Thailand lacks an incentive to escape middle-income trap

12-Oct-2017 Intellasia | The Nation | 6:00 AM Print This Post

A very premature prediction. While education in Thailand continues to suffer from declining standards, its neighbours are performing and forging ahead. Thailand 4.0 is a distant fantasy. No one has much trust in Thai e-commerce businesses.

The notion that Thailand will enter the category of fully developed countries just can’t be taken seriously. Japan, South Korea and Taiwan manufacture and export high-value products that can compete in the international market. Japan and South Korea rank fourth and fifth for global exports. Taiwan is 15th while Thailand is No 22. However, the exports of the Northeast Asian countries are high-value goods while Thailand’s exports are still mainly agricultural. This is not by accident. In the Park Chung-hee era South Korea allowed Japan to build factories there, but insisted on technology transfer enabling the eventual creation of Korean companies manufacturing autos and pianos of sufficient quality to compete internationally. After following the Japanese examples, Koreans developed their own technology and became global leaders in flat-screen TVs and LPG tankers.

Despite 30 years or so of making hard-disk drives and autos for foreign companies, there is no Thai company manufacturing and exporting either hard drives or autos. No foreign companies have set up R&D centres in Thailand, as Microsoft and IBM have done in India. There is no Thai company with international recognition like Samsung or Toyota, nor is there any Thai-designed export product with any global recognition.

The Thai development model is to rent out its labour cheaply to foreign companies. This model has in fact worked very well to bring Thailand to its current level of development, but without high-value exports and technological innovation Thailand will remain stuck in the middle-income trap. This is true because the vested interests in Thailand are quite satisfied with the status quo, which is a local economy divided into monopolies and duopolies controlled by Thai interests. They have not been interested in trying to export into the competitive global market. By far the largest Thai exporter is Charoen Pokphand, a producer of food products.

Thailand, like the other Southeast Asian countries, but unlike the countries of NE Asia, lacks a military incentive to develop its economy since it has no reason to fear invasion by its neighbours. The economic leaps achieved by Meiji Japan, the South Korea of Park Chung-hee, and Taiwan after the Communist Revolution were driven by exactly this motivation.

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Category: Thailand

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