Prasarn Trairatvorakul: Global risks and the outlook for Thailand Address by Dr Prasarn Trairatvorakul, Governor of the Bank of Thailand, at the Fitch Ratings 100th Anniversary Conference, Bangkok, 27 September 2013. *  *  *  Distinguished speakers and panelists, Ladies and Gentlemen, I would like to thank Fitch Ratings (Thailand) for inviting me to give an opening address at this year’s annual conference. Much has changed both at home and abroad since I gave an opening address at this event two years ago. In retrospect, however, it is interesting to look back over the past two years and notice how most global risks we talked about – for instance, fiscal drag and political gridlock in the U.S., sovereign debt crisis in the Eurozone, among others – are still with us today. Most of the risks have reduced in terms of magnitude and urgency, but they certainly have not disappeared. In fact, each of them took turn to appear in the media spotlight and became an object of market’s obsession. Victor Hugo once said, “No army can withstand the strength of an idea whose time has come.” And that sounds fitting for today’s financial market, where obsession with one idea could have a far-reaching implication for so many countries, at once, in an invasive way that is hard to shield against. A. The state of indecisiveness that we live in  It has been almost six years since the beginning of the global financial crisis.
It has to equip firms with capability to move toward higher  BIS central bankers’ speeches  3  product sophistication and flexibility to cater to changing global consumer demand. It has to nurture innovation, given that meaningful growth spurt tends to come from either new products or new ways of producing and delivering them. The strategic focus is thus to create the right environment and give the right incentive for firms to invest and innovate. Physical infrastructure is where we lack behind and suits to be the starting point. Hightech, capital-intensive industries tend to benefit greatly from knowledge spillovers and concentration of economic activities. Therefore, more specialized hubs and clusters – in the spirit of, for instance, Singapore’s Biopolis and Japan’s Tsukaba Science City – are needed. For industries with lower capital intensity, establishing industrial hubs and zonings of related industries would be beneficial, so that these industries can reap localized benefits such as the availability of specific inputs and better labor market pooling. Supporting these less capital- intensive industries will also serve toward the agenda of inclusive growth, for these industries contribute significantly to employment in rural areas. Last but not least, wellintegrated and cost-efficient logistics systems are called for, in order to ensure connectivity and efficiency of domestic production chains. Along with physical infrastructure upgrading, “soft” infrastructure has to be upgraded. In addition to educational reforms that I talked about earlier, improvements on the legal front are also needed.