For almost five decades now, Thailand has been a victim of the middle-income trap. From the 1970s to the 2000s, the country was ranked by the World Bank as lower-middle-income, advancing to upper-middle status in 2011. Considering the ongoing political uncertainty and weak governance institutions, the prognosis is that Thailand will likely remain at this ranking for many years. This has become a "wicked problem" for the country's economic and social development.
"Wicked problem" was coined by theorist Horst Rittel in the mid-1960s. The term has been used in social sciences to describe a problem that is difficult or impossible to solve, often due to socio-political factors. It is "wicked" in the sense that it involves incomplete information, high uncertainty and turbulence, interdependency of causes and consequences, a lack of consensus and knowledge about solutions, or a combination of these. All these apply to Thailand's development dilemma.
Since becoming an upper-middle-income country, Thailand is, in general, no longer a low-wage, low-skill, labour-intensive and agriculture-dependent economy. It is a hub for electronics and automobile manufacturing and health. Thailand has remarkable export numbers: second in the world for hard disk drives, sixth in rubber tyres, seventh in computer devices, and 12th in automotive products. Thailand is successfully becoming a strong player in global high-tech production.
Despite this, the country still languishes in the middle-income band. Thailand has not been able to compete with neighbouring Myanmar, Laos, Cambodia and Vietnam on wages and input costs. Crucially, it cannot catch up with countries in the region that possess more advanced innovation and skilled workers, such as South Korea, with China now also a competitor. Consequently, the country's US$505-billion (B15.42 trillion) economy faces low investment and limited innovation progress, especially in high-tech, knowledge-intensive manufacturing.
The Thai government is attempting to promote an escape route from the middle-income trap. Last year, it announced a 20-year master plan, "Thailand 4.0", aimed at upgrading the country's development status. At its core, the policy is intended to boost innovation and technology through public investment and tax incentives. In compliance with World Trade Organisation regulations, Thailand places no restrictions or conditions on manufacturing and export. Moreover, government agencies have been established to support foreign investors via market intelligence and business-matching.
However, the biggest obstacle is Thailand's socio-political stability. Political uncertainty is perceived as one of the main factors in slowing economic growth. Since the regime changed from an absolute monarchy to a constitutional monarchy in 1932, the nation has experienced 13 coups d'état and additional political crises, with the last two being the most socio-economically destructive.
Political instability has been the default for the last 87 years. With the exception of the 1997 "People's Constitution", the other 19 charters were largely crafted as weapons to quash political foes and protect the regimes that assumed power through the coups. The net result is that Thailand has had the longest on-off military government in the world.
After the latest coup in 2014, it took five years for a general election to be held to select a new government. After the coup, the US and EU expressed strong concerns over then-pending trade agreements and urged the country to establish a new government and preserve democracy. Demonstrations took place to protest the many delays before the election finally occurred. These delays and the ensuing irregular vote count have caused the new government to struggle to regain the trust of its strategic development partners.
Following the election, the public speculation has strengthened over irregularities and the lack of transparency in the way the public sector is doing business and providing services. This scepticism was underlined by Thailand scoring only 36 out of 100 for integrity of government institutions in Transparency International's 2018 report.
The wicked aspects of this problem lie in its interconnectedness with other problems. Political instability signals weak institutions, which are embedded requirements for economic activities. When corruption persists and rights are ignored, competition cannot be fair, and courts are not trusted to protect the rights of consumers. Investment becomes riskier, thus less attractive. For high-tech manufacturing that is inherently risky, operating in a high-risk environment such as Thailand is then not a good bet.
The situation becomes an endless loop: political uncertainty creates unfavourable conditions for doing business. Therefore, the country cannot attract greater investment from the private and foreign sectors, especially in the innovation and knowledge-based products that would benefit its workers more. Progress towards better institutions is at best slow and incremental, which keeps the economy from escaping the middle-income trap and maintains the political instability factor.
Coupled with the cause-consequence interdependency is the high uncertainty and turbulence surrounding the present administration. The risk of further political turmoil cannot be ruled out, and past experience shows the fear of such an occurrence is justified. Additionally, while the Thailand 4.0 strategy attempts to address the middle-income trap, no consensus exists for addressing the continuous political instability. Struggles for power and economic gain persist, and public trust has deteriorated after what was globally seen as an unfair 2019 election. The persistent involvement of the military in public affairs and its mechanisms, such as conscription, are also being heavily criticised. Such a political sphere does not provide a tailwind for economic growth.
Breaking this vicious cycle requires a comprehensive effort from the ground up, focusing on strong, democratic governance and better political institutions. For instance, a revitalised national human rights commission could provide greater moral legitimacy.
Tackling corruption is another necessary task for maintaining competitiveness. Ensuring transparency and accountability through open government and dedicated transparent tendering websites would repair the trust of the public and of international partners. Political parties need to promote compromises that could revitalise institutions. For example, parties from both sides of the political divide must strongly support decentralisation through local autonomy and elections at all levels of government.
Only if Thailand begins tackling these "wicked" issues can it provide a more attractive investment environment in order to unlock an innovating, knowledge-based economy, thus eventually escaping from the middle-income trap.
Peerasit Kamnuansilpa is a founder and former dean of Khon Kaen University's College of Local Administration (COLA). Le Anh Khan Minh is a doctoral student in the College of Local Administration, Khon Kaen University. Her research interests cover inclusive public management and public service motivation.