One major goal of economic development in the farming sector is to raise the rate of farmers' income per capita, to be equal to or higher than the non-farming sector. For decades, this noble goal has not been achieved.
In the past, the country experienced some success when the income gap per head between those in the farming sector and others was narrowed by eight times to 4-4.5 times in the late 2000s. Then it became stagnant.
It should be noted that Malaysia, a neighbouring country with a similar economic development pattern, fared much better, with a much lower gap, at 1.5 times, between those in the farming and non-farming sectors in the late 2010s.
Thailand's economic development resulted in economic and structural transformation through farm machinery, green revolution-related technologies and an extensive irrigation system that helped boost yields per rai by using lower production input. At the same time, the tourism boom and industrial development saw a shift of labour from farming to non-farming sectors.
With such a transformation, the proportion of the farming sector's gross development product massively contracted from 36% in 1960 to 8% in 2019; while the proportion of farm labour shrank to 30% from 82% during the same period. The change in Thailand's economic structure has been stagnant since the late 2000s.
Stagnation in the farming sector has been made apparent in poor growth in its GDP over the past nine years -- an average 0.23% growth per year from 2012-2021. Production per head, which fluctuated during 2014-2021, still remains so, while rice yields per rai per year decreased at an average of 0.87% during 2011-2020.
The decrease is the outcome of a substantial decline in investment in both production and research and development (R&D). Production investment which formerly accounted for 30% of the farming sector's GDP during 1990-2007 was down significantly to 15%-20% during 2011-2020.
At the same time, state expenditure on R&D in the farming sector, which accounted for almost 1% of its GDP in the late 1980s, was cut to 0.3%-0.4% over the past two decades. That is a wasted opportunity because money put into R&D usually secures high returns, as much as 44%.
Unconditional farm subsidies the government has splurged on farmers since 2005 have had a negative impact on farmers' motivation and behaviour. It should be noted that state subsidies under a price guarantee scheme and support in the form of administrative and production quality improvement accounted for 140 billion baht per year during 2021-2022.
More importantly, studies on the need for farm technology show that unconditional subsidies kill off farmers' enthusiasm for technology use and changes.
Besides the fact that many farmers are advancing in years, with an average age of over 55 years old, and are "part-time" farmers with a main job in the non-farming sector, they lack inspiration in investing for adaptability in product improvement for cushioning the impacts of climate change. Failing to adapt results in long-term loss through higher production costs and the loss of opportunity.
To restart or upgrade the farming sector, we need to come up with a fresh strategy. Here is a three-point recommendation for policy-makers:
Firstly, there must be a huge investment in the farming sector, from 15%-20% of its GDP to 30%, particularly in modern farm technology. Investment is important for the growth of the farming sector's GDP as well as the sector's restart. The focus should be its digital development and research.
Secondly, digital development is a key factor in increasing yields, lowering production costs and above all, helping farmers add value to their yields. Despite clear benefits, less than 15% of Thai farmers who grow cash crops -- rice, sugarcane, tapioca, maize, rubber -- embrace modern technology, so they fail to add value to their crops or process these raw materials into produce that fetches higher prices. The government must provide investment promotion and financial assistance to encourage the use of technology.
Finally, there must be some investment in human resources to up-skill farmers and personnel. The government must not be frugal in spending money to educate farmers about digital technology and bio-technology. The farming sector in Thailand seriously lacks digital technology literacy. Most, or 95% of people in this sector, have no knowledge about farm technology startups. Therefore, selling technology to farmers who plant mass crops is a must.
This is because these farmers have the impression that the cost of startup is high, so they are not sure if it's worth investing their time and resources in digital technology. On the technology supply side, startup developers cannot expand because software and data development in the farming sector is expensive, and so are the experts' consultancy fees.
The three-point strategy is necessary as it will help boost the farming sector's GDP, maximise labour productivity, and then narrow the income gap between farmers and those in non-farming sectors.
The government cannot rely on market mechanisms to execute this strategy. The private sector may lack motivation to pursue research since most R&D is categorised as "public goods", which means those investing in the technology cannot apply a non-exclusion principle, except for R&D coverage by intellectual property rights such as a patent on plant breeding technology.
Not to mention that fixed costs for IT knowledge development are high. Also expensive are the equipment and tools for agri-tech startups.
Besides, most farmers have the tendency to avoid production risk, and instead of adopting new technologies right away, they tend to wait for successful examples before acquiring them. A survey of 1,600 farmers found that after new farm technology was introduced, most said they would rather have their neighbours trial it first. If the neighbours were successful for at least two years, they would follow.
With a risk-averse nature, there need to be solid policies and support measures for the strategy so that a restart of the farming sector will become possible in a short period.
Nipon Poapongsakorn, PhD, is a distinguished fellow; Kamphol Pantakua is a researcher at the Thailand Development and Research Institute. Policy analyses from the Thailand Development Research Institute (TDRI) appear in the Bangkok Post on alternate Wednesdays.