Thailand has developed a roadmap to become a member of the Organisation for Economic Co-operation and Development (OECD), a group of developed countries, aiming to elevate the country’s standards and broaden trade and investment opportunities.
However, some international economists have warned that joining the affluent club of countries may bring more drawbacks than benefits.
The OECD was founded in 1961 by developed countries. Fifty years on, its membership has expanded geographically to include Latin America, Asia and the Pacific.
There are only two members from Asia — Japan and South Korea — though Indonesia is in the process of applying for membership.
Within the Asean bloc, no countries are members of the OECD. Thailand recently submitted a letter of intent expressing its commitment to join the bloc to the OECD secretary-general in February, but the approval process is lengthy.
Prommin Lertsuridej, secretary-general to the prime minister
Once an application is submitted for approval by the OECD’s 38-member council, it typically takes 7-8 years.
For Thailand, the government’s planning unit, the National Economic and Social Development Council (NESDC), which functions as the secretary-general of the OECD accession task force, has set a goal to shorten this timeline to five years.
To reach this goal, the government and private sector need to collaborate on elevating various standards in the nation to OECD levels, said the council.
HIGHER STANDARDS
“Why does Thailand need to become a member of the OECD? Just think, when we get sick, where do we want to seek treatment? What medicine do we want to take? Do we prefer over-the-counter drugs or herbal remedies, or do we want certified medications? Do we want to be treated by a general practitioner or a renowned specialist? Certainly, we desire standards and acceptance by others,” said Prommin Lertsuridej, secretary-general to the prime minister.
“At the same time, if we are to invite foreign investment into Thailand, establishing contacts for investment or trade necessitates having various standards for the country that are widely accepted. The keyword on why Thailand needs to join the OECD is the high standards of developed countries.”
According to Mr Prommin, for a country to become an OECD member, it must have (1) open, transparent and free-market economies and political freedom, (2) safety and good governance, (3) strong rule of law, (4) a quality education system, and (5) environmental sustainability.
“The main goal is to improve the quality of life for our people. We’re trying to compare standards not to show off but to improve our people’s lives. The entire process is aimed at that point,” he said.
Thailand began considering joining the OECD around 20 years ago during the administration of Prime Minister Thaksin Shinawatra. However, after the 2006 coup, all progress halted.
The initiative was revived in the later years of Prime Minister Prayut Chan-o-cha’s government and within the incumbent administration led by Prime Minister Srettha Thavisin, the first step of the application process commenced, with the submission of a letter of intent to the secretary-general of the OECD for consideration, said Mr Prommin.
According to Mr Prommin, in terms of legal readiness and regulations to facilitate investment, the government has established a working group on the ease of doing business to amend various laws for the convenience of business operations, potentially enacting a business facilitation act to enhance business convenience.
He cited one example that hinders doing business in Thailand, namely the requirement to obtain 19 licences from 19 different agencies when establishing a factory. The One Stop Service initiative for investment through the Board of Investment (BoI) or the Eastern Economic Corridor (EEC) also often falls short of expectations.
Mr Prommin emphasised the need for reforms to shorten and simplify these processes.
“The government’s task is to streamline and support rather than hinder business operations,” said Mr Prommin, adding that the government is in the process of implementing the digital government initiative to enhance the transparency of state operations, aligning with the requirements of the OECD.
In the financial sector, he said discussions have been held with the secretary-general of the Thai Bankers’ Association to improve the settlement system through digital platforms, aiming to streamline settlement processes and enhance transparency, reliability and security.
ADJUSTMENTS NEEDED
Wanchat Suwankitti, the NESDC deputy secretary-general, said Thailand submitted the letter of intent to the OECD on Feb 21 and had received a positive response from the OECD’s secretary-general. This marks a crucial step towards formalising Thailand’s OECD membership, he said.
According to Mr Wanchat, the evaluation process for OECD membership will consider various aspects, including Thailand’s readiness and commitment to the OECD’s values and obligations.
Mr Wanchat highlighted the need for substantial adjustments in Thailand’s public sector management and institutional structure to demonstrate the country’s commitment to becoming a member of the OECD.
According to Mr Wanchat, some countries take 7-8 years to complete the accession process, but the average duration is around 6-7 years.
For Thailand, responsible parties are requesting around five years to complete the ascension procedures, but Thailand must be prepared to make necessary adjustments, he said.
More importantly, Mr Wanchat said the private sector plays a crucial role in propelling Thailand towards OECD membership. If the private sector is invited to participate in providing insights on various group policies, it should actively engage to showcase the commitment of the private sector to address vital issues such as anti-corruption, responsible business practices, tax systems and environmental concerns.
“If Thailand becomes an OECD member, it would also help raise the standards of its private sector to match global standards. This would enable Thailand to compete on the global stage and establish partnerships within a global network,” said Mr Wanchat.
On a cautionary note, he said that if the private sector ignores Thailand’s OECD accession efforts, development opportunities might be missed and existing competitiveness could be terminated. For instance, neglecting to adhere to standards related to the enhancement of labour rights and environmentally friendly production could lead to the imposition of trade barriers, he said.
Regarding the impact on SMEs, he said increased foreign investment is anticipated if Thailand successfully joins the OECD, but the question is whether Thai SMEs can compete with foreign investors. This issue is a concern for the government because SMEs have been encountering intense competition.
Nevertheless, even if Thailand becomes an OECD member, reciprocal trade openness with other member countries is not obligatory for all sectors.
Reservations in specific areas are allowed, provided there are justifiable reasons. Examples include reserving certain occupations for Thai nationals and other restrictions, as observed in countries like the United States and South Korea.
For example, the US government reserves the right to prohibit foreigners from owning or controlling the production of energy using nuclear reactors and plutonium.
Private sector entities are thus allowed to engage and provide their perspectives on reservations in specific matters, he said.
In this context, Mr Wanchat said the prime minister established a committee to drive the OECD membership process, with members including representatives from both the public and private sectors like the Federation of Thai Industries (FTI). This committee is considered a national-level entity, demonstrating the commitment to OECD accession, he said.
“The OECD accession evaluation involves multiple committees, but one particularly rigorous committee is the transparency committee, where some applicant countries have spent up to seven years without successful approval,” he said.
HIGH AMBITIONS
Sompop Manarungsan, president of the Panyapiwat Institute of Management and a specialist on the Chinese and US economies, said the OECD is a club of wealthy nations, representing countries with per capita incomes exceeding US$13,000. Among the current 38 OECD member countries, there is only one country in Latin America that falls below the threshold of high income, instead categorised within the group of middle-income nations.
Thailand’s current per capita income, meanwhile, stands at around $8,000, placing it in the middle-income bracket.
Therefore, if Thailand and Indonesia become members of the OECD, they would be minority countries within the organisation.
More importantly, if Thailand becomes a member of the OECD, it would change Thailand’s status from a middle-income country, and the nation would need to contribute funds to less developed nations.
In the case of China, it is observed that China prefers not to be classified as a developed country within the World Trade Organization because it would entail additional obligations for developed nations, he noted.
“The OECD does not have cooperation guidelines with binding agreements, unlike free trade agreements [FTA] or groups like the EU, which have shared commitments. Therefore, the trade and investment benefits that Thailand would gain from OECD membership are less substantial compared to the potential drawbacks,” he said.
As a matter of fact, Mr Sompop said Thailand has been a partial member of the OECD for over a decade, and even without full membership, the country can still elevate its standards.
“Being an advanced economy country as an OECD member does not necessarily imply that other countries would be inclined to invest more. Developed nations typically have more stringent criteria than developing countries,” said Mr Sompop.