Some argue that raising the minimum wage, despite its costs, can potentially promote investment and improves labour productivity. Some prefer to provide direct fiscal incentives for firms to invest. Others see public investment as holding the key. The jury is still out as to how successful these approaches will prove to be in catalyzing an investment up-cycle, and ultimately alleviating the labour market issue. Fortunately, the currently conducive macroeconomic environment is already providing ample incentives for businesses to invest. Financing costs are currently low. Strong baht facilitates imports of capital goods. Firms stand to gain more from AEC integration if they carry out their planned investment in a timely manner. Collective efforts by all will also generate positive externalities, and can go a long way in easing the labour shortage problem for all parties. BIS central bankers’ speeches  3  One fundamental force that may exacerbate the labour shortage problem is the demographic change. Slowly but inexorably, the Thai society is aging, as the total fertility rate is consistently lower than the replacement rate. The number of people aged 65 and above will double in less than 10 years. As projected by NESDB, by 2030 the working-age population will fall from the current rate of 68 percent to just over 60 percent, making Thailand’s old age dependency ratio slightly higher than the Asian average. The government can help manage this demographic transition by speeding up the reform of immigration policy, and simplify registration procedure.
Even if it is too early to tell, we can see that the financial support plans have contributed to a certain degree of recovery in the markets. Interbank rates are falling, credit spreads are narrowing and liquidity is returning in some markets. However, most of the content of the support plans is directed at handling the most pressing problems in the financial system. In the longer term other measures will be needed, and this is what I will discuss now. What are the future challenges? Let me first say that we need to realise that times of financial turbulence are unavoidable and something that we have to learn to live with. What is important is that we learn from previous experiences and use this knowledge to lower the probability of future crises occurring, and when they actually do happen, to mitigate their costs. We also need to realise that despite the many similarities between various crises they are never exactly the same. Therefore, flexibility is needed in the policy frameworks aimed at preventing and managing financial crisis. If I may start on the prevention side, it is hard – given the present circumstances – not to get in to a discussion of what role monetary policy can play in preventing the build up of economic imbalances.