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    Thailand: Industrialization and Economic Catch-Up
    Thailand: Industrialization and Economic Catch-Up
    Thailand: Industrialization and Economic Catch-Up
    Ebook176 pages1 hour

    Thailand: Industrialization and Economic Catch-Up

    By Asian Development Bank

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    About this ebook

    Thailand's economic and social transformation of the last 50 years has placed it in the ranks of upper middle-income countries and made it an integral part of global value chains. It has also established itself as a regional hub for key transport and logistics, with a world-class airport. To continue its rise, Thailand needs to move into the higher-value segments of economic activity and create high-quality jobs that are regionally broader based. This report identifies the major constraints to accomplishing these goals and analyzes the main challenges. Among them, the country must: enhance research and development and international technology transfers; elevate worker skills and their industrial relevance; address structural impediments to competition, notably in services; provide advanced transport and logistics infrastructure; and improve access to finance and technology for micro, small, and medium-sized enterprises.
    LanguageEnglish
    PublisherAsian Development Bank
    Release dateDec 1, 2015
    ISBN9789292572952
    Thailand: Industrialization and Economic Catch-Up

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      Book preview

      Thailand - Asian Development Bank

      THAILAND INDUSTRIALIZATION AND ECONOMIC CATCH-UP

      COUNTRY DIAGNOSTIC STUDY

      Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)

      © 2015 Asian Development Bank

      6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines

      Tel +63 2 632 4444; Fax +63 2 636 2444

      www.adb.org; openaccess.adb.org

      Some rights reserved. Published in 2015.

      Printed in the Philippines.

      ISBN 978-92-9257-294-5 (Print), 978-92-9257-295-2 (e-ISBN)

      Publication Stock No.RPT157810-2

      Cataloging-In-Publication Data

      Asian Development Bank.

      Thailand: Industrialization and economic catch-up.

      Mandaluyong City, Philippines: Asian Development Bank, 2015.

      1. Economic development.    2. Thailand.    I. Asian Development Bank.

      The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent.

      ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.

      By making any designation of or reference to a particular territory or geographic area, or by using the term country in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

      This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of said license as well as the Terms of Use of the ADB Open Access Repository at openaccess.adb.org/termsofuse

      This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material.

      Attribution—In acknowledging ADB as the source, please be sure to include all of the following information:

      Author. Year of publication. Title of the material. © Asian Development Bank [and/or Publisher]. https://openaccess.adb.org. Available under a CC BY 3.0 IGO license.

      Translations—Any translations you create should carry the following disclaimer:

      Originally published by the Asian Development Bank in English under the title [title] © [Year of publication] Asian Development Bank. All rights reserved. The quality of this translation and its coherence with the original text is the sole responsibility of the [translator]. The English original of this work is the only official version.

      Adaptations—Any adaptations you create should carry the following disclaimer:

      This is an adaptation of an original Work © Asian Development Bank [Year]. The views expressed here are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent. ADB does not endorse this work or guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use.

      Please contact [email protected] or [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo.

      Note: In this publication, $ refers to US dollars, unless otherwise stated.

      Foreword

      Thailand has undergone major industrial and social transformation amid rapid economic growth and development for over half a century. It is now the second largest economy with the 4th highest income per capita in the Association of Southeast Asian Nations. It has successfully shifted its economy from agriculture to export-oriented manufacturing, while integrating key production, particularly automobiles and electronics, into regional value chains. It has also been quite successful in attracting foreign direct investment, particularly in export-oriented sectors.

      Now, as an upper-middle-income country, however, it faces new challenges. Wages are rising rapidly and productivity growth needs to keep up. Overall labor productivity grew 1.9% between 2007 and 2012, but with marked differences across sectors: it increased 2.5% in manufacturing, 1.9% in services, and 0.9% in agriculture. The country is also losing competitiveness in low-wage, low-skilled goods to less-developed, labor-abundant countries. Exports of labor-intensive goods will soon fall below imports of those goods.

      As Thailand has transitioned from an agrarian to industrial economy, its manufacturing and service industries have also moved from the lower-end of the global value chain to the higher end. However, both horizontal and vertical transitions remain incomplete. The agriculture sector still employs almost 40% of the workforce. Employment in manufacturing has stagnated, while the bulk of the workforce remains engaged in low-productivity, small-scale activities in trading and services.

      Moving further up the global value chain and reaching high-income status requires upgrading industrial sophistication and increasing domestic value addition in exports. Failure to do so, or to establish a broader base of innovative firms and improve competitiveness in the services sector, may constrain longer-term growth potential and, more importantly, the prospect of creating an adequate number of quality jobs for inclusive growth.

      This report identifies five major challenges in this transition: (i) enhancing research and development and international technology transfers; (ii) elevating workers’ skills and their industrial relevance; (iii) addressing structural impediments to competition, notably in services; (iv) providing advanced transport and logistics infrastructure; and (v) improving access to finance and technology for micro, small, and medium-sized enterprises. Thailand needs to enhance the domestic content of production capabilities for current technology and capital-intensive export industries. To do so, it is critical that it reinforces local suppliers’ linkages to global production networks and intensifies technology transfer from major global players to local producers. Reaching the higher-value economic segment requires not only innovation and advanced technologies in production and processing, but also an environment that is conducive to new businesses and investments. Maintaining a reasonably stable economic and political environment is crucial to restoring investor confidence.

      Major transformation is in order: accelerating market reform and enhancing competition, establishing effective social and educational policy, upgrading infrastructure for a modern industrial and service economy, and promoting regionally balanced growth and development.

      As a trusted partner, the Asian Development Bank is committed to supporting Thailand in its development goals. I hope that the analysis and policy suggestions this report offers are found useful for the country’s transition toward a modern industrial and service economy.

      Shang-Jin Wei

      Chief Economist and Director General

      Economic Research and Regional Cooperation Department

      Acknowledgments

      This study, Thailand Binding Constraints Analysis: Industrialization and Economic Catch-Up, was prepared by the Asian Development Bank (ADB) under regional technical assistance 7686: Diagnosing Critical Constraints to Growth and Structural Transformation. The report identifies some of Thailand’s critical development constraints and discusses policy measures and economic reforms needed to accelerate the country’s economic transformation toward a more modern and service-oriented economy.

      The study benefited from consultations with key government ministries of Thailand, particularly the Fiscal Policy Office of the Ministry of Finance and National Economic and Social Development Board (NESDB); research institution such as Thailand Development Research Institute; and development partner, the International Labour Organization. The study team is grateful for the support of these agencies especially for providing the relevant country information, data, and guidance shared during consultations.

      The study was undertaken by a team from the Economic Analysis and Operational Support Division (EREA) of ADB’s Economic Research and Regional Cooperation Department (ERCD), under the overall guidance and supervision of Cyn-Young Park, director, EREA. The study was initially led by Muhammad Ehsan Khan and subsequently by Paul Vandenberg, who prepared the initial full draft report, and Lilibeth Poot, who provided project coordination assistance and research. The report was further revised and finalized by Cyn-Young Park, with substantial inputs from Kaukab Naqvi and Jindra Nuella Samson. Relevant research work and assistance to the ERCD study team were rendered by Amador Foronda, Regina Baroma, and Lotis Quiao.

      Technical background papers were contributed by various sector experts, including: Dante Canlas, Tatre Jantarakolica, Sitanon Jesdapipat, Somchai Jitsuchon, Jongil Kim, Ma. Concepcion Latoja, Gilbert Llanto, Raymond Mallon, Nuntaporn Methakunavut, Richard Niebuhr, and Swarnim Wagle.

      Manuscript and style editing was done by Eric Van Zant, while Tuesday Soriano provided proof editing; Michael Cortes worked on the cover, design, and report layout. Paulo Rodelio Halili and Ricasol Cruz-Calaluan provided support on publication and printing.

      This study would have not been complete without the extensive technical review by ADB Thailand Resident Mission led by Yasushi Negishi, Wolfgang Kubitzki, and Oranuch Jetwattana.

      Finally, appreciation is expressed to colleagues from the Southeast Asia Department—Craig Steffensen, Soo-Nam Oh, and Luxmon Attapich from the Thailand Resident Mission, who assisted in fostering the collaboration with the Government of Thailand.

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