Can Thailand escape the trap?

[reader]

From The Wharton School at University of Pennsylvania

(Nov. 10, 2017)

 

Economists call it the ‘middle-income trap,’ and they say that it happens on every continent. Unheralded and unwanted, it occurs after a newly industrialized economy such as South Africa, Brazil, or Thailand fails to rise above what the World Bank defines as the ‘middle-income range.’ At this point, such a country’s wage rates have become too high for it to compete against low-wage, low-income nations, and yet that country lacks sufficient innovation and highly skilled personnel to compete effectively against the highest tiers of knowledge-intensive products from Japan, Germany and the U.S. And so, such countries commonly suffer from low investment, slow growth, limited industrial diversification and poor labor market conditions.

 

Few countries are more concerned about this malady than Thailand, which has transformed itself over the past few decades from a low-income economy dominated by traditional agriculture into a significant player in electronics, automobiles and various agribusiness products. After Thailand’s per capita GDP rose from $682 in 1980, to $3,971 in 2002 and then $5,560 in 2012, the growth curve has flattened out, reaching $5,900 in 2016.

 

Most famous as a tourist-friendly, sun-drenched destination, Thailand ranks second in the world in the export of hard disk drives; sixth in the export of rubber tires; seventh in the export of computer devices; and 12^th in automotive exports. One of the five largest petrochemical and biofuels producers in Asia, Thailand is blessed with a rich biodiversity comprising over 13,500 species of plants, enabling it to become the world’s second largest exporter of sugar (8.2 million tons/year), and biggest exporter of tapioca. It has also become a major producer of personal, homecare and hygiene products for such multinationals as P&G (U.S.), Beiersdorf (Germany) and Kao (Japan).

 

Yet despite all that progress, “Thai labor costs are not cheap and we are trapped in a middle-income sandwich,” says Bonggot Anuroj, deputy secretary general at The Board of Investment of Thailand. Because its wage rates have improved along with its standard of living, Thailand can no longer compete against such low-wage, low-income Asian producers as Cambodia, Laos, Myanmar and Vietnam. On the other hand, neither can Thailand compete against higher-wage Asian economies that are more innovative, such as Taiwan, South Korea and Japan.

 

How to escape that trap? The plan appears to be to make deep government investments and offer incentives in infrastructure and other areas in the hopes of luring in more foreign investment that can then help spark higher economic growth through innovation.

 

Continues at:

http://knowledge.wharton.upenn.edu/article/can-thailand-escape-middle-income-trap/

[vinapu]

“Corruption is rampant, courts are unreliable, and the political system is unpredictable to say the least.”

 

Those seem to be main obstacles to progress according to an article and it's hard to disagree

[faranglaw]

Interesting article. Thanks for sharing it.

[Guest]

There are various books written on the wealth & prosperity of nations.

 

Thailand could definitely benefit from reduced corruption.   Higher quality education would also be a big step forward, as would reduced censorship.   

 

It would be nice if Thailand got it's act together, but as a consequence, there would be fewer people renting their ass out in gogo bars.  So I'm not going to lose too much sleep over it.

[KhorTose]

It would be nice if Thailand got it's act together, but as a consequence, there would be fewer people renting their ass out in gogo bars.  So I'm not going to lose too much sleep over it.

Absolutely true, but I, unlike you, would hesitate to state such a self-serving take on the condition of the Thai people.  You must have misspoke, because I know you are better then this statement makes you sound.

[Guest]

Absolutely true, but I, unlike you, would hesitate to state such a self-serving take on the condition of the Thai people.  You must have misspoke, because I know you are better then this statement makes you sound.

 

Well, it depends on how you interpret what I read as well   

 

I'm certainly not wishing the Thai people carry on at a middle income level and I clearly have not stated that. 

 

However, in the 21st century, the spectrum goes from places like Syria & North Korea through to places like Switzerland & Norway.   The latter all have fantastic living standards AND good holiday allowances.

 

If I was going to be losing sleep over the problems of citizens in another country, the North Koreans should receive my sympathy before the Thais. 

Ultimately, I have approximately zero influence on how Thailand runs it's economy, so I'm not going to get too stressed out about it.    If they asked me, I would recommend changes necessary to improve their economy.  

 

Since they are not going to ask me, I'll not lose any sleep over it & will carry on distributing tips to the gogo boys. 

 

Most of us should:

1 Discuss the topic of the Thai living standards out of interest

 

2 Realise we have near zero influence over policy

 

3 Recognise that the gogo bar scene would not be anywhere near as successful if Thailand & it's neighbours were high income & corruption free.   This does NOT mean we should wish Thailand stays as it is.   It's just recognising that there is something we cannot change & we don't actually do too badly out of it. 

 

In the highly unlikely event any of us did have influence over Thai economic policy, we should do the right thing.  

 

However, even most of the Thais have no influence over policy.

 

As it happens, my own country now seems to have about 5~6 incompetent & influentual political parties determined to drown the country in a sea of debt.   I cannot do much about that either, other than voting and trying to manage my personal finances prudently.