Thursday, November 6, 2008

Thailand in the age of President-elect Obama

The election of Barack Obama to the office of the President of the United States of America has revived the hopes and dreams of all Americans. The optimism that President-elect Barack Obama inspired in his election bid not only won the office for him, it also brought along a Democrat majority in both the Senate and the House of Representatives. The legitimacy for change is mandated.

The change President-elect Obama promised will redefine the world we live in. The way he tackles the ensuing global economic crisis will pose both opportunity for and threat to prosperity for all.

President-elect Obama was able to spark confidence during the campaign. Now he must work to bring back trust in the free market system and re-ignite the world's economy.

But the global economic crisis will not disappear overnight. US regional banks and the credit card industry is bracing for another hard hit next year. The assets revaluation process will take a few years before settling on a new equilibrium. Meanwhile, the US government will have to dole out dollars to keep financial institutions and homeowners afloat.

It will be tough and costly. But with a majority in Congress, the President and Democrat lawmakers are in a position to pass the necessary legislation, hopefully easier and swifter.

The open attitude demonstrated so far by the president-elect will also be receptive to world leaders as they rebuild and restructure the global financial system.

Make no mistake though, President-elect Obama and the new Congress will have to cater to US national interests. The coalition that led to the election victory must be attended to. This is why many analysts expect a more protectionist tone in much of the legislation and the executive policies. For instance, as the president-elect puts it, American jobs must be protected and not "shipped overseas", while he questions the "fairness and compliance" of free trade agreements.

However, with a diverse multicultural background, President-elect Obama does not seem to have that "circle the wagons" mentality in times of crisis, and thus no isolationist attitude. He said in a speech, "The truth is, trade is here to stay. We live in a global economy. For America's future to be as bright as our past, we have to compete. We have to win."

Thailand, although a small country not on any significant agenda in Washington DC, must also be prepared for change. As a nation of traders depending on the flow of trade and capital, Thai government leaders must closely monitor and keep in tune with the changes.

In the past, Thai financial institutions have been correct in being conservative in their businesses. But with the rapidly changing rules of the game, the government together with the Bank of Thailand, must devise a strategy for a restructuring of the Thai financial sector to be more dynamic and able to effectively tap into world resources.

In terms of trade, the 175 long years of close friendship has been beneficial for trade between the two countries. At present, the Thai-US trade share is about 8-9%, with the balance of trade in Thailand's favour of around 6-7 billion dollars. The Thai government must work hard to keep this healthy relationship and increase the potential to become a significant strategic trade partner to gain further access to the US market.

Thailand must not be caught in any trade war between the US and China, or any other country for that matter. The Obama administration will push for tough negotiations with many of its trading partners, who are deemed competitors, especially ones that are taking away American jobs and not adhering to fair trade rules.

Again, President-elect Obama: "When it comes to trade, there's no one-size-fits-all approach. If countries are committed to reciprocity, if they are abiding by basic rules, then we should welcome trade. Most poor countries need access to our markets and pose no threat to our workers."

Thailand's capability lies in food and the agro-industry sector. Not only because humans need to eat to survive, but also with the rising concern on food safety, such as the melamine scare, Thai food products have the potential to build a strong niche in the American market.

But that means we have to raise the quality standard of our produce in accordance with food safety and environmental standards. We also must adhere to international trade practices in all aspects, including labour and human rights and intellectual property.

These are the measures to increase the value of our products, which if met, will increase our penetration not only of American markets but to world markets at a higher value, and thus must be pursued no matter what.

At the same time our unique strategic location and the leeway we made through free trade agreements with China and India must be utilised to the fullest. The US is, at present, the head of the growth engine, but China and India together with Japan, South Korea and Asean will share the lead towards prosperity in the Pacific century.

We must balance our various interests and pipeline trade and investment through our channels.

The government must concentrate on economic issues and should quickly put together a comprehensive strategic roadmap for the country to remain competitive in those markets.

Last but not least, we cannot be perceived by the US or the world, as a failed state.

That can only be proven through a firm commitment towards democracy and to resolvse our political conflicts peacefully. Let's make sure we do not close the window of economic opportunity by our own political mismanagement.

Suranand Vejjajiva served in the Thaksin Shinawatra cabinet and is now a political analyst.

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