Thailand's economic development model is not sustainable due to the nature of the country's economic engine, says a former finance minister.
Despite how the Thai economic archetype is diversified into several sectors, the existing model has started to become obsolete as reflected through stagnant agricultural development, low human resource productivity and lower foreign direct investment inflows, which are being diverted into other Asean countries, Korn Chatikavanij, policy unit chairman of the Democrat Party, told the Bangkok Post in an exclusive interview.
He said the low unemployment rate does not reflect the fact that many working-age individuals are engaged in low-productivity professions such as motorcycle taxi driving and security.
Thailand's labour problem is further compounded by an ageing population and education problems, Mr Korn added.
"[Our economy] is ill and we are not strong. The main problem is related to human capital. When people are deprived of opportunities, education and skills, what happens is their income is not adequate to cover their spending, causing them to incur debt [as a result]. Previous state policies further enticed people to shoulder greater debt burdens," he said.
Critics have dubbed Thailand the "sick man of Southeast Asia", as the country's economic growth over recent years has been subpar on the back of domestic political unrest, swelling household debt denting private consumption growth, ebbing private sector investment, continuous contraction in exports and low worker productivity.
Household debt in last year's final quarter climbed to 11 trillion baht, or 81.5% of GDP, an increase from 10.8 trillion baht or 80.8% of GDP in the third quarter, according to Bank of Thailand data.
"Impossible" was Mr Korn's response when asked whether the current economic model is sustainable. He stressed that the public sector has to change in terms of deregulating excessive state policies obstructing the ease of doing business and trade, which subsequently translates into lower economic growth potential.
Improvement in human capital and innovation are urgently needed to support economic sustainability and enhance Thailand's competitive edge, Mr Korn said.
He stressed the need to create value-added or premium products for consumer and agricultural goods in order to boost prices and sales opportunities, which would subsequently aid market penetration in the region and better serve foreign tourist demand in Thailand.
The domestic auto industry should also consider how best to keep up with innovative trends, otherwise foreign investors will forgo investing in the country's car industry, said Mr Korn, adding that other innovation clusters should receive public support in order to help drive the economy forward.
While agreeing that physical infrastructure development is important, Mr Korn reiterated that such development would not yield effective results if local citizens are not equipped with the requisite skills.
He added that it was both more difficult to develop human capital and rate its performance in comparison with physical infrastructure.
Mr Korn further pushed for an educational overhaul, saying the current system gravitates more towards supporting the bureaucracy than aiding student development.
Apart from wanting to see reforms in the judicial system and state-owned enterprises, agricultural reform is another area of major concern, he said, adding that farmers do not see consumers as their clients and a change in perception could help develop the supply chain and aid communication between the two sides.
Meanwhile, Thailand's economic growth is at risk of secular stagnation, whereby economic growth is anaemic for several years due to an absence in investment. This results in reduced per capita income and a refusal to change the developmental model despite the country's strong private sector, particularly Stock Exchange of Thailand-listed companies, said Mr Korn.
Whether GDP growth this year of at least 3% is possible needs to be assessed further, he said, noting that several private think tanks have lowered their economic projections to below 3% because of lacklustre performances in economic sectors associated with exports, agriculture and manufacturing.
Mr Korn said 3% GDP growth would only concern the finance minister and the deputy prime minister in charge of economic affairs, but would not apply to ordinary people, who are more likely worried about agricultural prices, debt burdens and business expansion opportunities.
Thailand's economy expanded by 3.2% year-on-year, a three-year high, and 0.9% quarter-on-quarter in this year's first quarter, mainly driven by public expenditure and robust tourism, according to the National Economic and Social Development Board.