THAILAND'S government bureaucracy and state enterprises must develop the policies and framework needed for the private sector to deal with the next phase of the country's economic development, according to a report issued by Political & Economic Risk Consultancy. The report said the Government must remove structural obstacles to pursue its goal of becoming a strategic gateway to mainland Southeast Asia and southern China. This included developing Bangkok as an offshore banking market, the report of the Hong Kong-based consultancy said. Among the biggest challenges facing the Government was dealing with the constraints on social infrastructure, the report said. The Government had boosted investment in the provinces to spread economic development and ease the strain on Bangkok's overburdened infrastructure, it noted. But unless more attention was paid to education and training, the report said Thailand's labour force would not have the skills needed to attract investment in higher technology and higher value-added industries. Thailand's overall risk fell slightly compared with the first quarter due primarily to political stability and the fact that the Government of Prime Minister Chuan Leekpai appeared less vulnerable, the report said. However, social risks were rising due to labour problems caused by competition from China, Vietnam and other low-cost producer countries. The report said it was becoming expensive to hire unskilled labour and there was a lack of experienced, technologically sophisticated labour. The consultancy raised its rating of foreign investment risk after the Government mishandled the Bangkok Expressway project. It said Government's treatment of both local and foreign firms demonstrated there were certain projects where even the basic rules could not be taken for granted. The Government had ordered the road opened earlier this month despite a bitter contract dispute with the Bangkok Expressway Co, headed up by Japan's Kumagai Gumi. The consultancy expected inflation to remain at about four per cent while interest rates continued to decline to 11 per cent next year. The baht should remain close to its present rate to the US dollar, it said. In the near term, it said Thailand's economic fundamentals supported expectations of sustained growth over the next few years. However, there were doubts the Government would be able to reach its ambitious goal of having gross domestic product increase by eight per cent a year, the report said.
