime Minister Prayut Chan-o-cha on their visit came from 39 companies in six major industries: energy and infrastructure; information, communication and technology; health and bio science; food and agriculture; manufacturing and tax; and financial services. The companies included Google, Netflix, American Express, Citi, Harley-Davidson, 3M, Ford, Microsoft, AIG, Chevron and eBay.

USABC president Alexander Feldman said, after meeting Deputy Prime Minister General Prawit Wongsuwan yesterday, that US investors are keen to increase investments in Thailand, especially in the EEC.

He added that the council members visiting Thailand this week expressed confidence that Thailand’s economy would continue to grow strongly.

Siwat Luangsomboon, assistant managing director at Kasikorn Research Centre (Kresearch), said the confrontational US trade policy has run into retaliations from the country’s main trading partners and these ructions will shake up the trading order and the global economy. Export-driven countries, such as Thailand and other members of Asean, as well as China, stand to be affected.

Siwat said US President Donald Trump is motivated by domestic politics in his trade actions.

“Trump is hoping for political advantages, rather than economic gains, and is looking towards the presidential election in 2020,” he said. “So, it’s possible for the US to go ahead with the trade wars for two to four years, depending on the political popularity of such actions, and this will determine whether the aggressive stance picks up or whether there will be an easing.”

This year, Thailand could encounter some impact, though this would be largely limited. Although some exporters would likely make some gains, he said.

Based on forecasts of the tariff collections to be made by China and the US, Thailand is expected to see US$280 million to $420 million wiped off the value of its exports this year and as much as $4 billion to $4.5 billion in 2019.

However, on the back of an 11.6 per cent year-on-year increase in exports for the first five months of this year, KResearch has raised its forecast for this year’s growth in shipments from 4.5 per cent to 8.8 per cent, said Nattaporn Triratanasirikul, head of research at KResearch.

The research centre revised up its forecast of economic growth from 4 per cent to 4.5 per cent for this year, with the gains expected to be driven by the international sector and domestic spending.

“In the latter half of 2018, farm income will likely turn around and move into positive territory due to the high expansion in agricultural production and a decreasing contraction in prices, particularly of Hom Mali rice. Rubber prices are expected to have hit their bottom levels,” Nattaporn said.

Kangana Chockpisansin, another head of research at KResearch, said that the research unit is revising its forecast for the baht in 2018,. The currency will likely depreciate for the rest of this year in light of a forecast of two US interest rate rises and concerns over the trade wars, Kangana said. The previous estimate was for 32.5 per to the US dollar at the end of this year.

The baht is projected to move in a range of 32.5-33.5 to the US dollar.

Thailand has suffered capital outflows to a lesser extent than some other countries, given its trade surplus and sufficient foreign reserves.

“Local interest rates’ direction has ended, even though the Monetary Policy Committee has not yet raised the policy rate,” Kangana said.

“Market rates have already risen. The three-year bond yield has edged up 25 basis points.”

KResearch estimates the Bank of Thailand’s MPC will maintain the policy rate at its current level for the rest of this year.

The research house also revised up Thailand’s loan growth from 4.8 per cent to 5 per cent on expectation of new loans reaching Bt313 billion in the latter half of this year. New loans totalled Bt287 billion in the first six month of this year.

Rating trends continue to be favorable across most sectors and geographies in Asia-Pacific, said S&P Global Ratings credit analyst Terry Chan. “Indeed, the net rating bias has eased to negative 1 per cent in May 2018 from –5 pepr cent in February 2018.”

However, tail risks from the US are rising, posing a threat to the Asia-Pacific. These US-related risks include: Potential trade interruption, Higher US-dollar interest rates and wider spreads, which would affect asset pricing and financial markets, and Global investors’ concerns about a turn in the US credit cycle, which could threaten an eventual pullback of liquidity in Asia-Pacific’s emerging markets.

“With China’s debt overhang risk relatively stable, the primary source of regional risks is external, mainly from the US,”said Chan.

“Front of mind is the US-China trade dispute, which is now in earnest following the recent tit-for-tat exchange of a 25 per cent tariff imposition, by the US and then China,” Chan said.

Left unchecked, the salary surge could add more than US$1 trillion to annual payrolls in the region by 2030, jeopardising companies’ profitability and threatening business models.

In Thailand, a worker shortage will cost an additional $22 billion by 2020, $27 billion by 2025 and $34 billion by 2030.

“The new era of work is one of scarcity in abundance: there are plenty of people, but not enough with the skills their organisations will need to survive,” said Dhritiman Chakrabarti of Korn Ferry. “While overall wage increases are just keeping pace with inflation, salaries for in-demand workers will skyrocket if companies choose to compete for the best and brightest on salary alone.”

Korn Ferry’s Salary Surge study estimates the impact of the global talent shortage, identified in Korn Ferry’s recent Global Talent Crunch study, on payrolls in 20 major global economies in 2020, 2025 and 2030. It measures how much more organisations could be forced to pay workers, above normal inflation increases.

Based on the study, the projected labour demand figures for graduate level workers and above in Thailand in 2020, 2025 and 2030 was 5,737,900, 5,857,280 and 6,016,130.

Meanwhile, the projected labour supply figures for graduate level workers in 2020 was at 5,164,160, 2025 at 5,137,790 and 2030 at 5,054,850. This was projected to cause a 10 per cent, 12 per cent and 16 per cent labour shortage in 2020, 2025 and 2030.

The study estimates the huge impact a salary surge could have.

Japanese companies can expect to pay the most with an additional $468 billion needed by 2030.

Thai companies can be expected to pay more than $34 billion by 2030.

But smaller markets with limited workforces are likely to feel the most pressure. By 2030, Singapore and Hong Kong could expect salary premiums equivalent to more than 10 per cent of their 2017 GDP.

By 2030, China could see an additional wage bill of more than $342 billion.

India was projected to be the only economy that can expect to avoid upward spiralling wages as it will probably have a highly skilled talent surplus.

By 2030, the average pay premium, meaning what employers could have to pay the amount above normal inflation, across the region per worker is $14,710 per year.

However, Hong Kong could face a $40,539 per year per highly skilled worker, Singapore $29,065 and Australia $28,625 more by 2030.

In China the highly skilled worker shortage is expected to exceed 1 million by 2030, meaning that the wage premium could reach nearly $51 billion, higher than any other country analysed.

Dr Mana Lohatepanont, managing director of Korn Ferry in Thailand and Vietnam, said: “In Thailand, the increase in average pay premiums may have a high impact at both the macro and micro level, especially in 2030 where average pay premiums will be as high as $34 million, equivalent to 7 per cent of Thailand’s GDP in 2017.

“By 2030, organisations will see a 15 per cent surge in annual payroll compared to salary increases, and this will directly affect businesses’ bottom-line. Organisations that identify and develop employees’ skills to match their future needs will be well-positioned to enjoy financial success.”

The bloc’s 27 leaders meeting without Britain will largely work off proposals set down with great pomp by France and Germany, known as the Meseberg Declaration, after the site of a recent meeting between Chancellor Angela Merkel and President Emmanuel Macron.

Europe’s twin engines of EU unity, France and Germany make up nearly half of the eurozone economy. But smaller members, led by the Netherlands, have voiced their irritation at having the EU’s future announced from on high by the bloc’s biggest powers.

Eurozone budget

First the bad news for Paris.

National governments have for months been haggling over a French idea of creating some sort of budget capacity for the 19-nation single currency bloc which could be used in case of crises or economic shocks.

Even if modest, Macron sees a eurozone budget as a symbolic step towards a more centralised and mutually supportive Europe.

But austerity-loving hardliners, usually led by Germany, fear an unnecessary transfer union, with disciplined countries in the north propping up over-spenders to the south (think Greece or Italy).

In Meseberg, Merkel gave it her quiet backing and the EU commission has proposed a scaled down version — building a budget of just 55 billion euros.

Germany is open to something modest and included in the overall EU budget, which would require the approval of all the EU’s soon to be 27 member states, not just the countries using the single currency.

But the resistance by a group of smaller countries, spearheaded by the Netherlands, has been fierce and just hours ahead of the summit, the eurozone budget was not mentioned explicitly in a draft of summit conclusions seen by AFP.

European Monetary Fund

Eurozone governments will on Friday accept the general idea of upgrading the responsibilities of the European Stability Mechanism (ESM), which oversees bailouts to troubled member states, such as Greece, into some sort of European Monetary Fund.

But beyond the concept, Europeans struggle to agree on the exact missions of this future body and even on its name. Details on the body’s new mission have been delayed until December — and this reform was considered an easier one.

Everyone agrees that it should assume the role of “lender of last resort” (or “backstop”) for banks in distress if the backup mechanisms already in place prove ineffective.

But some, including Chancellor Merkel, would like the fund to rival the Commission in its power to oversee national economies. This is opposed by the EU executive, which is loath to cede power to national governments.

Banking Union

Completing the banking union is a central challenge for EU leaders, but the last missing piece is the toughest.

The creation of a European-wide deposit insurance scheme has been bitterly opposed by Berlin for years in the belief that Germany would be on the hook to save fragile banks in countries such as Greece and Italy.

Under the scheme, all EU deposits would be insured up to 100,000 euros through a treasure chest that was guaranteed by taxpayer money.

The repeated delays of EDIS, the acronomy for the European Deposit Insurance Scheme, has become a Brussels inside-joke.

Asian companies would suffer only if US dollar sharply rise, he warned.

Now, the world economy remains supportive. Emerging economies have current account surplus, particularly Thailand which indicates strong economic fundamentals, he said at a seminar hosted by Kasikorn Private Banking .

At the same time, surveys point to a solid economy in Europe as many countries have recovered from the previous crisis. Spain has posted current account surplus and its economy has now grown by about three per cent.

He said Europe has gone through an economic restructuring and unemployment rates have now declined.

China is less vulnerable to trade disputes with the United States as it has more trade with Asia, he said.

Meanwhile, the US economy is in an early overheating stage. Growth will continue for a while and the US Federal Reserve will gradually raise inter-rates to address rising inflation concerns.

He argued that judging from the history data , the next economic crisis would be caused by higher interest rate when long term rate surpasses economic growth rate .

The next crisis could happen in the next two to four years, should the US Fed Fund rate rises to about 1-2 per cent from below one per cent currently, according to Chaar.

He was optimistic that the US-China trade dispute will not escalate into a trade war. He expects President Donald Trump would make a compromise with Chinese leader Xi Jinping.

If China offers some market access to the US, Trump would be able to tell his political supporters in the upcoming mid-term elections that he could open the China market. Trade tension is not expected to escalate, he said.

Chaar is positive about investment in equities in Asia and Europe. Investments in yen assets are advised since the Bank of Japan is likely to increase its policy rate.

The “R-Walk” project is intended to join with public transport as well as providing convenient access to offices, shops, hotels and Bangkok’s famous Erawan shrine.

The area hopes to attract 1 million visitors per day during the high season.

Ratchaprasong District has more than 4,000 rooms in five-star hotels and 5,500 shops. The Ratchaprasong Walk, an ongoing construction project since 2002, has a construction budget of Bt715 million to connect Big C supercentre on Ratchadamri Road to Chit Lom BTS station to Chaloem Phao Junction, Gaysorn Village and Platinum Fashion Mall.

It is currently used by around 100,000 people a day.

Pol Gen Aswin Kwanmuang, governor of Bangkok Metropolitan Administration, said: “Ratchaprasong is an area that never ceases to develop and is determined to become Thailand’s prominent business and lifestyle district.

“The ‘Ratchaprasong model’ indeed serves as an example of the country’s first business, lifestyle and tourism district that completely connects to public transport — an integral drive for business, tourism and lifestyle activities. Ratchaprasong is a district with the highest number of tourists in the country, creating a huge amount of revenue for Thailand.

“It is an icon of success, a sign of collaboration between public and private sectors to come up with a concrete development strategy.

“The ‘R-Walk’ elevates Ratchaprasong to the next level of modernity and convenience, especially for tourists.”