Baht Economy has great potential

By Narongchai Akrasanee

BANGKOK: The Baht Economy encompasses five countries: Cambodia, Laos, Myanmar, Thailand, and Vietnam. Due to their proximity to Thailand and their current stage of development, there is great potential for trade between these countries and Thailand.

The relative strength of the Thai economy in the region and the use of the Thai Baht as the currency for trade and investment among these countries is what gave rise to the term. Thailand has a relatively stable currency due to its remarkable growth and prosperity in recent times.

The three Indochinese countries and the three Mekong countries (including Yunan Province in China) are collectively referred to as the Greater Mekong Subregion (GMS). Since 1992, these six countries have held a series of conferences on subregional economic cooperation, with particular attention to the transport and energy sectors. Subregional initiatives have also been launched with respect to trade and investment, human resource development, tourism, environmental protection, and natural resource management.

The Greater Mekong Subregion and the Northern Growth Triangle (with Malaysia as the point of reference) are two areas of increasing interest. People never really paid much attention to these areas. So why the interest now?

Because the fit is perfect at the moment. Thailand needs the help of these countries. (Thailand used to conquer land, abduct the women, and make them queens of Thailand). Now we need the natural resources available in these countries, and markets for our goods and services.

Thailand has been growing at about 8 percent a year for the last 30 years. We have run out of oil and energy resources and 60 percent of our energy is imported. We have developed all the hydroelectric potential we have. Now what do we do? The best solution is to buy energy from the GMS countries.

These countries have great potential for hydroelectric power, being mountainous. Thailand, being surrounded by these countries, is thus also surrounded by mountains. When the rains come, they hit the mountains -- typhoons in the east, monsoons in the west - and turn into rivers. These rivers feed powerful waterfalls, which make the best electricity and cost practically nothing.

The GMS's water potential, according to the assessment of the Asian Development Bank (ADB) is tremendous. If you turn all these waterfalls into hydroelectric power, you will have a capacity of about 100,000 megawatts. Of course, you cannot dam all the rivers because you have NGOs preventing you from doing so. The ones that would not invite NGO intervention amount to approximately 58,000 megawatts.

This projection is based on a plan to establish commercial relationships with other countries to gain access to their natural resources. This plan will be the key to all development.

A map is being developed by the ADB, the bible for business in the GMS. The ADB has provided technical assistance of more than US$5 million for a series of country consultations, sector studies, subregional project identification, and development.

Areas with the biggest potential hydroelectric power that one can develop without much danger to the environment have been identified. With high mountains and waterfalls, few areas under development will be flooded.

In anticipation of NGO objections, a tunnel has been dug so that water passes through a tunnel to generate electricity and pump water back through a 210-megawatt dam. We are talking about developing a total of 15,000 megawatts of electricity in Laos alone. We have identified areas, again based on ADB studies, which would not create environmental problems; if the plan materializes, Laotian income per capita would quadruple, just by selling electricity.

Laos has a hydropower generating capacity far greater than its foreseeable needs. Development of this capacity can and should be based on the demand and supply conditions of its neighbors. Thailand, on the other hand, has huge energy needs. An energy accord with Thailand has facilitated a public/private joint venture for 210 MW, the US$ 210 million Theun-Hinboun Power Project in Laos.

Thailand needs energy as well as markets for its goods and services, and the GMS countries need income.

Thailand has huge power needs which may be satisfied by Laos electricity and Myanmarese gas. Thailand is also keen on developing an alternative route to the sea through Vietnam. A road will soon be completed which will connect Northeast Thailand to Vietnam, through which goods from Thailand, Laos, Myanmar, and Southern China may be shipped to the rest to the world.

The coincidence of wants, demand for resources in Thailand, and demand for liberalization and development in these countries, show that all parties stand to gain from closer economic ties.

Yet for the GMS to develop its full potential, the infrastructure needs to be developed. There is a great need for infrastructure in these countries, especially in the transport, energy, and telecommunications sector.

Consider the current lack of transport facilities. The ADB estimates that until the year 2020, there will be 10.4 percent annual growth in freight traffic (based on 7 percent GDP growth).

All these countries are changing from command economies to market economies. They welcome foreign investment. They have embraced market reforms after years of inward-looking authoritarian rule. They want to reconstruct their economies.

Cambodia advertises: "Come to Cambodia - Land of The Future Growth - Your New Destiny." But if you go there, you might get stuck. Why? Because there is no effective business support systems. Bureaucrats in these countries are used to command economies. They studied in China, Eastern Europe, or Russia. These countries had communist "economies", and did not trust capitalists.

So what are the immediate prospects? There is no doubt that there is an increasing amount of economic activity here, but only later on, when the GMS has infrastructure and energy, can these countries go shopping. At the moment, the countries are poor. They do not have the money to buy anything, therefore it is unwise to try to sell them anything.

With the shift to export-oriented growth and market-driven economies, competitiveness has become important. Subregional projects promote efficient use of human, capital, and natural resources; sub-regional infrastructure projects combine the comparative advantages of each country.

Dr. Narongchai holds a Ph.D. degree from Johns Hopkins University and M.A. in Business Economics (with honors) from the University of Western Australia.

-- The Asian Manager

Window A: The coincidence of wants, demand for resources in Thailand, and demand for liberalization and development in these countries, show that all parties stand to gain from closer economic ties.

Window B: At the moment, the countries are poor. They do not have the money to buy anything, therefore it is unwise to try to sell them anything.