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Why
Services?
Kirida Bhaopichitr
Research Director International Research & Advisory Service
28 June 2016
1. Why services?
2. What roles can the
service sector have?
3. What can Thailand do to enhance its service sector?
Services
2
1. Why services?
2. What roles can the
service sector have?
3. What can Thailand do to enhance its service sector?
Services
3
Thailand needs a new development model to get out of the Middle Income Trap
4 Source: World Bank GNI per Capita per year
GNI per Capita levels per year (World Bank Atlas Method, Current US$ as of 2014)
A higher-value service sector is an integral part of the new development model
Thailand is aging quickly & will demand better services
Source: World Bank, Live Long and Prosper: Aging in East Asia and Pacific (2015) 5
Also, Thailand’s older labor force will be more suited for the less labor-intensive services sector
Enhancing incomes of the labor-rich service sector will help reduce Thailand’s high income inequality
6
0
10
20
30
40
50
60
1985 2009 1984 2005 1992 2008 1981 2007 1994 2008 1993 2008 1990 2010 1984 2010
Philippines Indonesia Lao China Cambodia Vietnam Thailand Malaysia
Increasing inequality Constant inequality Decreasing inequality
Source: World Bank, World Development Indicators
Gini coefficients (Income)
Thailand has one of the highest income inequality in E. Asia
Service sector is environmentally friendly
0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
LOS ANGELES
Bangkok
BEIJING
SINGAPORE
LONDON
NEW YORK CITY
HONG KONG
JAKARTA
TOKYO
PARIS
Stockhom
tCO2e / capita
Buildings Power Industry Ground Transportation Aviation and Marine Waste
3.6
4.6
4.7
4.9
6.0
7.8
9.6
9.7
10.1
10.7
13.0
CO2 missions per capita
7
1. Why services?
2. What roles can the
service sector have?
3. What can Thailand do to enhance its service sector?
Services
8
Service sector can enhance future growth & equality
9
Service is largest sector & has largest employment in the Thai economy
Trade of business services can be the next engine of growth
10
Thailand’s Future – 3 Scenarios
11
Moving to services raises growth & reduces income inequality & CO2
12 Source: TDRI
1. Why services?
2. What roles can the
service sector have?
3. What can Thailand do to enhance its service sector?
Services
13
14
Thailand’s needs to raise labor productivity in services
0
20,000
40,000
60,000
80,000
100,000
Singapore Malaysia Thailand Phillpines Indonesia
Manufacturing Service
Source: IMD World Competitiveness Yearbook 2012
Labor productivity (US$ per person per annum)
Services Trade Restrictiveness Index (STRI)
& Per Capita GDP, 2012
Services trade restrictiveness has to be reduced…
15
Source: The World Bank Group, ASEAN Services Integration Monitoring Report, 2013
Argentina
AustraliaAustriaBelgium
Brazil
Cambodia
CanadaChile
China
ColombiaCzech_republic
Denmark
Ecuador
Egypt
Fin land
France
GermanyGhana Greece
Hungary
India
Indonesia
Ireland
Italy
Japan
Jordan
Kenya
Korea_Rep
Lithuania
Malaysia
Mexico
Mongolia
Morocco
Netherlands
New_zealand
Nigeria
Pakistan
Peru
Philippines
Poland
Portugal
Russia
Saudi_Arabia
Senegal
South_Africa
Spain
Sri_Lanka
Sweden
Tanzania
Thailand
Trinidad
Tunisia
Ukraine
United_KingdomUnited_States
Venezuela
10
20
30
40
50
60
Re
str
ictiven
ess o
f S
erv
ices P
olicie
s
0 10 20 30 40Per Capita GDP(thousand)
rest_ind Fitted values
GDP per capita,PPP (constant 2005 international $)
Source: Gootiiz, Mattoo
15
Thailand’s services trade restrictiveness is higher than those of many countries with similar per capita income level
There is a negative correlation between a country’s income & its trade restrictiveness – countries with higher incomes have lower trade restrictiveness
Thailand
East Asia and Pacific
Global
0
20
40
60
80
100
ManufacturingServices
Source: IFC Investing Across Borders 2010
16
… for FDI into the services sector…
16
Ease of Investing by Foreigners
020
40
60
80
10
0S
erv
ices t
rade r
estr
ictiveness in
dex
IDN PHL THA LAO MYS VNM MMR KHM SGP
Note: Sectors are comparable with 2008 sectors
ASEAN Member States: Industry STRI, 2012
Financial Telecom Retailing
Transportation Professional
Source: World Bank, ASEAN Integration Monitoring Report (AIMR), 2013
… and in the movement of professionals
17
17
18
Thailand could start with liberalization under AEC (AFAS)
18
Shareholding of Investment in Service businesses
51% 49% 70%
51% 49% 70%
49% 30% 70% 51%
Foreign Shares
4 Priority Sectors e-ASEAN, Health, Tourism,
Air transportation
Logistics
Others (ICT, professional services, construction, distribution, education, environment, transport, and all others)
?? 2015 2013 2010 2008 2006
Targets under the AEC have not been met; negotiations under the ASEAN Framework Agreement for Services (AFAS) are still on-going
2009 2010 2015
Skilled Labors
& Short Term
Visits
Draft Mutual Recognition Agreements (MRAs)
Sign MRAs for 7 professions (Engineering, Nursing, Architecture, Surveying, Medical Practitioners, Dental Practitioners, Accountancy Services) & Hotel & Travel professionals
• Exempt visas for Short Term Visits issue ASEAN
Business Card • Facilitation of movement of skilled labor • Develop curriculum and standards for skilled labor
AEC
Movement of 7professions & Tourism Professionals are still not free
as MRAs have not been completed + behind the border barriers exists
19
Thailand could start with liberalization under AEC
19
20
THANK YOU