Thailand must 'break out' and become a trading nation

Thailand must 'break out' and become a trading nation

In 2012, Ruchir Sharma wrote in his famous book called Breakout Nations: In Pursuit of the Next Economic Miracles about the aftermath of the 2008 financial crisis, which had affected economies worldwide. In this book, he predicted that not many countries would be able to maintain economic growth at the desirable rate throughout this decade. He called these fortunate few countries, including Thailand, "breakout nations". These nations, he argued, were likely to continue growing and becoming the next economic miracles.

This is both good news and bad news for Thailand. Undoubtedly, being considered as having the potential to prosper can attract inward investment and boost the domestic market. On another hand, high expectations mean more eyes are on the performance of both the public and private sectors.

Breakout can mean surpassing previous achievements and, at the same time, can depict a struggle to get out from being stuck -- which requires serious effort.

In 2014, the Ministry of Commerce declared its strategic plan to upgrade Thailand to be a "Trading Nation". The plan aims to utilise the strength of Thailand's geographical location which connects countries with abundant resources such as Myanmar, Laos, Cambodia and Vietnam to markets with a large number of consumers and strong purchasing power including China, Malaysia, and Singapore.

 Together with the opportunity in the Asean Economic Community (AEC), in which freer flows of goods, services, investment and skilled workers are expected to create a regional single market and production base, the plan to develop Thailand as a trading nation could ultimately make the country a breakout nation.

Of course, there are several weaknesses and threats that the MOC needs to consider. The most critical for Thailand as a trading nation is labour productivity. The 2015 World Competitiveness Yearbook published by the International Institute for Management Development (IMD) placed Thailand's labour productivity at 56th out of 61 countries. This implies that industrial development during the past decades has not led to skilled development, neither for workers nor entrepreneurs. The rationale for this failure could be inadequate education policies and curriculums, which do not create the relevant skills that serve the demands for national development. The English language, for example, is considered a lingua franca and used to conduct business globally. In the same IMD report, Thailand ranked 57th in the English Proficiency index (determined by TOEFL scores), which is far behind other Asean countries such as the Philippines and Indonesia. It would be difficult for a country to trade if it is unable to communicate with trading partners.

If the AEC is a great opportunity for Thailand as a trading nation, any Free Trade Agreement (FTA) which Thailand has not joined is considered a serious disadvantage. The Trans-Pacific Partnership (TPP), for instance, encompasses both Thailand's trading partners and competitors such as the US, Japan and Vietnam. When effective, the TPP could be a tremendous loss for the Thai export sector and manufacturing industry. The situation may get worse if the weakness in labour productivity is not addressed properly, as the country will surely lose its competitiveness, and hence economic growth.

In order to put the Thai economy on the right path toward becoming a breakout nation, the MOC needs to carefully craft a trade strategy by considering all the strengths, weaknesses, opportunities and threats on this path. And the plan must be reconsidered as often as possible, because these strengths, weaknesses, opportunities and threats can alter over time. A new threat of terrorism may affect the strength of some locations as cross-borders checkpoints may need to be stricter. The threat of TPP could overshadow the opportunities in the AEC as some Asean members may prefer trading within the TPP block as opposed to intra-Asean. At the same time, the TPP threat could be dealt with by connecting Thailand to the non-TPP markets such as China and South Korea. Of course, the success of turning this threat into opportunity depends on the solutions to the country's weaknesses.

Such big tasks cannot be left solely to the MOC. An effective trade plan and strategy requires the effort and participation of all parts of the nation. Other ministries and state agencies must lend their support, while businesses, civil society organisations and scholars must be actively consulted. The media must be tuned to the right channels in order to deliver useful information for the market.

This is the task for the nation, and the responsibility should be shared by all its members. In order for Thailand to break out from the current economic slowdown, everyone in the nation must take action and collaborate with one another.


Boonwara Sumano is a research fellow with the Thailand Development Research Institute (TDRI).

Boonwara Sumano

TDRI Research Fellow

Boonwara Sumano Chenphuengpawn, PhD, is a research fellow at the Thailand Development Research Institute (TDRI) Policy analyses from the TDRI appear in the Bangkok Post every other Wednesday.

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