At the end of a highly eventful decade, the Thai business community looks ahead with mixed emotions. Reasons for an optimistic economic outlook in Thailand are plentiful, with several promising Thailand 4.0 projects on the horizon. Improved business incentives are now being directed to promote growth in high value-added industries, such as aviation – which saw the lifting of foreign ownership restrictions, and a new joint venture between Airbus and THAI Airways International. Under Thailand’s chairmanship of ASEAN, we also saw the successful conclusion of the Regional Comprehensive Economic Partnership (RCEP) agreement, a mega trade deal which is expected to enhance trade across ASEAN and five of its key trading partners.
Yet many complicating factors are currently giving business leaders pause. Thailand’s GDP growth has been underperforming, while both exports and imports for each of the first three quarters of 2019 have fallen year-on-year due to weak global demand and a strong Baht. In particular, the automotive, electronics, chemical, and agricultural sectors have delivered consistently lower export numbers compared to 2018. Potential remedies to stimulate exports, such as a free trade agreement with the EU, are not yet confirmed by all sides.
The Thai government is concerned about the economic slowdown and has been busy rolling out stimulus measures throughout the year. Since the start of Q2 2019, the government passed a 316 billion baht fiscal package last August which subsidises farmers, domestic tourists, and low income earners. November saw another round of fiscal stimulus, this time worth 144 billion baht, which further subsidises farmers and provides home ownership rebates. However, the overall economic outlook in Thailand has yet to rebound, leaving many businesses hesitant to move forward with investment or expansion plans, as they wait for clearer signs of recovery to materialise.
With greater global and domestic economic uncertainties to contend with, Thailand’s business leaders now show the highest level of economic uncertainty in the world, among the worldwide respondents surveyed in Grant Thornton’s most recent International Business Report. The country’s World Economic Forum competitiveness rankings have also fallen from last year, with Thailand now in 40th place worldwide for this key business metric.
Toward a new normal
As a new decade dawns, Thailand must decide how committed it will be toward creating a foundation for a thriving economy and business climate. As the country moves up the economic and social development ladder, Thailand must reevaluate its economic development policy priorities. The days of double-digit economic growth may be a thing of the past, as the country’s economy matures. GDP and export growth can no longer be the country’s economic cornerstones; the economic outlook in Thailand should take into account its performance in other social and economic measures as well.
One of these areas involves transparency, a key index that influences the WEF’s competitiveness rankings. On the topic of trade transparency and the openness of the trade economy, Thailand presently ranks 106th out of a total of 141 countries worldwide. Mediocre scores also mark Thailand’s labour performance (73rd out of 141 countries), and infrastructure (71st out of 141 countries). The country’s non-tariff barriers are yet another area where WEF analysts singled out Thailand’s need for improvement.
A maturing economy may attract greater foreign investment through improved transparency and better infrastructure, as well as more productive and skilled labour. Clear and effective rule of law, along with streamlined regulatory processes and bureaucratic oversight can reduce costs to businesses, as the higher labour cost is offset by improved skills and productivity. Such a shift would enable Thailand to stand apart, and out-compete developing economies that generally have lower costs but less skilled labour and greater regulatory uncertainties.
Thailand’s coming of age
As a middle-income country, it is imperative for Thailand to allocate its institutional resources effectively in order continue growing. The government must re-invest in improving its educational foundation, its physical and digital infrastructure, and its official channels so as to reduce bureaucratic delays. Greater economic and political transparency, along with an embrace of international norms, could further open the door to improved trade relations with developed economies, allowing Thailand to reposition itself from a localised industrial economy to that of a regional economic hub.
Yet entrenched interests and a relative lack of experience in this sort of governance could become barriers toward effective implementation of the necessary improvements. Clear, mature, and decisive leadership will therefore be needed to right the ship once again, and set a course forward for smoother seas in the years ahead.