Temporary in the sense that problems in Japan have been mitigated, at the same time, we see recovery in vehicle production for Thailand since late May. 1  JSCCIB stands for the Joint Standing Committee on Commerce, Industry and Banking. JFCCT stands for the Joint Foreign Chambers of Commerce in Thailand. BIS central bankers’ speeches  1  As for the domestic side, high income and confidence are supporting domestic economy going forward. Domestic demand, both consumption and investment have been and continue to be strong as underpinned by a high level of farm income, high employment, and good consumer and business confidence, complemented by a favorable credit condition. Tighter resource utilization also reflected these vibrant economic activities. The seasonallyadjusted unemployment rate fell to the lowest record in April. Meanwhile, the capacity utilization rate is expected to accelerate in the second half of the year following the recovery in the vehicle sector. Overall, the economic momentum in 2011 remains sound. Nevertheless, political stability remains a key factor to facilitate this ongoing momentum. Having an orderly outcome of the election is one step, but the underlying conflict must continue to resolve in order to further boost confidence and business climate in the economy. Given the current economic development, the Bank of Thailand is more concerned with inflation which is a common outcome in a good growth prospect environment. Increases in inflationary pressure have become a worldwide phenomenon particularly among emerging market economies. Thailand is no exception.

This does not bode well for productivity. Thailand’s infrastructure continuously needs improvement in several areas, particularly logistics, irrigation and quality of education. These public investments will also influence private investment through the “crowding in effect” as public and private investment complement each other. Therefore, the government policies should be prioritized, be gradual and have specific target in their spending. Priority should be given to productivity enhancement project and spending should be selective and targeted to certain areas to ensure policy’s effectiveness. At the same time, graduality of policies is necessary to minimize inflationary pressure and allow time for private sector to adjust. Second, fiscal stance, like monetary policy, is also required to normalize in order to ensure fiscal discipline and sustainability. In a time of normal trend growth, there is a lesser need for a fiscal stimulus. Rising public debt, together with increasing contingent liabilities, may endanger fiscal sustainability in the long run. Reforms of the tax revenue collection and tax structure should be implemented along with rising expenditure to ensure a healthy balance sheet of the fiscal sector. Third, political stability is a vital condition to the private sector for maintaining an investment-friendly environment. These three challenges, if prevail, will put Thailand forth into a competitive frontier. Likewise, the private sector contribution is as equally important. One immediate challenge which businesses face today is the problem of labor shortages.