TBA urges informal economy reform for green growth, SME gains
In a recent seminar organised by the Fiscal Policy Office (FPO), Payong Srivanich, CEO of Krungthai Bank and Chairman of the Thai Bankers' Association, he emphasised the urgent need to address the informal economy to drive Thailand's transition to a green economy.
The discussion, part of the "Fiscal GreenPrint: Bridging Policy and Practice" panel, highlighted the challenges posed by the large informal economy, which accounts for nearly 50% of the nation's GDP.
A large informal economy leads to numerous challenges, including low national income, reduced competitiveness, poverty, and high inequality, particularly between large and small businesses.
These challenges make it more difficult to address climate impacts, aligning with the World Bank’s and the IMF’s data that countries with large informal economies are less capable of managing climate risks.
Therefore, resolving informal economy issues is seen as essential for establishing a strong foundation for Thailand's green transition.
"Thailand is classified as a country with high climate risk. This, coupled with the country’s large informal economy, makes Thailand more vulnerable compared to other countries in the region. Therefore, addressing the informal economy is a priority because solving this issue will provide Thailand with a strong foundation for effective green transition."
Thailand should view the green transition as an opportunity to elevate the country's economy, solving related structural problems in one go, particularly through new investments.
Over the past decade, private investment in Thailand has remained low; averaging only 25% of GDP, significantly lower than the 41% of GDP observed during the period prior to the Asian Financial Crisis and below many Asian countries. Bain & Company estimated that by 2030, green investments in the ASEAN region will reach approximately $1.5 trillion, with Thailand requiring up to $180 billion in green investments during this period.
This presents an opportunity to raise income and employment levels due to the increasing demand for green jobs and to boost competitiveness in the future economy.
Payong noted that The Thai Bankers' Association has made green transition a priority, incorporating sustainability as one of its four key strategies.
This year, eight commercial banks joined forces to promote the "Financing the Transition" project, continuing last year’s efforts of nearly 200 billion baht in transition finance, equivalent to 1.4% of total outstanding loans.
Additionally, the Thai Bankers' Association has included the Green Economy in its proposals to the government as a guideline for addressing the country's economic problems.
The Association has proposed enhancing the competitiveness of businesses by supporting Tax Incentives for Transition Finance and Green-related investments. By providing appropriate incentives to businesses, especially SMEs, they can better adapt and gain better access to funding sources.
"Data is crucial in driving the green transition as it enables understanding of real problems or situations, leading to a data-driven economy. It should also be transparent and open to all. Currently, data related to climate risk and green economy has limitations, both in terms of data collection and reliability, especially for SMEs and Scope 3 greenhouse gas emissions data. Additionally, there is a need for verifiers and carbon credit standards that align with national and international contexts because carbon credit is a global asset class."
He emphasized that driving the green economy requires cooperation from all sectors, ensuring that no one is left behind for this green transition to be an inclusive transition.
The government is a lighthouse by implementing policies and creating incentives through financial measures and operating environment, such as tax incentives, soft loans, and government procurement advantages for Thai products that meet environmental standards.
Large enterprises, particularly listed companies, should play a role in elevating SMEs in their supply chain as part of their corporate responsibility. The public at large and small businesses should formalize, increase awareness, and adapt through upskilling and reskilling to align with green job opportunities to receive higher pay based on skills.
"The financial sector is just one of many gears that will help drive green transition. Effective implementation requires cooperation from all sectors, both public and private. Timely and rightly targeted government policies will support businesses of all sectors, especially SMEs, in entering the green transition and drive the country towards a sustainable green economy with a balance between reducing carbon emissions and passing on incentives to ensure better quality of life for communities and households."
