Thailand must focus on youthful CLMV neighbours

The latest projection is 2.8-3.8 per cent growth (or about 3.3 per cent) for this year, revised downwards from the previous 3-4 per cent range (or about 3.5 per cent).

According to Dr Veerathai Santiprabhob, governor of the Bank of Thailand, the preferred normal growth rate ought to be 4-5 per cent to reflect the country’s potential.

In my opinion, such a trend cannot be achieved yet due to political |and economic restructuring challenges.

First, Thailand still has a political stability challenge. Will the political transition towards a democratically-elected government smooth out in the next one to two years?

Over the past decade, political instability has significantly hurt the country’s economic potential. Thailand has lagged behind virtually all other nine member-countries of the Asean Economic Community (AEC) in terms of economic growth rates.

Growth rates have been higher in Cambodia, Laos, Myanmar, Vietnam and the rest of the AEC, even though most have a smaller economy than that of Thailand, which is AEC’s second largest after Indonesia.

Second, the country needs a strong government to implement supply-side restructuring to boost competitiveness, which is more difficult than demand-side management.

Energy and education reforms are also crucial to allow the country to realise its full economic potential in coming years, especially in view of an ageing Thai society.

With a lower birth rate but longer life expectancy, the number of senior citizens has risen sharply, facilitated by better healthcare and other favourable factors.

This has resulted in a shrinking labour force and a bigger burden on the younger generation to provide welfare.

To cope with such a trend, one of the strategies is to focus on the CLMV economies of Cambodia, Laos, Myanmar and Vietnam, which have a much younger population and rising purchasing power.

Given the country’s advantageous geographic location, Thailand can be positioned to benefit from the huge labour forces and fast-growing markets in these neighbouring countries.

Vietnam, for instance, is booming with a lot of labour-intensive industries – just like Thailand two to three decades ago. With a population of nearly 100 million, it can also be a big market for Thai products and investors. Several have already set their footprints in the neighbouring country.

In Myanmar, the demographic factor is similar with a big and young population of 60 million, who are ready sources of both workers and consumers.

Thailand should also deepen its economic links with Cambodia and Laos, even though their populations are smaller, for mutual benefits in the global supply chain involving all these Asean economies.

Value-added industries and services are key to Thailand’s economic future due to rising domestic wages and demographic factors.

Thai enterprises should also focus on quality control and creative works such as design, entertainment and software development to uplift its potential to new heights.

Even in manufacturing areas, the country should be linked with CLMV economies to leverage the region’s advantages in the global supply chain as exemplified by Japan’s so-called Thailand-plus One strategy.

The new model means Japanese enterprises will further expand into other Asean countries out of its base in Thailand. For example, it could move the labour-intensive parts of their production processes to special economic zones in Cambodia, Laos or Myanmar to take advantage of cheaper and more abundant workforces.