Before I start talking economic jargon filled with figures, let me explain Thailand's economic situation in plain language.
There is an average, unnamed Thai labourer. He earns an average wage of 300 baht per day, but the cost of living is 330 baht per day. Naturally, he borrows to sustain his standard of living, first from formal sources and later from any sources available, regardless of conditions and costs.
His boss knows this employee's financial situation well, but to increase this labourer's wage beyond 300 baht a day would bankrupt his business as he has no ability to raise product prices to compensate for rising labour costs.
If he is brave enough to raise his product prices, his market share would be taken by competitors and importers. The ending of this sad story is the "Thai labourer" has to cut his expenses and lower his standard of living while the boss's business no longer earns a profit and he must give up his dream of business expansion.
There are two key takeaways from this story.
First, the economy as a whole will not benefit from low business expansion.
Second, the labourer is always in debt and his living conditions deteriorate.
If you ask me, this is an economy's self-destruction in the making.
Ever wonder why Thailand's GDP growth rates are consistently low, particularly comparing to key Asean members?
Even before Covid, during 2015-2019, Thailand's economy grew at an average rate of 3.4% annually while the Vietnamese, Indonesian and Malaysian economies grew at average rates of 7.1%, 5% and 4.9% respectively during the same five-year period.
Things got even uglier in 2022, where fourth quarter GDP growth is merely 1.4% as opposed to the 4.2% projected by the World Bank. Exports of goods (in volume) plunged 9.8%. Without 5.5 million tourists in the quarter, the economy would contract badly. Thailand owes this to strong pent-up demand in the tourism sector.
While the Thai economy suffers from slow economic growth of 2.6% in 2022 despite the tourism bonanza, our Asean friends are leaving us in the dust. Malaysia announced its 2022 GDP growth as 8.7%.
Not to be outdone, Vietnam and the Philippines came up with impressive growth figures with 8.2% and 7.6% respectively. Even a large-size economy like Indonesia or first world economy like Singapore expanded 5.3% and 3.6% last year.
The problem? Please go back and read the "plain language" story again.
The solution? Yes, there is a solution. The solution is giving the boss the ability to raise product prices.
To show that I am not dreaming and higher product prices, ie moving up to high value-added products, can be attained, I will give reader an example of three economies which started as poor underdeveloped nations, and took three different economic development paths, and ending with three different results.
They are the Republic of Korea, Malaysia, and our beloved Thailand.
The table above is quite self-explanatory, and as such, there is no need to go over the numbers.
This table yields two valuable conclusions.
First, it is not true that when an economy gets too large, it is difficult to grow. It is just a lame excuse for governments which have no ability to push the economy forward.
Second, tourism has a limited ability to drive an economy but high-value added products can provide sustainable rapid growth paths.
Thailand's booming tourism period of 2017-2019 with 35.6 million, 38.3 million, and 39.9 million foreign tourists respectively does not seem able to boost our economy faster than other two countries.
Maybe because tourism in not a high value-added product. I am sure that even with 100 million tourists, our per capita income would not be anywhere near Malaysia's.
Did anyone notice that during the past two years, Malaysia was able to raise per capita income by almost US$3,000 (104,000 baht) while Thailand was able to increase its per capita income by merely $471?
It is clear that Malaysia is no longer our competitor, they have already moved up to the developed nations league, with per capita income over $12,000. But if Thailand does not want to lose economic competition to Vietnam, which had 8.2% GDP growth in 2022 and an average 7.1% growth for the five years prior to the Covid outbreak, Thailand needs to change.
For the public's benefit, I decided to write a series of articles guiding Thailand out of its long-standing economic problems.
There are five articles in the series. The first one is "Need to Change".
This article demonstrates the fundamental problems of the economy that need to be corrected. These problems include the middle-income trap, misleading GINI index, debt growing faster than GDP, and widening income gap and social classes.
The second article is "Managing Household Debt".
This article provides a stop-gap solution before Thailand can change its economic structure towards higher value-added products which will take a minimum of 10 years. Before that time, Thailand needs to maintain its growth momentum and allow the economy to build up savings.
The third article is "Building a New Middle Class and Choosing New Core Industries".
Remember the solution to my "plain language" case? The solution is giving the boss the ability to raise product prices. One cannot do that with existing products; higher valued-added products must be produced. Such higher value-added products will come from new core industries. Japan did just that in 1960 when Prime Minister Hayato Ikeda changed the country's core industry from textiles to automobiles.
The fourth article is "Investing in Education and Financing New Core Industries".
New core industries will not be gifts from heaven, they must be created. Here, I propose two new core industries for Thailand. They are the hospitality business and aviation business. One might notice that these industries are connected to our tourism industry where Thailand clearly has a competitive advantage.
The final article is "Moving Towards a Welfare Economy".
One fact about Thailand: we are a rapidly aging nation. In 2020, the population over 65 years old made up 13% of the total but this share is projected to rise to 30% in 2050. The county must prepare its economy to provide care for our aged citizens.
I have little hope that policymakers will bother to read these articles. We are a country that lives on hope and wants to hear only good news.
However, these articles will certainly be thought-provoking for Bangkok Post readers.