World Competitiveness Center

Dedicated to the advancement of knowledge on world competitiveness

13 July 2022

Professor Bris addresses the 2022 Thailand Competitiveness Conference, advising cautious optimism

 

Professor Arturo Bris, Director of the Center, spoke at the Thailand Competitiveness Conference 2022 in Bangkok last week.

‘As an exporting economy, Thailand could be hard hit by a world in which monetary policy no longer works. Educating executives to deal with the unknown is the only solution,’ he said at the event, which was hosted by our partner institute, the Thailand Management Association (TMA).

Bris said it was impossible to speak with anything near certainty but that his assessment of the current economic climate is that the US economy is on the brink of a recession. Compounding this, he said, is the fact that the velocity of money has decreased.

“With technology, money circulates faster so money velocity ought to have increased, in theory, in the last 10 years. And yet it has decreased. This is because so much money has been printed that the economy cannot move.”

Monetary policy was excellent for fighting the pandemic. Now what?
 

During COVID, central banks – including Thailand’s – started printing more money, coming to the rescue of governments and in turn enabling them to help people, Bris explained.

“But we now cannot print any more money and we cannot take that money back either because inflation has changed the game. Add to that fact that increasing interest rates could go either way and the big question is: are central banks going to reduce inflation or are we going to create a massive recession in the world economy?”

Bris said we could end up with stagflation, whereby an increase in inflation and stagnation of economic output converge.

“In this paradigm,” he said, “exporting economies would suffer more, meaning China and Thailand, for instance, would both grow less.”

However, ultimately, we remain ignorant about the future and need to make big bets, which he described as “risky in the traditional sense, but the only way to navigate our future.”

Making bets on an uncertain future takes skilled managers
 

“We need to give managers the skills they need because as the economy changes, leaders need new skills,” said Bris.

“In the case of Thailand, our indicators show a lack of management skills and low competence of managers. The quality of Thai education is good but is contained mainly to primary and secondary education. Quality of education proper encompasses having the right talent at schools, universities, and in companies by training people on the job.”

Leaders need to draw upon a company’s mission, vision and values in response to crisis. “Keep these and strategize around them,” said Bris. “They are skills that come to our rescue when we don’t know what future we are dealing with. However, executives need to internalise them in the good times – all too often they don’t.”

Thailand among a trio of ‘economies of hope for Asia’

“Thailand, Malaysia and India are the three economies of hope for Asia,” Bris said. “They are going to experience the biggest development in competitiveness among Asia’s economies in the next decade because they have very low-hanging fruits that can be exploited.” Bris was referring to regulatory reforms, corporate governance reforms, trade treaties and public-private partnerships.

Thailand was 33rd out of 63 economies ranked in the World Competitiveness Ranking in 2022, having placed 28th in 2021. “But this [drop] is just because the 2022 rankings capture the relative recovery of the world’s economies, measuring 2021’s GDP growth as part of this. It follows that those economies that were locked down for longer declined. And that’s just mechanical.”  

Thailand is joined by Asian neighbours Indonesia, China, Japan, South Korea and Malaysia in this regard. European economies, by contrast, opened their borders quicker but paid the price with infection numbers, said Bris, who concluded:

“Asian competitiveness will increase with the reopening of borders and more so if China recovers; European economies, on the other hand, look set to take a beating from the effects of the Russia-Ukraine war and rising inflation.”

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