Real estate bubble ahead, says ex-WTO chief

18 พฤษภาคม 2560

Thailand's economy is geared towards unproductive real estate & stock market speculation & not productive investment to develop economy for the long-term.

ECONOMY

Real estate bubble ahead, says ex-WTO chief

Wichit Chantanusornsiri & Kanana Katharangsiporn
18/05/2017

In Thailand, domestic private investment remains low, with most of it concentrated in the property sector.

This could cause an economic bubble.

This is according to Supachai Panitchpakdi, a former director-general of the World Trade Organization (WTO) and secretary-general of the UN Conference on Trade and Development (UNCTAD).

Mr Supachai was also a former deputy prime minister who oversaw economic policy in the Chuan Leekpai government.

REAL ESTATE SECTOR GETTING MOST INVESTMENT MONEY

"Investment has poured into the real estate sector mostly," Mr. Supchai said.

"This is quite abnormal."

"One cannot deny the beginnings of a bubble in the real estate sector as many more projects have been launched but there's an oversupply."

PRIVATE SECTOR NOT MAKING INVESTMENT IN PRODUCTIVE ENTERPRISE

The private sector does not invest, instead allocating profit through dividends to shareholders.

Private companies in Thailand pay the highest dividends in Asia, Mr. Supachai said.

According to Stock Exchange of Thailand (SET) data, 567 SET- listed companies delivered an aggregated net profit of 909 billion baht last year, a 30% surge from 2015 and marking the highest net profits in five years.

HIGH DIVIDENDS DRIVING STOCK MARKET, BUT INVESTMENT WILL DRIVE FUTURE

The high dividend payments of Thai private companies have propelled the stock market.

Dividend payments, however, divert money from investment that strengthens business and the economy.

LOW INVESTMENT IN RESEARCH & DEVELOPMENT (R&D)

This practice causes a low level of research and development (R&D) funding in Thailand, he said.

"The Pracha Rat initiative [for public - private collaboration] enables the private sector to make a larger profit, but that profit should be used to help the people," Mr Supachai said.

ATTITUDE TO DOING BUSINESS: SPECULATIVE VS. PRODUCTIVE ECONOMY

He argued that tepid private investment has nothing to do with confidence, but rather is about operators' attitude in doing business.

"If we teach people to focus too much on dividend payments or low interest rates it discourages them from saving, instead putting money into the stock market where there is higher risk but sometimes a better return," Mr Supachai said.

"I want the government to instruct state agencies to show the real economic figures to let people understand them. I understand they use political rhetoric for fear of affecting investment, but we sometimes need to tell the truth."

"For example, the government announces that investment applications through the Board of Investment (BOI) increase by 70-80% every year, but where is the real investment."

GREATER ROAD CONNECTIVITY WITH CHINA WILL ADVANCE REGIONAL ECONOMY

Separately, he said China's One Belt, One Road initiative will be a boon to the regional economy, particularly the Greater Mekong Sub-Region because economic integration with China will deepen.

Major and secondary roads under the initiative will be modernised, developing the areas where they connect, said Mr Supachai.