As Thailand’s former Commerce Minister, an economic advisor to several of its Prime Ministers and an architect of APEC, Dr Narongchai Akrasanee helped to facilitate the Asia-Pacific’s rise over the last quarter century. Now, after time in the private sector, including as Chairman of the Import-Export Bank of Thailand, the PhD economist and Chair of the Thai committee for PECC has taken on a new role intent on boosting economic sustainability: as Thailand’s Energy Minister.
In his interview with the APEC Secretariat, Dr Narongchai shared his perspectives on growth, the emergence of a new middle class in the Asia-Pacific and energy security as lifestyles, consumption habits and technology change in the world’s most populous region. He also described his views on oil prices as well as the outlook for regional trade and economic ties, energy priorities and opportunities for greater cooperation within the sector heading towards the APEC Energy Ministerial Meeting on 12-14 October in Cebu, the Philippines.
APEC: What is your take on the pace of growth and development across the Asia-Pacific?
Dr Narongchai: The growth performance in the Asia-Pacific, although not as high as before, is still reasonable, respectable, meaning therefore that the disparity between Asian economies and the West has become less and less. Just the fact that we were able to grow at high rates before Lehman Brothers and continue to grow although at lower rates after Lehman Brothers—the result has been an emergence of the middle class in Asia in particular.
With the sheer size of the number of the middle class, you can see the geography, the architecture, the vista of Asian cities changing so fast. Even me, I could not believe that Asia’s cities and economies would be like what we have today. Urbanization has been growing very fast in all of the Asian economies. In Thailand alone, 46 per cent of the people now live in urban areas.
Because there is a middle class, things are changing very fast in the retail business, tourism business, travelling activities—these are all new things, including condominium and property development. So although it may seem to the people who measure macro numbers that growth has been low, if you look with your own eyes, you wouldn’t believe that the growth rate has been low.
APEC: The Asia-Pacific’s middle class is opening up new sources of growth but is it emerging fast enough to keep economies moving in the right direction?
Dr Narongchai: Although the percentage might not be high, the number of the middle class in Asia is huge. They have adopted the modern style of living very quickly, facilitated by the digital revolution. I myself of course am not from the new generation but the old generation, but I am amazed at the speed and impact of the digital revolution on people, particularly younger ones.
Some economies have been able to use the digital revolution for their benefit. I think partly why the Philippines has been doing pretty well is because they are pretty good at this digital revolution. And Korea, you can see, in many areas has jumped ahead in terms of development because of the digital revolution. You look at Singapore.
APEC: Please talk about the implications of changing lifestyles and consumption habits in a region of three billion people for energy demand.
Dr Narongchai: With the kind of new lifestyle you need energy. It’s impossible for people to accept blackouts and brownouts not because they cannot live in the dark but because they could not use the internet. They would get so mad if they could not log on to the internet. Because of that, demand for energy, in terms of power production and also for transportation, has been growing fast. Demand for energy, for oil in Asia has grown continuously. So energy security is a top priority.
APEC: There is this increasing thirst for energy which is needed to power new growth in the Asia-Pacific but at the same time oil prices are still very low and impacting economies globally. What is your view of this dynamic and where do you see things going?
Dr Narongchai: I think it is temporary. Accepting the fact that demand for energy, demand for oil and gas, is growing very fast in Asia which has a huge population, eventually it will drive prices up again.
I have studied the situation. Of course, nobody could predict that deep fall in the price of oil towards the end of last year. Nobody could make that prediction but now we have begun to understand why. The main reason was because of the discovery, the unexpected discovery in the US of oil shale and also because of the evolution and revolution in the supply of LNG, liquefied natural gas, which is becoming a more important source of fuel for power generation. That was the reason for the deep price adjustment.
I am sure after this period, we don’t know how long, but I don’t think it would be more than two years, the prices will go up. But it’s also very unlikely that the price would be beyond USD100, because of the evolution in the use of fuel. Motor vehicles are now very fuel-efficient. You can go for a gallon much longer, further.
APEC: How do you think advances in technology will impact energy security moving forward?
Dr Narongchai: Even though the demand is rising, new technology is managing itself. The hybrid development between power and fuel is emerging very quickly. Also with the use of the digital revolution, you could do so much for efficiency improvement. I don’t think anybody can predict how much efficiency improvement will be within the next few years with the digital revolution--not just in transportation and telecommunications, but in everything. The application of digital technology will go into everything and that will make life, the use of all things, much more efficient. That’s why I like this term very much, ‘the internet of things.’ It’s the internet of everything!
APEC: On a broader, strategic level, how do you see economic policy evolving in the Asia-Pacific and among APEC members in particular?
Dr Narongchai: We have to change our mindset about what is important. In the period when APEC was formed in 1989 until the end of the millennium, trade and industrialization was most important. They were the major engines of growth. There was a creation of the supply chain.
When we liberalize, we allow production to take place where it should be. Now with this technology, it is very obvious that more and more economies can be competitive, producing things for themselves. The evolution of 3-D printing could allow even small companies to produce things that are very good quality and very efficient.
APEC: To what extent will changes in the nature and pace of development transform trade and economic ties in the region?
Dr Narongchai: I firmly believe that trade will go on but I am sure we cannot expect high growth in trade. We can expect more domestic consumption. Trade will be intra-regional--to short distances, to areas where people are familiar with products produced in neighboring economies. Trade disputes will be so unimportant.
I think we should discuss more about this digital revolution. We now have opportunities in cloud computing among us. In terms of connectivity, the most important thing is how to make wireless connections available to everyone, particularly in Asia. If we can make that available to everyone, then we can improve people’s lives a lot.
Anything in the way of connectivity should be discussed and managed to minimize obstacles to connectivity, particularly digital connectivity.
APEC: Where does the energy agenda go from here for Asia-Pacific economies?
Dr Narongchai: Energy is going to be a major factor of production, factor of consumption, factor of life, of living from now to whenever in the future. But the energy situation in the Asia-Pacific needs to be clearly defined. Some economies face an energy deficit, some economies face an energy surplus, some economies have potential for developing more energy.
APEC: What are your thoughts on meeting rising energy demand from a production standpoint and how can regional cooperation support this effort?
Dr Narongchai: Natural gas is a potential solution to all these energy issues that we have been talking about. Natural gas is not heavily polluting and it’s easier to find. Now it’s also easy to transport, easy to use too.
The sharing of pipeline and the sharing of grid is a very important matter that we could cooperate on. Because if you transfer natural gas by way of pipeline it is the most effective way of doing so.
APEC: APEC members are working to double renewable energy by 2030. What are your expectations for moving beyond fossil fuels? How far away are we from solar, wind and other renewable technologies becoming viable alternatives, as drivers of economic growth and sustainability?
Dr Narongchai: There is a lot of optimism about renewables. At the moment, the bias is for the social cost to be more than the social benefit. If we stick to the equivalent of social cost and social benefit, then the use of renewables would have a limit.
Most important of all is energy conservation – not just energy production but energy conservation. That is where Asia-Pacific economies can help each another because the level of knowledge on energy conservation, saving and so on varies. If we could do that, certainly it would be to the benefit of all of us.