Thailand Economic Report : Can the Thai Economy be Southeast Asia's Model again?

The Thai economy is good. Its long term growth is far better than three of its neighbor countries: Laos, Myanmar, and Cambodia. And something really good is happening as well. For over a decade the growth in the north-east region and northern region is more than double the growth of the Bangkok region. This shows that the development program for the Thai rural area is working. The Northeast and North region are the poorest in the country. Double growth there does not have the same impact as double growth in the large Bangkok area. Thai people in these regions will regard the economy as not good due to income discrepancy (at least 4–5 timed less compared to the wealthiest regions). But when looking at the entire country, the GDP development is good given it’s a growing country which relies heavily on export and lacks the high technology manufacturing power of South Korea and Malaysia, and also lacks the financial sector Malaysia has. But a strong currency is generally disastrous for a country that rely on exports and tourism . Welcome to The Atlantis Report. Thailand's main exports are Rice, rubber, palm oil, fish, textiles, clothing, autos, and electronics. There is no oil or other mineral deposits. The tin mines are all closed. What else to they have of value. There is no “Silicon Valley” in Thailand. The electronics exported are all from contract manufacturers. The country is not producing scientists or engineers that are on the cusp of groundbreaking discoveries. The educational system does not turn out men and women who continue to become industry leaders in their field of endeavor. There is no abundance of valuable and desired natural resources, such as oil or gold or diamonds. Thailand is service-oriented. Contract manufacturing, tourism, small service businesses like mom and pop shops, restaurants, massage parlors, bars, nightclubs, karaoke, and the like are all that they do. All the big companies are serving the local economy. In addition, the Thai people lean to the protectionist side of free trade. Import duties are really high, and they make it quite difficult for foreign businesses to set up shop in their country. By population, Thailand is the fourth largest country in Southeast Asia. Ahead of them are Indonesia, the Philippines, and Vietnam (from first to third place). Naturally, Indonesia is so much more populous than anywhere else in southeast Asia and has the largest economy. Vietnam is a country that is visibly steaming ahead economically, but it had a substantial set back due to its colonization by the French ; and the so many wars. It was effective in a state of war from the end of WWII until 1975. After that, being a communist state, it was substantially cut off from a lot of the rest of the world and didn’t establish diplomatic relations with the US until 1995. The Philippines, though colonized by the Spanish and later by the Americans, has enjoyed relative peace for most of the 20th century but it suffers from a brain drain (and general drain on labor for that matter) as a result of its good education system. I once read that education spending as a proportion of GDP was one of the highest in the world. And it has some of the best English proficiency in Asia. Many Filipinos and Filipinas leave the country to work in every field from domestic helpers in richer southeast Asian countries and the Middle East, all the way up to educated professionals in the west. By contrast, Thailand has not been involved in any major wars in modern history, has been a close US ally for as long as anyone can remember, and with a capitalist, if the slightly protected economy. Thailand also has a substantial Chinese population (including partial and mixed Chinese. It is probably more half the population; which, as many would know, are the key creators of wealth throughout Southeast Asia. The largest economies in Southeast Asia are: 1. Indonesia. 2. Thailand. 3. Singapore. 4. Malaysia. 5. The Philippines. In 1967 the Philippines had the largest economy in Southeast Asia, followed by Indonesia, Thailand, Malaysia, and Singapore. In 1983 Thailand surpassed the Philippines to become Southeast Asia's second-largest economy. In other words, Thailand has been the region's second-largest economy for the last 35 years. Level of development of countries in Southeast Asia: 1.Singapore. 2.Brunei. 3. Malaysia. 4. Thailand. Note that Singapore is a city-state. And Brunei is a tiny oil-rich Sultanate with a population of only 400,000 people, less than 10% of Singapore's population. Thailand has the next highest per capita GDP in Southeast Asia. The status of its infrastructure, level of governance, and the development of the business sectors are progressing well and will soon be in par with Eastern Europe. However, this is only true for the Bangkok metropolitan area, which is the focus of the population and its wealth. The rest of rural Thailand remains poor and underdeveloped. Therefore, Thailand is not the MOST developed. The Development in Thailand is too Bangkok centric. And even Nakhon Ratchasima (Korat), Thailand's second-largest city, does not even exceed 300,000 residents. Thailand is one of the few developing economies that has a successful Universal Healthcare System. The Thai Capital Bangkok — though thought to be the most polluted city in the country — has now become the “green city” model for developing countries. After years of concerted efforts and determination, it now ranked the least polluted city among the developing countries’ megacities. The real surprise is that Bangkok now outperforms San Francisco, Melbourne, Paris, and Berlin in terms of air quality. So, although Thai people may not realize it, their quality of living is getting closer and closer to the level of a developed economy. However, education is still a key area that needs major reform. More engineering and technology students are needed. Population number on its own is not the main determinant of the size of the economy. What determines the size of the economy is the level of economic productivity (total factor productivity), of which labor is only one component. It's interesting to note that from 1967 to 2017, Thailand recorded the lowest population growth amongst the ASEAN-5 countries. The population of ASEAN-5 countries has all tripled, whereas Thailand's population only doubled. The above notwithstanding, Thailand has the highest labor force participation rate as well as the lowest unemployment rate in the region. Thailand's economy, like other ASEAN economies, is highly dependent on export. This relies on the development of the local manufacturing industry. The types of manufacturing have evolved from light industries such as garments, footwear, and textiles to the automotive industry, computer components, and consumer electronics. Thailand is now a regional and global manufacturing hub for vehicles, automotive components, consumer electronics, and processed food and beverages. Manufacturing today represents nearly 30% of the GDP output and employs over 9 million people (26% of the workforce). The manufacturing sector is currently twice the size of wholesale and retail trade and four times larger than agriculture. In 2016 the total value of manufactured goods exported was worth a combined $185.4 billion, including $46.4bn worth of vehicles and automotive parts; $30.7bn of electronics and electrical appliances; $25.4bn of agro-manufactured products plus $19bn worth of machinery and equipment. Thailand produces over 2 million vehicles a year. It is the world's third-largest maker of one tonne pick up trucks (behind the US and Japan) as well as the world's second-largest market. Thailand has emerged into a regional production of small electric and hybrid vehicles. The electrical and electronic industry is the next biggest export sector. This includes electrical appliances and consumer electronics, automatic data processors (hard disk drives), and integrated electronic circuits. As an example, the 1.7 million sq feet Seagate factory in Nakhon Ratchasima (Korat) in Northeast Thailand is the company's largest factory and one of the two factories in the world with a fully vertically integrated production unit. In a 2016 report by Deloitte on global manufacturing competitiveness, Thailand is ranked #14 globally, behind Sweden and just ahead of Poland. Tourism is another important sector of the Thai economy, although its economic impact tends to be overstated. As recent as 2005, tourism generated only $12 billion or 6% of the GDP. Nevertheless, Thailand has established its position as a major tourism hub (the most visited destination in ASEAN and the top 10 in the world). The tourism industry is now worth $50 billion a year and accounts for around 12% of total GDP. Thailand is often held up as a model of success for how quickly the country has transformed from rural and very poor to upper middle income in a matter of a few decades. Early industrialization, smart government policies, the development of a capable workforce, and infrastructure investment have all played vital parts in this economic transformation. Thailand is now seeking to move up the value chain. The government has recently adopted a 20-year National Strategy (dubbed Thailand 4.0), which prioritizes the development of a value-based economy to steer Thailand out of the middle-income trap. Thailand is certainly rich in history and culture and is blessed with fertile soils and abundant rainfall. The last 50 years of industrialization have boosted Thailand’s economy, but it is still dependent on two principle things, agriculture and tourism. The principal export is rice, but Thailand has to compete against a number of other major rice producers, so the price of rice on the world market is low. Also, for a variety of reasons, tourism has been weak. When the two principal components of the economy are in trouble, the nation is in economic distress. A large portion of the population, especially those from rural farm areas, have been largely left out of the economic boom the country as a whole witnessed. There is a huge gap between the rich and the poor with a small, relatively minuscule middle class in between. In order to become an economic powerhouse, a strong, healthy middle class is needed. It hasn’t helped that much of the country is subject to intense periodic flooding. Also, corruption is generally pervasive throughout Thai society, which tends to suck the lifeblood out of the economy. The present military government is making strides with their anti-corruption campaigns, but much more needs to be done. In many ways, Thailand is still predominantly a Third World country. There is a lot of shoddy construction going on and very little enforcement of modern building standards in most areas of the country. Predatory lending practices have cost many farmers their land, leaving them virtually destitute. Furthermore, the educational system tends to teach rote memorization versus creative, independent thought. Thailand needs a large number of independent entrepreneurs taking creative action to build a basis for a sound economy, and that is generally lacking at the moment. Thailand has tremendous economic potential, but modernization has proved both a blessing and a curse, and not an easy thing to do. Much is needed to help the country achieve its potential. But I doubt Thailand will become a major economy outside South east Asia. But I also doubt that Thailand will slip into becoming a poor South east Asian economy. I heard an American businessman describe Thailand in financial terms as “Teflon Thailand - nothing sticks.” He meant that whilst it has it’s up and downs (like in the late ’90s), it soon rebounds, and nothing affects the economy long term, in spite of a relatively turbulent political history. This was The Atlantis Report. Please Like. Share. And Subscribe. Thank You.















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