As global competition intensifies, Thailand can neither simply keep growing on the back of capital accumulation nor dwell on massive production of low value-added goods. Desirable product features such as high quality and consistency are needed to sustain export competitiveness, and to maintain linkage to the global arena with clear focus on market awareness and adaptability. Recently, there have been positive signs in some industries such as jewelry, garments, and food, where production technology has been upgraded to increase competitiveness of these industries and to move them up the value chain. Unfortunately, while such developments are encouraging, they have not been adequately spread out to other industries. By the time these adjustments are completed, it may have been too late, probably rendering losses in a number of industries. What we need now is a national agenda that comprehensively looks at competitiveness of all parts of the real sector. Industries that can no longer compete in the world market will have to be gradually phased out. Other industries that depict competitive edge and growth potential in the global arena will warrant further plans to upgrade technology, increase added values, and develop marketing strategies. These plans will have to be implemented through a concerted national effort so as to ensure better resource allocation along with greater value creation. Reforming the real sector would however need to be complemented by strengthening of the financial sector. A notable example of such a strategy is the establishment of the Thai Asset Management Corporation or TAMC.

Thus, the recovery in the services and tourism sectors ensures a rebalancing in the composition of demand in the third quarter in terms of goods and services. In fact, sectoral confidence indices also suggest a significant improvement in recent months particularly in the services and retail sectors. When talking about the recent developments, I would like to place a special emphasis on investments. Data for the second quarter indicate that investments, particularly in machinery-equipment, contributed significantly to growth. The CBRT’s research shows that our firms have a high investment appetite. In the recent surveys, firms operating in all sectors excluding construction have reported that the weight of financial constraints among factors limiting activity/production has declined. We see that the weight of this factor is even below the historical averages currently. Moreover, investment and employment tendencies of firms have reached very high levels compared to previous years. We are pleased to see that the improvement in the employment expectation of firms also continues in the third quarter while the investment tendency remains strong across main sectors. We envisage that as the improvement in macro indicators continues in the upcoming period, as the risk premium declines and volatility decreases on the back of improving current account and inflation outlook, the credit channel will function effectively and stabilize the positive outlook regarding the investment appetite. Although there seems no obvious problem in accessing credit, high loan rates limit the access to credit.