The vision for Thailand 4.0 is certainly ambitious, and is extremely well adapted to the digital economic stage that the world is now entering. But is that vision also well adapted to Thailand itself? Can this moderately advanced Southeast Asian nation handle the weight of its own development plan?
Companies seem split on the likelihood of Thailand reaching its industrial targets over the coming years, although several large international businesses have bet that it will, committing to substantial long-term investments within the country’s burgeoning EEC. For those betting on success, a secondary question naturally arises: Will Thailand’s economic upgrade follow the schedule outlined by government?
Initial signs have been encouraging, but they do not tell the whole story. The Thai government is making all the right moves in order to spur investment – fast-tracking permits, offering generous tax breaks at every level, contributing investment money for R&D, radically improving infrastructure – and the business world has responded with a flurry of activity to capitalise on the new incentives. Moreover, the business investment that has already been announced is of the very same high-tech variety that the government has been trying to encourage.
And yet, even such a promising start does not guarantee success, particularly when local conditions are inadequate to the needs of the situation. A farmer may buy modern equipment and top-quality fertiliser for his farm, but if the soil is sub-par, the harvest will still be modest. So, what exactly is it about Thailand’s economic foundation that is holding the country back, and can this shortcoming be overcome by the government’s sheer willpower and determination to set up a thriving Thailand 4.0?
The main areas of concern are centred around the country’s people, its economic system and its thought and strategic leadership. Thailand’s educational system has a huge room for improvement to support this strategic vision, with a lower rate of well-qualified university graduates in STEM fields when compared with other countries which have thriving, tech-based economies.
This shortage of skilled and knowledgeable members of the younger generation translates to a workforce that has limited potential. Smaller numbers of qualified workers for high-tech industries means that it will prove difficult for companies that need to fill their positions, which in turn means greater negotiating power for those who do have the requisite skills, and therefore a reduction in the competitive advantage enjoyed by tech companies that set up in Thailand. This labour shortage would be felt particularly acutely among SMEs, which could face steep challenges in recruiting effective teams.
Even if a solution is found for the education and labour issue, further challenges remain. The domestic consumer market in Thailand is much lower than the global opportunity, making it difficult for manufacturers to sell their own products to the local market. High levels of household debt present a barrier to increased consumption, and the general uncertainty regarding the country’s overall future economic development creates an atmosphere in which consumers are cautious and wary.
Other kinds of uncertainty exist in the political realm, where general lack of trust in the political framework and leadership to achieve peaceful transfers of power have turned some investors away. Thailand has an opportunity to regain its reputation for dependable leadership over the coming election period, and many in the international business community will be watching the country to see if it can move past its current difficulties.
It is difficult to determine the relative weight of these shortcomings, when compared to the many positive aspects of investment in Thailand’s up-and-coming tech economy. To be sure, there is never an entirely perfect investment opportunity; if there were, then the competition to enter it would be so strong that the government would have no need to provide the extra incentives that Thailand now offers.
Whether Thailand will be able to stay on schedule for its infrastructure upgrades is an open question. Businesses must decide how important the timing of such improvements is for them, monitor current progress, and adjust their investments accordingly. The challenge here, as ever, is to analyse carefully the conditions upon entry, structure a realistic plan for development, and then execute it efficiently using strong local knowledge.