Thailand’s economic challenges surface amid calls for structural reform


Thailand finds itself at a crossroads as it grapples with significant economic challenges, raising concerns about its lagging performances compared to neighbouring countries.

Over the past decade, key sectors like manufacturing, exports and tourism have exhibited minimal improvement, prompting worries about the nation’s economic framework in the face of modern complexities.

Prime Minister Srettha Thavisin’s government has set ambitious targets, aiming for a minimum annual growth rate of 5% over the next four years. However, projections from the Economic Intelligence Office (EIO) paint a starkly contrasting picture, foreseeing a meagre 1.8% expansion in the gross domestic product (GDP) for 2023 compared to the 2-3% average growth observed over the past 10 years. This places Thailand at the bottom among its ASEAN counterparts.

The Bank of Thailand (BOT), meanwhile, has highlighted several issues across various sectors, particularly manufacturing and exports, which were once the pillars of the Thai economy. For instance, Thailand’s rice production has stagnated for over two decades now, losing its global market share to competitors like India. This, he said, highlights an urgent need for structural reforms to enhance competitiveness.

Thailand’s market share has dropped from 25% in 2003 to 13% in 2022, with India overtaking as the world’s top rice exporter.

The global shift towards high-technology electronic products has also left Thailand behind, as it continues to export electronics with little added value.

Thailand’s failure to incorporate artificial intelligence (AI) has also deprived it of opportunities in the digital electronics field.

As Thailand grapples with these challenges, there is a pressing need for a comprehensive re-evaluation of economic strategies to ensure competitiveness in the ever-evolving global landscape.

Push for new initiatives

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said revitalising Thailand’s industrial landscape was of utmost importance.

“The Thai industrial sector must adapt to changing dynamics and global demands to sustain its competitiveness. We need to move away from labour-intensive industries and focus on sectors where Thailand holds an advantage,” he said.

Underscoring Thailand’s geographical position and connectivity, Kriengkrai said: “Our nation is well-positioned to serve as a global hub. However, to realise this potential, we must accelerate the transformation of our industries.”

In response to these challenges, the FTI has launched the Next Gen Industry initiative in a bid to revitalise Thailand’s industrial landscape.

“We are prioritising the development of new target industries, embracing the bio-circular-green [BCG] principles, and implementing strategies to mitigate the impact of climate change,” Kriengkrai said.

“The future of Thailand’s economy lies in innovation, sustainability, and adaptability. We must act swiftly to reshape our industrial landscape and drive long-term growth.”

He also outlined the collaborations required between the public and private sectors to navigate Thailand’s economic transition.

“The government must facilitate and provide support for reforms, such as modernising education to meet market demands and technological advancements,” he said.

Kriengkrai underscored the need for upskilling and reskilling the workforce in line with evolving industries and technologies, as well as the importance of balancing traditional and contemporary skill sets.

“At FTI, we have observed that while some industries have embraced technological advancements, others lag due to factors like lack of knowledge, capital, and guidance,” he said.

As for the export sector, he pointed out that over the past decade, Thailand’s top exports have largely remained unchanged, though he foresees potentially drastic changes in the next five years, particularly in two distinct groups of export products.

“The first group comprises products at risk of obsolescence within the next five years, such as automotive parts and petroleum products. The second group includes single-use plastics, which face declining demand due to environmental concerns,” Kriengkrai said.

Calls for restructuring

Assoc Prof Dr Aat Pisanwanich, an international economics expert, has proposed restructuring Thailand’s export sector to prioritise sustainable and efficient product groups, like rubber and rubber products, and health and future food products.

He highlighted the rubber sector’s potential to absorb carbon and generate carbon credits, potentially adding value to the industry by more than 500 billion baht.

He further proposed that the restructuring of Thailand’s export sector should focus on specific product groups, boosting the value of processed agricultural products, agriculture, and industries.

Aat also stressed the importance of pushing the technology and innovation industries to utilise semiconductor technology, as well as promoting agricultural products with low carbon footprints.

Tourism in secondary cities

Thirayuth Chirathivat, CEO of Centara Hotels and Resorts, is calling on the tourism industry to look beyond major cities to alleviate strain on urban sectors and spread tourism benefits across the nation.

He also called for policies to facilitate access to funding for entrepreneurs and to ensure fair competition.

Citing the Airbnb business model, which helps people rent their homes to tourists, Thirayuth said the government should come up with clear regulations on such practices.

He also called on the government to address issues like encouraging airlines to boost flights, tackle exorbitant airfares and address seat shortages on flights to meet growing travel demands.

Chamnan Srisawat, president of the Tourism Council of Thailand (TCT), agreed with Thirayuth, saying the tourism industry should look beyond a handful of popular provinces like Phuket, Krabi, Chiang Mai and Chonburi.

He said that while medium and large businesses reap rewards, smaller players and other provinces struggle to attract foreign tourists. He added that a new tourism model that benefits the entire country is needed.

To achieve this, Chamnan said, the government needs to redesign tourism strategies with a focus on quality as tourist arrivals in Thailand continue to rise.

However, he pointed to challenges on the supply side, especially for small-scale tourism players and hotels facing regulatory hurdles hindering licencing and access to funding. To overcome this, he called for opportunities for small players to invest, innovate, and elevate their entrepreneurial endeavours.

He also pointed out that it was crucial to maintain a balance between high-quality and high-volume tourism, adding that solely catering to high-end tourists would exclude smaller operators and potentially lead to unemployment.

Political uncertainty

Milin Wirarattanaroj, CEO of Tang Ngee Sun Superstore, criticised the lack of cohesion among government agencies, which he said hindered economic competitiveness against international counterparts. He also urged private enterprises nationwide to take proactive measures to stimulate economic growth amid political uncertainties.

As Thailand navigates these economic headwinds, there is a pressing need for bold and comprehensive reforms to revitalise key sectors, enhance competitiveness and foster sustainable growth in the ever-evolving global landscape.

Source: The Nation