Experts point out that ‘Exports’ start to can’t bear the Thai economy

KKP Research by Kiatnakin Phatra Financial Group reported that the export sector, which has been driving the Thai economy for more than 30 years, has reached a turning point in the Thai economy. KKP Research has provided information that shows Thailand’s export sector problems in five main areas as follows.

Problems in infrastructure and labor quality

Although Thailand is ranked 40th out of 137 countries in overall competition, Thailand has problems with no clear solution policy yet. For example, the monopoly of the domestic market, the international trade tax, the role of the Institute of Infrastructure, and the skill of laborers.

Thailand does not have rising star goods in a new world

Due to exports that are not in line with the modern world trend, demand for products that Thailand produces has not yet been able to attract and develop technology substitute for high-tech products such as smartphones, semiconductors, and solid state drive SSDs. Thailand’s market share has declined over the past 20 years, resulting in a lower proportion of exports than other regions and countries with similar income levels such as Vietnam.

The continued appreciation in Baht that affects the competition in the long run

This is because Thailand has experienced very low inflation from the slowing economy in recent years. Although the revenue from tourism is increasing, it has hidden the loss of competitiveness of the industrial sector, resulting in a current account surplus pressuring the stronger Baht.

Similar to Dutch disease, foreign earnings from natural gas discoveries in the Netherlands have strengthened the currency and resources flowing into the petroleum sector, which has affected the long-term competitiveness of the industrial sector.

Wage is risen, but production productivity has not yet been improved

Thailand used to benefit from cheap wages that attracted foreigners to set up production bases in Thailand. However, Thai labor costs are currently rising, but productivity has not improved much, so it is not possible to attract investment in highly complex industries.

The Thai economy has entered the aging society and has no any clear investment plans in technology development yet

As a result, Thailand is facing challenges from a demographic structure that is likely to turn into a full aging society within the next few years, which will result in a decrease in the country’s workforce, a smaller size of the domestic market, and a drop of economic growth potential. More worrisome is that Thailand’s investment and R&D development that will help increase productivity is still low compared to other countries.

‘Exporting’ Rival

At the same time, it can be seen clearly that rival countries have begun restructuring their export products into new products. For example, Vietnam has become an export base for smartphones, electrical circuits and solar cells more in the global market, or Malaysia has turned to exporting more new world products such as SSDs in the world market and has begun to reduce exports of older world products such as HDDs.

Moreover, the Thai economy is becoming increasingly being hit by China. Thailand once relied on China to become part of the world production chain. However, at present, many products can be produced by China itself at cheaper costs and export final consumer goods directly to Thailand. KKP Research views this phenomenon as a significant impact on the Thai economy.

For example, the way China does direct business in Thailand is to seek new business opportunities and penetrate the Thai market directly due to the Chinese economic slowdown. On the other hand, increasing investment may be beneficial to boosting Thai economic growth, but will force Thai businesses to adjust themselves to cope with tougher competition in the domestic market.

What role should the government play?

KKP Research estimates that Thailand can develop economic and technology by 57 %. Even though the private sector plays an important role in improving competitiveness, the government sector should join to play a role in developing as well. This problem cannot be solved with a short-term economic stimulus policy, but a supply-side structural reform policy must be found.

It will attract new investment both domestically and internationally, with technology suitable for the development and strength of the Thai economy, reduce international trade and non-tariff barriers, improve tax regulations and use of tax privileges for easier access, and attract skilled foreign workers to increase employment and economic activities at home. Moreover, restrictions and regulations on business operations should be reduced to enhance the economic growth of Thailand in the long run. In addition, measures should be taken to mitigate the impact on the domestic industry from unfair trade competition.

References from

thebetter / kkpfg