This article, after a few interruptions, is Part 3 of "Changing Thailand: The Series." It began with a prologue that presented an overview, emphasising that Thailand has been lagging behind its neighbours in terms of per-capita income growth.
"Part 1: Need to Change" demonstrated how, for the past six years, debts have been outpacing incomes. Increasing indebtedness will eventually cause the Thai economy to come to a standstill, or even a collapse, after financing sources become exhausted.
The second part was titled "Managing Household Debt." As this is the imminent threat to the economy, it has to be wisely managed. That article suggested a short-term solution to a nagging concern.
The debt situation seems to be worsening by the day. A recent survey by the University of Thai Chamber of Commerce (UTCC) concerning the debt situation experienced by labourers who earn less than 15,000 baht a month clarifies the dire nature of the situation.
It found that 99.1% of those surveyed were in debt, and 77.2% lacked sufficient income to cover their daily expenses. Worst of all, only 4.3% of debtors can afford to repay their debt in full, 26.7% rely on partial payments, and a whopping 68.8% can barely make the minimum monthly payments.
The core of this debt problem is the widening income-expense gap. Data collected by the National Statistical Office in November 2022 confirms such a hypothesis, as 40% of Thais earn less than 17,000 baht per month while the average monthly expense is 18,145 baht.
The Bank of Thailand (BoT) reports similar findings with an average nationwide income of 15,416 baht per month as of Q4 in 2022, which is, of course, lower than the average monthly expenses.
The lowest paid professions, according to the BoT, are skilled agricultural and fishery workers with a monthly pay of 6,397 baht.
So what happens to one's pay if one is "unskilled"? I have one important table to show readers. It summarises commercial banks' deposit accounts, classified by size. It can be read as a representation of wealth concentration in Thailand. This country has a relatively good income equality when measured by the GINI index -- 31.5 compared to the much worse score of 39.7 in the US.
But good index scores can also mean everyone is "equally poor." Myanmar (30.7) has a better GINI index than Thailand whereas Brunei has the worst among all Asean members. But who cares? This oil-rich nation still enjoys a per-capita income of US$31,449 (1.07 million baht). "Unequal, but rich" is okay with me.
Thailand is a medium-high income country with a per-capita income of US$7,066 as of 2021, according to the World Bank's estimate. Unfortunately, few Thais earn that much, as evidenced by the table.
Some 88.2% of deposit holders have just over 4,000 baht in their bank accounts. Just imagine having to live with 4,176 baht for your life savings! The survey of Thai labourers by the UTCC found a similar result, with 73.5% of those questioned having zero savings. So for Thai workers, having 4,000 baht in the bank could be considered a "luxury".
Before I go on, may I interrupt with some unpleasant news: Thailand's economic performance in March 2023. In a nutshell, the economy continued slowing down that month.
Despite incoming tourists rising to 2.2 million from 2.1 million in February, all indicators reflect an economic slowdown. Compared to March 2022, tax revenue was down 6.4%; exports (by value) declined 5.8%; the manufacturing production index dropped 4.6%; and private investment indicator contracts were down 1.6%.
Most importantly, money supply growth slowed to 2.7%, compared to 6.3% growth a year earlier. Less money being used basically means a less active economy. When the present conditions look unfavourable, one can only look towards the future for some glimmer of hope. May I present to you the future of Thailand!
There is only one solution to this problem -- raising the per-capita income of the country with a much better wealth distribution, namely, shoring up the middle class. Referring back to the table, a successful economic policy must be able to make "C class" depositors the dominant group. In other words, they must account for over 50%. First, average wages must be increased by 17.9% to balance incomes and expenses. No more debts to supplement income. After that, average wages should be raised again by 30%, to about 20,000 baht per month, to allow room for savings.
There are two ways to raise wages -- by force or by structural changes. The former is easy but could be disastrous as industries cannot afford higher wages. Factory shutdowns would be inevitable. New core industries, with at least 30% higher value-added products, must be created to lead the country's economic structure. Existing industries have to be adapted to be more capital- and technology-intensive to raise productivity in order to catch up with higher market wages.
Planners and economists must go back to the drawing board to find industries that have enough value added to pay workers 20,000 baht a month. May I suggest two new core industries for Thailand to consider: the hospitality and aviation industries.
The country has all of the comparative advantages for a strong hospitality industry, particularly in the fields of health and old age care. With service-minded workers, great healthcare personnel and a mild climate, the country is suitable for various hospitality businesses, such as long-term stays for retirees and nursing facilities for foreigners.
Best of all, these can be done without relying on foreign technologies -- unlike the electric vehicle or semiconductor industries. The key word here is "home-grown" resources.
Aviation is the future mode of transport. The focus of the industry will change from long-haul international services to short-haul domestic services, which is perfect for small aircraft with 50-100 seats.
One might want to study the business model of Embraer, the aerospace manufacturer of Brazil. This industry will generate thousands of associated SMEs. SMEs are what Thailand needs to sustain high per-capita income, not multi-billion-dollar businesses that only benefit a few multi-billionaires.
This article should serve as food for thought. The bottom line is that if Thailand does not alter its manufacturing structure, the problem of the income-expense imbalance will never be resolved, and Thai workers will be eternally in debt.