It is almost impossible for Thailand to become a high-income economy within 12 years, according to the blunt analysis of an economist at Thailand Development Research Institute (TDRI).
Nonarit Bisonyabut, a research fellow at TDRI, said Thailand’s current average income is US$7,500 (247,000 baht) per person per year. If Thailand wants to move into the high-income category, income needs to reach at least $15,000 per person per year.
“The benchmark used for high-income economies is GNI [gross national income] per person based on the Atlas method, which is the World Bank’s measure,” he said.
“To double income and reach $15,000 per person per year, we can use the Rule of 72 to calculate the required growth rate. If we want to become a high-income country within 12 years, dividing 72 by 12 means our economy would need to grow by an average of 6% per year over the next 12 years. That is impossible.”
The World Bank’s specialised methodology measures a country’s average income in US dollars, while smoothing out wild swings in exchange rates and inflation.
The Rule of 72 is a mathematical shortcut used to find out how long it takes for an investment or metric to double at a steady growth rate.
BARELY BUDGED
In the past, particularly since 2020, the Thai economy has barely expanded. Moreover, if GNI per person is the measure, Thailand’s income level is considerably lower, as some of the income generated in Thailand does not actually belong to Thai people, said Mr Nonarit.
Many economic activities in Thailand are carried out by non-Thais, such as workers from Myanmar and Chinese-owned businesses. At some point, the income generated by these activities is transferred overseas.
“While our GDP has been growing at a low rate in recent years, our gross national product [GNP] has barely budged. Expecting it to grow by 6% per year for 12 years is almost impossible. Even Vietnam would not be able to achieve that,” he said.
To become a high-income country, Mr Nonarit said Thailand needs to own or produce something the world wants. Countries that have rapidly developed into advanced economies have something the world needs.
“In the past, we talked about the Sony Walkman culture, produced in Japan, while South Korea became a high-income country based on companies such as Samsung and Hyundai. Singapore has a port ships must pass through to enter the Strait of Malacca and developed as a financial hub. China, which is moving towards high-income status, has companies such as Huawei and Tencent,” he said.
“The question is: What does Thailand have that the world wants? The answer is: Not much. Thailand is simply a country that sells cheap labour. In the past, we relied on Thai workers, which helped raise the incomes of Thais. But nowadays, some of that labour is being supplied by foreign workers.”
The agricultural sector must be addressed for the country to move towards high-income status, said Mr Nonarit.
In wealthy countries, the agricultural sector tends to be smaller, but Thailand’s agricultural sector remains very large, with around 30% of the country’s population working in it.
The number of people in the farming sector needs to be reduced, shifting them into other occupations, he noted.
HUMAN CAPITAL
However, Mr Nonarit stressed that wealth does not reside in money, but rather in people and their capabilities.
If Thailand develops a large pool of skilled and capable people, income and wealth will follow. Simply throwing money at people or handing out cash can make them poorer in the long run, he said, comparing it to a tuk-tuk driver who wins the lottery.
Thailand’s development in recent years has been heading in the wrong direction, reflected by the steady decline in GDP growth to around 2%, while GNP has barely expanded.
“We have taken the wrong path. Our education system still lags behind those of Vietnam and China. Thailand’s educational performance is not even in the middle of the pack for the region; we remain near the bottom. Thai workers also lack skills, while a large proportion of the population remains in the agricultural sector,” said Mr Nonarit.
“We also failed to foster innovation and build strong brands. I do not see Thailand developing the potential to become a developed economy.”
Meanwhile, investment meant to upgrade the country may not produce much impact as long as corruption remains a problem. Instead of investment being directed towards development, the money may simply be spent on repairs and construction.
There are also many inefficient investments, such as airport development. Thailand has more than 70 airports, but only around six are in regular use, he noted.
Foreign investment that is not linked to Thai suppliers or does not create jobs for Thais will have minimal impact on the country, such as data centre investment, said Mr Nonarit. If these projects use local content sourced from Thailand, that would be beneficial.
“I still believe it is possible for Thailand to become a high-income country, but it depends on whether the country’s leaders understand the problems and recognise the challenges,” he said.