Meeting the Challenges from Globalization : A Historical Perspective and Future Outlook

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Meeting the Challenges from Globalization A
Historical Perspective and Future Outlook
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• Narongchai Akrasanee, Ph.D.
• TDRI and FPRI

Presentation prepared for the 2002 TDRI Year-End
Conference Meeting the Challenges from
Globalization Ambassador City, Jomtien, Chonburi
December 14-15, 2002
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Introduction

• Long history of having to meet the
• challenges from globalization
• Future outlook of the challenges is
• more complex and multi-dimentional

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1850 -1855

• Colonization or Trade Liberalization?
• Threat from Great Britain
• Trade Liberalization
• (Bowring Treaty, 1855)

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1932 -1935

• Socialism or Capitalism?
• Change from absolute monarchy to parliamentary
  democracy
• Debate on economic regime
• Global protectionism and global recession
• State Capitalism

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1957 - 1960

• State Capitalism or Private Capitalism?
• Revolution led by F.M. Sarit Tanarat
• US influence to adopt the Bretton Woods System,
  i.e Private Capitalism a la World Bank, IMF, GATT
• Private Capitalism

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1980 1984

• Import Substitution or Export Promotion?
• 1979 Second oil crisis
• US 13.2/B, 1977 to US 40/B, 1980
• Oil import bill, 31
• Slow growth (4-5), C/A deficit (7.4), rising
  foreign debt (DSR 17.6, 1980)
• WB - SAL conditionality
• Export Promotion
• Devaluation in 1981 (8.7), 1984 (14.8)
• Investment incentives
• Reduced protection
• GATT membership in 1982

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1989 - 1993

• Financial Protection or Financial Liberalization?
• More Trade Liberalization?
• ICT Protection or ICT Liberalization?
• High growth from 1986 fiscal and financial
  strength
• Industrialization process created demand for
  downstream industries
• (Iron and steel, petrochemicals, oil refinery)

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1989 1993 (cont.)

• Growing need for commercial infrastructure
• Ability of private sector to raise foreign money
• Financial Liberalization
• 1990, Signed IMF Article 8 (Lifted FX control)
• 1993, BIBF licenses, 47 granted
• 1991, New SEC Law and Office

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1989 1993 (cont.)

• Imminent conclusion of GATT Uruguay Round for
  trade liberalization (started 1986)
• High export growth was reassuring
• More Trade Liberalization
• Lifting import ban (1990) and reducing tariff
  rates (1991) for automobiles
• AFTA 1992
• APEC Summit 1993, Community of free trading
  nations

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1989 1993 (cont.)

• Rapid development and growing application of ICT
  worldwide
• Limited ICT Liberalization
• Private investment in fixed line phone and mobile
  phone

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1997 - 1998

• Slower Liberalization or Faster Liberalization?
• 1993 1995 --- Bubble economy due to foreign
  capital inflow
• 1994/1995, Annual net inflow US 20 B
• Financial and economic crisis in 1997
• Liquidity problems at financial institutions
  started in 1996
• Nov 1996 May 1997 --- attack on the Baht and
  its defense 2 July 1997, Baht floatation
• (July Dec 1997, Baht25 Baht48)

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1997 1998 (cont.)

• Questioning global market capitalism
• (Privatizing gains, socializing losses)
• Need for IMF bail-out (US17.2 B), and IMF
  conditionality
• Faster Liberalization
• Liberalization of financial and insurance sectors
• 11 Economic Laws

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2001 - 2002

• Local or Global ?
• Global finance has too much inherent risks
• Dominance of US
• Volatility of capital flows and exchange rates
• Influences of hedge funds, investment bankers,
  rating agencies (Moody's, Standard Poor),
  analysts and commentators
• Negative reaction to foreign elements in
  financial crisis in 1997

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2001 2002 (cont.)

• Global trade is highly competitive and at times
  unfair
• China in world trade, plus India, former Social
  Union, and many others
• WTO system is not development friendly enough
• - Tariff liberalization but growing NTBs
• - Pressure for services liberalization

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2001 2002 (cont.)

• ICT and E-business development is a handicap
• Global IPR system makes new technology
  acquisition very costly
• Unsatiable appetite of MNCs for expansion, merger
  and acquisition
• International terrorism adds complication to
  international economic relations

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2001 2002 (cont.)

• But new WTO-Doha Round promises to be more
  development friendly, and
• Potential of Asian markets, with GNP at 28 of
  world GNP

Local / Regional Link Global Reach
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Local / Regional Link Global Reach

• Active participation in multilateral trade and
  finance systems
• Promoting regional and bilateral cooperation in
  trade and finance
• ASEAN (AFTA)
• GMS
• ASEAN China, ASEAN Japan, ASEAN 3
• Bilateral with China, Japan, Australia, India,
  etc.
• APEC
• Regional financial arrangements
• (Chiangmai Initiative, Asian Bond, etc.)

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Local / Regional Link Global Reach (cont.)

• Applying global business practices to promote
  sectors with competitiveness potential (processed
  foods, fashion goods, automotives, tourism, etc.)

• Cluster approach
• Logistics approach
• IPR system development (innovation,
• commercialization, protection,
• securitization)

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Local / Regional Link Global Reach (cont.)

• Promoting grassroot sector and SMEs
• Supporting domestic demand
• Applying global standard of good governance